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SBD/January 31, 2011/Facilities
AEG, Farmers Insurance sign $600M naming-rights deal for downtown L.A. stadium
Published January 31, 2011
Five days before the Super Bowl will be played at a stadium without a corporate name, AEG today will announce that it has signed Farmers Insurance to a 30-year, $600 million naming-rights deal for a proposed 1.7 million square foot, 68,000-seat football stadium in downtown Los Angeles that has no architect, no site approvals and no NFL team.
The proposed billion-dollar stadium will be called Farmers Field. Some of the parties involved in the deal were touting it as the largest naming-rights contract ever. Farmers CMO Kevin Kelso called it an exceptional branding play, especially crucial now, with the always-competitive insurance market spending more than ever on media and sports marketing assets.
According to Kantar Media data, ad spending by insurance brands during sports programming grew an eye-opening 36 percent during the first nine months of 2010 compared to the same period in 2009.
“More than anything, this is a national stage for us,” Kelso said. “This is going to put Farmers up as a brand and get exposure at a really high level, and that’s very attractive to us. ... Having our name associated with this will give us a TiVo-proof exposure opportunity.”
GroupM ESP advised Farmers on the deal. Greg Luckman, CEO of the marketing consultancy, said the popularity of the NFL and the value of returning a team to Los Angeles makes L.A. naming-rights “an incredibly valuable deal and a breakthrough idea, even in a increasingly competitive and marketing-intensive category, like insurance.’’
Kelso added that the chance to have a stake in reuniting the NFL and L.A. was alluring, as was the opportunity for Farmers, an L.A.-based company, to be part of the city’s continuing downtown economic revitalization, which was started by AEG with the Staples Center/L.A. Live complex.
“To have the NFL come back to L.A. and for us to be involved in that is just such a huge thing,” he said. “We saw the potential for this project to revitalize downtown forever and really wanted to be a part of that.”
Consequently, Kelso and Farmers went after the deal with a singular focus after taking a preliminary presentation last June. While some agency sources said they’d received feelers about a naming-rights deal last year, AEG Global Partnerships COO Shervin Mirhashemi said, “We literally pitched one company. … We knew from [Farmers’] initial reaction that they shared the same vision for this project. Once you know that, there’s no reason to fish anywhere else.”
Under the deal, Farmers gets broad exclusivity in the insurance and brokerage categories; signs inside and outside the complex; video boards; activation areas; branded clubs; and other hospitality. With no team in place, this is a rare naming-rights deal that doesn’t include media other than signage. Farmers also gained insurance business through the deal. Without specifying, Kelso said, “There is a business opportunity here for us from a pure insurance standpoint. AEG is a very significant customer of [parent company] Zurich Insurance already. ... As part of the deal we have agreed to broaden that relationship.”
Today’s planned announcement in the West Hall of the Los Angeles Convention Center, the site of the proposed stadium, will include Los Angeles Mayor Antonio Villaraigosa, a tacit endorsement that AEG’s stadium proposal appears to be the winner after more than 16 years of false starts in trying to bring the NFL back to L.A. Both the Raiders and Rams left after the 1994 NFL season.
While it’s unusual for a venue to sell naming rights before breaking ground, it’s not unprecedented. Barclays in 2007 purchased naming rights at the NBA Nets’ planned new Brooklyn arena. After numerous delays, the Barclays Center is now scheduled to open in mid-2012.
What is curious is that the Farmers Field deal was consummated without a team as a building tenant. Considering how tortured the attempt to return an NFL franchise to Los Angeles has been, the confidence exhibited by both parties that an NFL team will play in Farmers Field is either a remarkable display of bravado or an indication that the deal for another NFL team to move there is fait accompli. So, a leading question is whether Farmers pays the same whether or not an NFL team plays on its field.
Sources said one clause in the deal has them paying more if a second NFL team moves in. Is it then logical to assume they would pay a lower rate for no NFL team?
“The contract addresses a number of contingencies,’’ Kelso said. “The reality is there’s very little likelihood that an NFL team is not going to come into this stadium when it’s built. I am not worried about that.”
Kelso said he and other Farmers execs met with senior NFL league officials early in the process. “We came away from those conversations wanting to do the deal, so draw your own conclusions,’’ he said.
Another strong appeal to Farmers, Kelso said, was getting in early so as to “influence design and make sure it’s not just signage but an experience that will help people understand your brand and hopefully come out of there wanting to buy products from you.”
As for any impact on the two new NFL stadiums that are already open but are without naming rights, in New Jersey and Texas: “Bringing football back to L.A. is a unique storyline that goes along with this particular project,” Mirhashemi said, “but we believe this deal will confirm that naming rights work.’’
Head of the class
At $600 million over 30 years, the Los Angeles stadium naming-rights deal for Farmers Insurance becomes the largest such deal in place in sports as measured by total price.
Current stadium naming-rights deals
|Venue||City||Sponsor||Price||No. of years||Avg. annual value||Expiration year|
|CitiField||Queens, N.Y.||Citibank N.A.||$400 million||20||$20.0 million||2028|
|Reliant Stadium*||Houston||Reliant Energy Inc.||$310 million||31||$10.0 million||2032|
|Gillette Stadium**||Foxboro, Mass.||Global Gillette||$240 million||15||$8.0 million||2031|
|FedEx Field||Landover, Md.||FedEx Corp.||$205 million||27||$7.59 million||2025|
|Minute Maid Park||Houston||The Coca-Cola Co.||$178 million||28||$6.36 million||2029|
|University of Phoenix Stadium||Glendale, Ariz.||Apollo Group Inc.||$154.5 million||20||$7.72 million||2025|
|Bank of America Stadium||Charlotte||Bank of America||$140 million||20||$7.0 million||2023|
|Lincoln Financial Field||Philadelphia||Lincoln National Corp.||$139.6 million||20||$6.98 million||2022|
|Lucas Oil Stadium||Indianapolis||Lucas Oil Products||$121.5 million||20||$6.07 million||2027|
|Invesco Field at Mile High||Denver||Invesco Institutional NA||$120 million||20||$6.0 million||2021|
|* Reliant has the naming rights to the entire Reliant Park, which also includes Reliant Arena.|
|** Includes 15-year extension signed in 2010|
|NOTE: Barclays Center, the planned new home of the NBA Nets, also has a deal valued at $400 million over 20 years.|
|Source: SportsBusiness Journal archives|