Pandemic slows but can’t halt stadium naming rights deals

By Bill Shea of The Athletic–While live team sports are inching closer to a possible return after months on ice because of the global pandemic, there has emerged an additional business challenge — naming rights.
A handful of teams with current or future stadiums and arenas are in the process of seeking corporate names for their buildings, or are hammering out deals worth hundreds of millions of dollars to attach brand names to the venues, but that has been complicated by the pause in sports…
… Questions remain unanswered about when fans can return to live games and events, but those who work in the naming rights business say deals will still happen, just as they did during and after the 2008 Great Recession and its fallout. They just may take longer, and there might not be splashy fanfare announcements.
Naming rights deals are important to teams because while they’re not the biggest source of income – that’s usually broadcast rights – they’re still a reliable stream of cash, and that at least partially fuels the push by the major leagues to get back on the air…
… Some of the major-league clubs seeking naming rights deals include the New Orleans Saints, Miami Heat, Pittsburgh Steelers and Pirates, New York Islanders and Los Angeles FC. There also are college bowl games, such as the Rose Bowl, in search of a new corporate sponsor.
There have been no reports of brands ending name deals because of pandemic-related bankruptcy or squeezed budgets. Mostly, they’re either a new facility seeking a name for the first time, or a deal has reached its contractual end and a search is on for a replacement.
Mercedes-Benz said in May it would not renew or extend its 10-year naming rights deal with the Saints that ends in 2021 for the venerable Superdome. Instead, the company will concentrate on its 27-year contract with the Atlanta Falcons at the newer Mercedes-Benz Stadium that has been estimated at $10 million to $12 million annually.
The Superdome deal was reportedly worth $5 to $6 million a year to the Saints, who are confident a replacement sponsor will quickly be found…
… Major League Soccer has five future stadiums in the works that will need names for expansion clubs. A current team, LAFC, also is in the market for a stadium name after Banc of California last month paid a $20.1 million fee to exit its 15-year, $100 million deal 12 years early.
The bank said its decision was based on a shift in business focus and expense-cutting under new executive leadership rather than because of the pandemic.
Regardless, the team is left to find a new naming rights partner at an inopportune time. LAFC gets a total of $35 million from the fee and past payments but forgoes $87 million that it now must try to replace with another sponsor willing to pay that amount or more.
In Pittsburgh, both Heinz Field (Steelers) and PNC Park (Pirates) are in search of naming rights as 20-year deals are at their end and the brands have signaled they don’t plan to renew. Neither club provided specifics on their search process.
The Islanders’ $1.3 billion Belmont Park Arena is scheduled to open in 2021 and is seeking a name to replace its tentative one. The team didn’t respond to a request for comment.
In Seattle, the old KeyArena that’s being entirely redeveloped at a cost of $930 million for the city’s expansion NHL club is in talks for a corporate name…
… A couple of teams worked out naming rights deals not long before the pandemic struck: The LA Rams last fall inked a 20-year, $400 million contract with San Francisco-based Social Finance Inc. to call their new $5 billion venue (shared with the Chargers) SoFi Stadium.
The Oakland Raiders relocated this year to Las Vegas and have new stadium that locally-based budget air carrier Allegiant Airlines is putting its name on for a reported $20 million-plus annually for 30 years. The airline expects to get the equivalent in $90 million worth of advertising spends with its Raiders deal, according to company SEC filings.
The Raiders deal also is an example of the risks of naming rights deals: Allegiant has said it has been losing $2 million a day because the pandemic has crippled air travel, but it has not indicated any plans to exit or reduce its obligation.
Naming rights typically are paid to the team or public authority that owns the venue at the start of the year, although there are occasional examples of a company paying everything up front. Example: Ford Motor Co. paid $50 million for the rights to name the stadium where the Detroit Lions play in 2002, and SEC filings show that the automaker paid the money entirely over three payments that year. It’s a 25-year deal.
The pause in live sports has siphoned the present value of naming rights deals, according to data from Ann Arbor, Mich.-based analytics firm Joyce Julius & Associates. It analyzes mentions of brand names in print, digital and TV media and calculates how much that exposure would cost if the company had to buy an equivalent amount of paid advertising.
The firm’s research shows that MLB’s 20 stadiums with corporate names averaged $12.5 million worth of value – based on nearly 8,000 mentions of the venue names in TV, print and online reports – from March 28-May 8 last year. In that same stretch in 2019, the brands got an average of $3.6 million in exposure value from just 2,200 mentions. That’s a 70 percent decline in value.
While the pandemic eventually will end, will its legacy leave an imprint on sports business like naming rights?