Naming rights of stadiums have been shunned by
mega-brand firms such as Coca-Cola and Nike while
lesser-known companies have jumped into the naming
rights mix. Why is this? Companies such as Savvis, a
company that is not currently on the lips of most
Americans, have paid upwards of $70 million for the
right to have St. Louis Blues hockey fans see their
name every time they attend a game.
Savvis, which touts itself as a premier, global IP
network services provider, is looking to establish
itself as a market leader by investing in its brand
through sponsorship. The partnership with the St.
Louis Blues "is an investment in maintaining and
building the SAVVIS brand and raising our visibility
as a leader in the marketplace" according to Rob
McCormick, chief executive officer of SAVVIS. The
acquisition of stadium naming rights has become a
strategic brand building strategy by companies.
FedEx is paying a record $205 million to the
Washington Redskins to rename the former Jack Kent
Cooke Stadium to FedEx Field for the next 27 years.
CMGI paid approximately $120 million over 20 years for
the rights to name the New England Patriots new
stadium. Why would a company pay so much for an
intangible right? The amount of money paid is
dependent on subjective and objective factors. FedEx
has leveraged qualities like speed, teamwork and
precision in building the largest express
transportation company in the world and it believes
these same qualities are prominent in sponsorship,
making the sponsorship relationship both natural and
complimentary.
According to CMGI, the agreement with the Patriots
will help raise public awareness of the company. But
behind the scenes, CMGI's affiliate companies will
also host the Patriots' Internet site and manage
Webcasts of team news and special events. The net
effect is that CMGI is banking on increased brand
value from this investment. In essence, not only is
CMGI benefiting from the visual name recognition on
the stadium and the discreet advertising every time
the stadium is mentioned, but CMGI recognizes the
brand leveraging power of the Internet. For example,
more than 120 million Internet users visit CMGI's
network of 69 affiliated business-to-business online
companies each month however, many of the visitors do
not know about CMGI. By becoming the Patriots'
"preferred provider" of Internet technology
products and services, including web hosting and
streaming media broadcasting, CMGI may benefit from
additional revenue streams and further exposure on the
web.
If properly communicated to shareholders, CMGI's stock
price may be positively influenced not only by
additional revenue, but also by increased brand value.
If shareholders perceive that CMGI's investment in the
naming rights of the stadium has resulted in a return
on investment reflected in its brand equity, a higher
stock price may be supportable. The bottom line for
CMGI may be a higher stock price which through higher
earnings per share and/or increased brand value.
According to a recent telephone study of 750 sports
fans in 14 cities nationwide by Performance Research,
there may be some real brand awareness holding up the
bricks and mortar. Fans are aware of the corporate
names flying over their stadiums, with nearly 90% of
those in Chicago, Boston, Indianapolis, and
Minneapolis correctly naming (unaided) the arena
sponsors in their city. Perhaps more importantly, over
one-third (35%) of those polled reported that this
kind of advertising has a "Positive effect"
on their opinion of the sponsoring company, and 61%
agreed that the sports facility named after a
corporation in their hometown adds favorably to the
community. Even more telling, nearly one-fifth overall
believed that they personally benefit from
corporate-named arenas, with "Lower taxes",
"More sports opportunities", and "Lower
ticket prices" often cited as reasons. Much of
these feelings can be quantified into brand value, an
important part of a company's total value.
In its annual survey of companies and stock analysts,
Brand Finance plc, a London-based valuer of brand
equity, learned that 78% of analysts and 72% of
companies surveyed think that public companies should
publish more information on brand values.
While fans may be remembering company brands because
they are attached to stadiums, perhaps it is up to
companies to translate these positive associations to
a return on the company's investment before they
evaporate.
According to David Haigh, Chief Executive of Brand
Finance "when a company is considering its
sponsorship options and analyzing the potential return
on investment the process is similar to quantifying a
brand value. In other words, a company must decide
whether or not the investment in naming rights will
best maximize its brand value."
A company can have many reasons for investing in its
brand through naming rights. These include providing a
public service, enhancing the company's market
position or fostering community cultural spirit.
Alternative and at times additional benefits include
securing exclusive rights (e.g., pouring, in-arena
vending) to a captive audience and securing event
access for marketing opportunities. Sponsors clearly
benefit from access to nationally televised events
which add to an integrated marketing communications
campaign. Mechanisms which boost levels of exposure (eg
through the use of the facility - both in frequency
and purpose), will generally also serve to increase
brand awareness.
In evaluating how much a company should pay for naming
rights, Brand Finance quantifies the squishy marketing
reasons into a hard number by identifying demand
drivers and what role the brand contributes to each of
them to determine how they affect the naming right
opportunity.
Such Drivers
of Demand
may include:
Record
of a Team:
Savvis considered the St. Louis Blues' record in its
decision to buy the naming rights for the stadium.
"Hockey is known worldwide for speed, performance
and power, much like the SAVVIS network, and we're
proud to ally ourselves with an arena that houses a
team that is at the top of its game" according to
Savvis' McCormick. In the 1999-2000 season, the St.
Louis Blues captured the NHL Presidents' Trophy for
the best regular season record in the league, as well
as Most Valuable Player, Coach of the Year, Best
Defenseman and other key awards. The Blues have
finished in the top five in the NHL in attendance and
television ratings for two of the last three years.
Attendance
in Numbers:
There is an obvious positive correlation between
attendance at stadiums and the price for naming
rights. According to Paul Kagan Associates, Inc.
Sports Analyst, Terri Ritenour, naming rights are
hottest now for the NFL. "With the league earning
incredible media rights fees and running at top
attendance with pricey tickets, stadium naming rights
is one of the remaining conduits for increasing NFL
revenues."
Audience
Financial Demographics:
Mellon Financial Corp. recently signed an $18 million
10-year agreement to rename the Pittsburgh Penguins
arena. The agreement included the exclusive rights to
offer financial services such as automatic teller
machines and credit card signup booths inside the
arena to target their sports fan constituency.
Geographic
Location:
Politically, sponsors acquiring naming rights provide
a unique source of income to offset taxpayer costs of
establishing a presence in a hometown. In terms of
localized marketing, this communicates providing a
public service and establishes community goodwill. For
example, Pepsico acted as a good corporate citizen in
its sponsorship of the arena in Denver, Colorado.
Possible
Political Issues
Various potentially controversial issues may have an
impact on the success of the sponsorship - namely the
popularity of players and team, location, stadium
capacity and the heritage of the stadium. Could
Wrigley Stadium in Chicago ever be renamed Pepsico
Stadium without a major uproar and damage to the brand
in that market? presumably not.
Perennial
Favorites: A
company's choice of sponsoring a perennial favorite
team such as Chicago Cubs, New York Yankees, Dallas
Cowboys, or Green Bay Packers may convey a company's
enduring commitment to a genuine classic all-American
sport.
Long-term
Investment v. Short-term Advertising:
From a marketing perspective, sponsorship enables a
company's brand to very quickly establish a high level
of awareness in new geographical markets, and sustain
awareness longer term. Sponsorship deals extending
beyond a decade are common, serving as long-term
marketing as compared to an alternative such as a
one-minute television ad during the Super Bowl.
Potential
Negative Affects:
One very interesting area is in the world of mergers
and acquisitions - how to rename a stadium without
damaging the resultant brand. Take for example the
decision to re-name the old Boston Garden as the Fleet
Center by the Fleet Financial Corporation. With
convenient timing, during construction of the proposed
Shawmutt Center, Shawmutt was acquired by Fleet. Had
the timing of this occurred when the Shamwutt Center
(the name originally planned) had already launched,
confusion could have proved expensive to the resultant
business - both by switching the name and by leaving
it - a lose, lose situation.
Popularity
of a Sport:
In 1994, during the baseball players' strike and
cancellation of the world series, baseball's
popularity hit an all time low, however with the
homerun battle between Sammy Sosa and Mark McGwire
came a new enthusiasm for baseball and increased the
value of baseball-related tangible and intangible
assets. For example, McGwires' number 70th homerun
baseball was auctioned off for $3 million in 1998. It
is likely that a baseball stadium deal during the
player strike would have commanded less than more
recent times since the popularity of the sport has
increased.
Agreement
Contents:
A naming rights deal can be valued higher or lower
depending on the entitlements included or excluded.
For example, luxury suites, tickets to events,
preferred parking inclusions and signage may increase
the value of the deal. In Chicago, the United Center's
employee uniforms, napkins, plates, trash cans,
letterhead and drinking cups are adorned with United's
name. The Canadian Airlines Saddledome in Calgary,
Alberta has the corporate logo painted on the roof of
the building. More corporate exposure equates to more
value.
How much the brand contributes will in many ways
determine how much a sponsor is willing to put on the
table for the naming rights. Some sponsors see naming
rights of facilities as highly effective target
marketing - increasing visibility and recognition of
the brand. The sponsor gets their name on all printed
materials of the facility being sponsored (be it
stadium, soccer complex or mall). As a means of direct
marketing, stadium sponsorship can be highly effective
however the benefits should be quantified to determine
the long-run return on the brand investment.
Elise M.
Neils
with assistance from K.Hauser
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