Buying naming rights is a two-way street. The sponsor gets exposure; their name on the lips of potential users of their services, and community respect for proudly standing up for the venue that their favorite teams and shows call home. The seller gets money, a lot of it in many cases, of course. When it’s good, it’s great. But what happens when a naming rights deal goes bad because of bankruptcy or bad publicity? Venues Today spoke with top industry insiders for best practices for when your naming rights deal goes belly-up.
The Good: Air Canada Centre, Toronto, and Scotiabank just inked a historic $800 million deal for the naming rights to the venue that’s home to the Toronto Maple Leafs and Toronto Raptors. The record-breaking deal sent shockwaves through the industry and will undoubtedly shake-up the sports marketing landscape for the foreseeable future.
Reported terms of the deal will see the Canadian bank pay $40 million a year for the next 20 years to rename the building. The price tag is massive — more than 10 times what Air Canada paid for the rights nearly 20 years ago — and bigger than any naming rights deal the country has ever seen.
“The name change will become effective July 1, 2018,” said Wayne Zronik, SVP, music & live events, Air Canada Centre, Toronto. “The 20-year strategic partnership also includes new philanthropic opportunities with the MLSE Foundation and a digital collaboration between MLSE and the Scotiabank Digital Factory.”
“This is a game-changer,” said branding and marketing expert Dan Griffis, president, global partnerships, OVG. "I'm a big fan of this deal.”
Griffis put together the deals for Target Field and Target Center, both in Minneapolis, making him intimately acquainted with the buy-side of the equation.
“An entity like Scotiabank has the resources to really understand the value of this arrangement. Air Canada Centre is one of the premiere buildings in North America,” said Griffis. “The biggest piece to naming rights is civic pride and Scotiabank just purchased a whole lot of goodwill from the Canadian hockey community.”
Another perk in naming rights deals is the business-to-business aspect, said Griffis. “Hosting clients and being able to use the hospitality function of the venue can be priceless,” he said.
“What a great deal,” said Eric Smallwood, managing partner of sports marketing consultancy Apex Marketing Group. “The bank will get unlimited exposure by announcing the deal a year early; it’s almost like they will get a free year of it.”
The Bad: Sometimes, naming rights deals feel right; play-out to great effect and are supported by the fans, but unforeseen circumstances turn the deal sour. The Denver Broncos and Sports Authority was such a deal.
The sporting equipment company absorbed the naming deal for the field the Broncos played on from Invesco in 2011. The contract called for $60 million over a 20-year period. Signs were changed; the fans embraced the change, but joy through the land was interrupted when the company went out of business and filed for bankruptcy in 2015.
Matt Sugar is the director of stadium affairs for Metropolitan Football Stadium District, the owner of Sports Authority Field at Mile High, home of the Broncos.
“There were rumors about how Sports Authority was doing,” he said. “But there was no action we could take,” he said, about trying to get ahead of the bad news coming down the pike. “They paid a year in advance and their contract was still good.”
The Broncos ultimately bought the naming rights themselves and tried to quickly find a new sponsor, to no avail, said Sugar.
With no partner materializing after the first attempt (they’re currently making a second push), the team and stadium was left in a quandary: do they rip out the Sports Authority signs and rebrand as Broncos Stadium, at great expense, until a new partner emerges or sit tight?
“Signs for a football stadium can run anywhere from $1 million to $1.5 million,” said Smallwood. “Changing them to only change them again doesn’t make a whole lot of financial sense.”
The Broncos choose to keep the Sports Authority name. “It takes time for the fans to call a stadium by a new name,” said Smallwood. “The Broncos did the right thing by keeping the Sports Authority name until they finalize a new sponsor.”
Griffis agrees. “It’s not that Sports Authority did anything wrong,” he said. “Keeping the name until a new sponsor shows up is the prudent thing to do.”
The dot-com boom and bust 20 years ago provided another high-profile example of The Bad. Gillette Stadium, home of the New England Patriots, was due to be called CMGI Field, after the tech company that paid $120 million for the naming rights for 15 years starting in 2000, a huge deal back then. But be careful about deals too good to be true — the internet firm backed out of the contract before the ink was dry.
The Ugly can be summed up in one word: Enron.
The Enron Corporation was an American energy, commodities and services company based in Houston. They acquired the naming rights to the venue the Houston Astros called home in 1999. The deal had a $100-million price tag and was supposed to stretch over 30 years.
Just two years later, the company was enveloped in one the biggest corporate-fraud scandals in American corporate history. Enron’s misdeeds rocked the business world, wrecked lives, put other businesses out of business and the name Enron conjured up images of corporations run amok and opened up the door to public mistrust of big business.
“Any company that has bad PR impacts the venue it sponsors,” said Smallwood. “Enron is the prime example. Once the depth of the deception was uncovered, Enron became a dirty word. Who would want that name on your venue?”
The Houston Astros didn’t, and the team reclaimed the naming rights for $2.1 million.
The best plan to ride out a naming rights storm is transparency, said Griffis, who experienced a PR tornado after Target got hacked and a huge data breach was uncovered. “You must let the customers — and fans who go to the venues — know you are working hard to fix the problem,” he said. “It takes consistency in messaging to regain public trust. Most importantly, actions speak louder than words.”
One of the smartest things a venue can do is get out in front of a bad situation by changing the name from Field to Park to Stadium, according to Smallwood. “One of the best moves they made in the Enron/Minute Maid switch was change it from ‘Enron Field’ to ‘Minute Maid Park,’” he said. “It took the negativity of ‘Field’ out of the equation and changed the vernacular even more so and quicker.”
“In Enron’s case, the company became synonymous with corporate greed and getting the name off there as quickly as possible was the wisest thing to do for the stability of the venue,” added Griffis. “If the PR is ugly and it’s a lost-cause, get that name off ASAP.”
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NAME GAME: THE GOOD, THE BAD AND THE UGLY
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