Why Companies Are Naming Arenas After Themselves
from Winter 1999
by Michael Brush
The sports arena rising out of that hole in the ground on the edge of Denver will be the new home of the Broncos—and could boast your corporate name. More and more companies are paying big money to name stadiums (oops, stadia) after themselves—usually for 10 or 20 years—and it’s turning into a seller’s market. Some 40 new stadiums will be needing monikers over the next five years and quite a few companies are already negotiating for them. As the table on page 14 shows, prices have gone as high as $150 million, which is what American Airlines paid last March to name a stadium that became home to both the Dallas Stars and Dallas Mavericks (for nonjocks, these teams play hockey and basketball, respectively.)
The sellers are the cities and sports teams that built the arenas in the first place and want to recover their costs—the cities, to whittle down the bond debt that financed construction; the teams, to plough the money into player salaries. Stadium name buyers say the purchase not only gets them brand recognition far more cheaply than advertising or other forms of marketing, but also helps them build good community relations.
It’s tempting to dismiss such corporate spending as nothing more than CEO egos, and, indeed, some shareholders think this is exactly what it is. “It gives a guy jollies to drive by and see his company’s name on a building,” says David Rocker, head of Rocker Partners, a New York City hedge fund. He sees announcements that a company is about to put its name on a stadium as a good indicator of a weakening stock that might make a good short position.
Others who reject this form of advertising include champion marketer Coca-Cola, owner of the world’s best-known brand. “We did a lot of research which shows there is no payoff,” says spokesman Scott Jacobson.
However, less prominent companies cite statistics that demonstrate enormous leaps in brand recognition. Says Dean Bonham of marketing and sponsorship firm Bonham Group in Denver: “Companies that have low name awareness virtually become household names overnight.” Consider Cinergy, a midwest utility. It paid $6 million in 1996 for a five-year deal to name the baseball and football stadium in Cincinnati “Cinergy Field.” Soon thereafter, the company’s name recognition rose from 9% to 70% in Indiana and from 35% to 94% in the Cincinnati area, says Joe Hale, vice president for communications. “It really got our name out. If we had bought TV and radio time in all our markets, it would have cost us several times as much to get that recognition.” Similarly, recognition of the Pro Player line of sportswear rose from nearly zero to 45% nationally, and to 90% in south Florida, once Pro Player Stadium became home to the Miami Dolphins and Florida Marlins in 1997. PSINet, an Internet service provider in Herndon, Virginia, saw the numbers go from zero to 38% among professionals who would buy its services after a new Baltimore stadium was named after it last January. “We have gotten a lot of contracts that would not have come along if the clients did not know we are a player,” says Robert Leahy, who heads the company’s marketing and communications division.
Many companies use the stadiums as the cornerstone of a wider marketing campaign:
- Miami Dolphin cheerleaders modeled Pro Player clothes at a fashion show in the team’s dressing room.
- PSINet has set up an online fan club site for the Baltimore Ravens and offers a chat room with the team’s players.
- Consumer electronics giant Philips will open a retail store at the Philips Arena in Atlanta.
- At Enron Field in Houston, the diversified energy company gives tours of the stadium’s boiler rooms and air conditioning systems to prospective customers.
Naming deals don’t come without risk, however. For one thing, if a company’s identity is morphed into something unrecognizable by a merger and name change, a 20-year contract could prove very expensive. Cinergy’s Hale says this is one reason why he only wanted a five-year deal.
Stadium sponsors can also catch local wrath for traffic jams, noisy crowds, a perennially losing team, stiff ticket prices, insufficient parking, and rude employees. “When people are unhappy, the company gets the calls, not the stadium,” says Lawrence Silver, director of marketing for Raymond James Financial Services, a brokerage firm that paid $35 million for a 13-year naming deal for the Buccaneers’ football stadium in Tampa.
Another discovery: Better to attach your brand to fresh concrete than rename a sentimental favorite. When 3Com put its name on Candlestick Park in San Francisco in 1995, angry fans dubbed the stadium “Commercialstick Park” and 3Com took a lot of criticism.
Proponents of renaming say the math behind these deals is simple: If 30 seconds of ad time during the Super Bowl costs nearly $2 million, why not kick in a bit more and put your name on the stadium itself? And arena deals seem like a real bargain when compared with other sports marketing ploys, such as being one of many sponsors of a PGA golf tournament. “Before you pour your first martini you’ve paid $6 million, and that’s just for one weekend,” notes Russell Wallach of SFX Sports Group, which has negotiated many naming-rights deals for sports stadiums. “Then it goes away. But an arena is 365 days a year. You get news coverage, hospitality, and entertainment potential all year around.”
Marketing firms like to gauge their impact by counting the number of “impressions” generated. Then they compare the results to other forms of advertising. Measured this way, naming rights at a basketball or hockey arena can deliver anywhere from two billion to three billion impressions a year, says Cindy Shevrovich, research director at Joyce Julius Associates, an Ann Arbor, Michigan firm that values naming-rights deals. That’s equal to $30 million to $50 million worth of advertising exposure.
Moreover, companies that sign up for naming deals claim they get more than fleeting impressions—they get the chance to build better community relations. When San Diego set about restoring its stadium for the 1998 Super Bowl, it came up $18 million short. Qualcomm, a wireless phone provider based in the city, grabbed the opportunity to save the day. The company covered the shortfall in exchange for a 20-year naming-rights deal and got credit for keeping the game local. “The community got to see the game on TV, and we got more exposure,” says Jeff Belk, a Qualcomm vice president. “It was a real win-win."
