November 24th, 2006

Stadium Naming Rights Deals Make Rebound

By Ben Klayman
Reuters

Sports stadium naming rights deals seemed bad karma a few years ago amid accounting scandals and the dot-com bust, but they have rebounded with a vengeance, with bigger dollar amounts and more comprehensive plans.

Companies are no longer simply slapping a name on a stadium. They are devising complex brand-burnishing strategies involving logos, advertising and technology deployment with a view to boosting profits.

Financial services company Citigroup Inc. agreed last week to pay the New York Mets a reported record $400 million over 20 years for rights to name their new baseball park, set to open in 2009, Citi Field. In California, the Oakland A’s said network equipment maker Cisco Systems Inc. would pay $120 million over 30 years to name their new stadium Cisco Field, to be built in nearby Fremont.

“What you’re seeing today and why you’re able to get $20 million a year out of a relationship with Citibank, for instance, is that these are strategic alliances designed to drive business between the two organizations,” said David Carter, executive director of the USC Sports Business Institute.

The Mets-Citigroup agreement tops the 30-year, $300-million naming rights deal the National Football League’s Houston Texans have with Reliant Energy Inc., according to Bonham Group, a Denver sports marketing and consulting firm that has negotiated a number of similar deals.

Teams are only too happy to sign such deals as they look to squeeze every possible dollar from their properties, analysts said. And past scandals have not scared off either side.

The most infamous name change occurred in 2002, when the Houston Astros baseball team re-acquired their stadium naming rights from bankrupt energy trader Enron Corp. in order to sell them to Coca-Cola Co.’s Minute Maid.

Other sports venues have seen similar changes. The football stadiums of the Tennessee Titans and Baltimore Ravens, respectively, switched from names linked to a former unit of cable company Adelphia Communications and Internet services provider PSINet, both of which filed for bankruptcy.

As companies look to connect with customers, naming rights deals will remain lucrative for the teams, said Fred Popp, chief executive of SME, a New York sports branding and design firm.

“Clients need to bypass the brain and go right for the heart,” Popp said. “Sports brands are surrogates. They allow the typical consumer brand to engage the consumer in a highly emotional way, in a way that you just can’t establish with your product alone.”

Naming rights alone are not enough, however, The Mets deal also includes the right to put the Citi brand throughout the new park, the use by Citigroup of Mets logos, the bank’s purchase of advertising on the Mets’ cable network and the joint development of business opportunities.

The Cisco deal includes the sale by the company of 143 acres of land to the Oakland team for a new stadium. Cisco’s technology in the ballpark will allow services such as the ability to upgrade tickets in on-site ticket kiosks, order souvenirs or food using a mobile device, and view replays at your seat and save them to a personal Web page.

Cisco treasurer, David Holland, who negotiated the deal, said it aligns closely with his San Jose, California-based company’s business objectives, which include getting more of its technology into sports venues.

“In the past, we have not been a company that looks to hang our sign on these kinds of venues,” he told Reuters. “If you look at how Cisco’s business has evolved, particularly in the last few years and most recently with the acquisition of Scientific Atlanta, we are moving closer and closer to the (consumer) of our equipment.”

While still growing accustomed to new ballpark names, fans accept them as the price to be paid for competitive teams and lower taxes related to stadium construction.

“Nowadays, when you talk about the costs of stadiums, you understand eventually it’s going to go to the highest bidder,” said Mets fan Nick Parente.

“I’m just looking forward to the new stadium, in all honesty, because even though Shea was one of the older stadiums, it wasn’t one of the prettiest,” said the 37-year-old Hoboken, New Jersey, resident, who works in aviation insurance underwriting.

The Mets shouldn’t get too comfortable with their record-setting deal, however.

Analysts said the NFL’s New York Giants and Jets’ new football stadium—planned for 2010—features a large venue, two major teams in a popular sport and the New York market, suggesting yet another new record is likely.

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