Brand News: Friday, April 01, 2008
Wrigley Field Naming Rights Value
by Brad SarnaWrigley Field is among other things, a local historic landmark, a baseball mecca, and one of the top tourist attractions in Illinois. It is also the center of a brewing controversy between the current owners, Sam Zell and the Tribune Company, the Wrigley Company, and the blindingly loyal fans of the Chicago Cubs. The issue of stadium naming rights is in the middle of the Tribune’s effort to sell Wrigley Field separately from its intended sale of the Chicago Cubs in an effort to maximize value of the sale and offset the debt Zell accumulated in his purchase of the Tribune Company.
The baseball stadium’s name was changed to Wrigley Field in 1926 in memoriam of chewing-gum magnate and former team owner William Wrigley Jr., and not after the Wrigley Company. However, this has effectively given the Wrigley Company 82 years of free advertising on the iconic Wrigley Field. Companies today are spending exorbitant amounts of money to land exclusive naming/sponsorship rights to sporting facilities. Two new facilities due to open shortly have already agreed to deals averaging $20 million a year. Citigroup acquired the naming rights to Citi Field, home of the New York Mets starting in 2009, for $400 million over 20 years. Barclays Bank has reached a similar agreement with the New Jersey Nets for the new stadium being built to coincide with their move to a new arena in Brooklyn, with anticipated completion in 2010.
Naming rights seems like a recent phenomenon of the past 20 years but they actually extend back to 1972 when the first official naming rights agreement was established between Rich County, New York and Rich Products Corporation. Rich Stadium was home to the NFL’s Buffalo Bills and the agreement was for a total of $1.5 million over 25 years, which averaged to $60,000 per year over the life of the deal. From this controversial original deal to today’s mega-deals, naming rights have recently grown at a rapid pace and have become a necessity in the current sports environment.
The following statistics may shed some light on just how important naming rights are in terms of revenue for sports teams and are based on currently available agreed upon naming rights deals for professional baseball, football, basketball, and hockey.
- The average annual revenue per team from naming rights deals is greater than $3 million.
- The annual total from professional naming rights deals is greater than $250 million.
- The total value of current naming rights deals is greater than $5 billion.
Various factors go into determining the value of naming rights for a sports facility. Some of the more important factors include:
- Team success: this matters both short term and long term, the more successful a team is the higher the premium for naming rights.
- Attendance level: higher attendance means more people seeing the company or brand.
- Geographic location: major cities like New York, Los Angeles, and Chicago can charge more than smaller cities like Kansas City, Nashville, or Columbus.
- Popularity of a sport: baseball and football are breaking attendance records right now while hockey and basketball have lagging attendance in recent years.
- Agreement contents: deals with entitlements such as luxury suites, tickets, parking, additional signage, and advertising will increase the value.
The situation between the Tribune Company, the Wrigley Company, and Cubs fans gets interesting when the subject of naming rights for Wrigley Field is brought up. At the Cubs annual convention this issue was raised by a fan to Cubs Chairman Crane Kenney, who responded by saying, “Nobody wants to see the name change. And in my perfect world, the Wrigley Company would step up and start paying for what they`ve been getting free all these years. Obviously the market has changed, and it`s our duty to look at everything.” This effectively called out the Wrigley Company to step up and pay for the “free” naming rights and advertising it has been enjoying for the previous 82 years.
The Cubs are pressuring Wrigley into making a significant offer to continue having its name on the venerable institution. There is the fact that Wrigley has not paid anything for the name over 82 years, naming rights deals are increasing exponentially, and that it is Wrigley Field, one of the most recognizable sporting facilities in the world. Wrigley is feeling pressure from the Cubs and their fans to reach an agreement and keep the Wrigley Field name. But what would be considered fair in this situation? Should the value of 82 years of free advertising be worked into the potential deal by forcing Wrigley to pay an even greater premium over the normal deal? Naming rights agreements didn’t exist until the Buffalo deal in 1972 and for great value until recent years, making the “82 years” argument moot in terms of value.
Looking at the naming rights value drivers mentioned earlier, Wrigley would be able to determine what a fair naming rights deal would be. The Cubs and Wrigley Field score high with attendance as just about every game is sold out. The geographic location being Chicago is also a positive as it is a marquee sports and business market with a large population. Negatives in this situation would be the team’s success and agreement contents. The Cubs have not won a championship in 100 years and have only won one playoff series in that time span. However, this is not completely negative as the Cubs made the playoffs in 2007 and have a high probability of returning to the playoffs in 2008. Lastly, the outfield wall, ivy, and scoreboard are considered historical landmarks and are not able to be modified or used for advertising which severely limits additional opportunities for a naming rights partner.
The Cubs have attempted to force Wrigley’s hand by publicly declaring Wrigley’s exploitation of free advertising and playing to Cubs fans heart strings who desperately want the name to remain. The Wrigley Company hasn’t owned the team since 1981 and has considerable bargaining leverage in this situation. It can make a reasonable offer and put the pressure back on the owners of the stadium to either accept or reject. And the Cubs may have to accept a lesser offer from Wrigley to appease fans unless a public backlash is worth a couple extra million a year.
It is a bit unsettling thinking of how Subway Park at Wrigley Field or Wrigley Field at Coca-Cola Park would go over with fans of the Cubs and baseball traditionalists. In fact, press has been building against the idea within Chicago and Cubs fans are inundating the Tribune Company with emails, letters, and please not to change the name. The pressure is on both parties involved to get a naming rights deal in place but the Cubs assertion that Wrigley has received years of free advertising is a bad start to negotiations. The value of the naming rights for those years is minimal because the practice has only been a revenue generator in recent years and the Tribune Company was free to sell those rights at any time since they purchased the team in 1981.
Value of past and future naming rights:
Using the original naming rights deal for Rich Stadium in 1972 of $60,000 per year and using it for only 20 years, then using the average annual value of naming deals from 1992 through 2008 the past value of naming rights for Wrigley Field would amount to approximately $35 million. This is purely a rough estimate as there is no way to truly establish length or potential value of any naming rights for Wrigley Field during those years.
If the Cubs believe that Wrigley should pay now for this past value, a 20 year agreement would include an additional $1.75 - $2.0 million per year. Wrigley Field could command a high average annual value to which this additional fee would be added, but as mentioned before the negotiations may never reach this high value due to the existing circumstances.
Whether it is the Wrigley Company, some other faceless corporation, or a consortium of concerned/caring fans, Sam Zell and the Tribune Company have made it clear they are going to sell the naming rights to Wrigley Field and maximize all facets of revenue production as soon as possible. Within the current naming rights landscape Wrigley Field stands as an attractive target to interested parties. Using the various naming rights value drivers and other current deals, a 20-year agreement averaging $10-15 million a year is not unreasonable.
This annual value may be high compared to other current MLB naming rights deals, but Wrigley Field is in its own category with Fenway Park and does not fall in line with the “average” naming rights transaction. If a brand new field in New York City for the Mets can average $20 million over 20 years, surely Wrigley Field with all its history, nostalgia, and un-replicable ambience is worth half to three quarters the value of a new ballpark with all its creature comforts and overbearing advertisements. Wrigley Field is old, doesn’t have all the luxury boxes, and has limited additional signage options but its uniqueness and status as a destination, for both baseball fans and tourists in general, give added value that a new “retro” park cannot replicate, especially in a market the size of Chicago.
There will be fan backlash to any deal that is struck that does not result in the Wrigley Field name continuing on but as in all other aspects of life, things change and people adapt. Cubs fans will continue to love their “Cubbies”, continue to sell out all 82 games a year, and continue to hold out hope that the 100 year drought since the Cubs last championship will end this year. And if it does end this year, or next year, or 10 years down the road, it will not matter what name is on the building when Wrigleyville parties through the night to celebrate a World Series.
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