SBD/February 1, 2011/Facilities

Farmers Insurance Signs 30-Year, $600M Naming-Rights Deal For AEG's L.A. Stadium

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, $600M naming-rights deal for a proposed 1.7 million-square-foot, 68,000-seat football stadium in downtown L.A. 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% during the first nine months of '10 compared to the same period in '09. "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, and Greg Luckman, the company’s CEO, said the popularity of the NFL and the value of returning a team to L.A. makes naming rights "an incredibly valuable deal and a breakthrough idea, even in an 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. Kelso: "To have the NFL come back to L.A. and for us to be involved in that is just such a huge thing. We saw the potential for this project to revitalize downtown forever and really wanted to be a part of that."

FARMERS ONLY COMPANY REALLY TARGETED: Kelso and Farmers went after the deal with a singular focus after taking a preliminary presentation last June. While some agency sources said they had 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 does not 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" (Terry Lefton, THE DAILY).

MORE DETAILS OF THE DEAL: In L.A., Sam Farmer in a front-page piece reports the deal is worth $700M over 30 years, and sources indicated that payments are "starting at $20 million for the first year and escalating incrementally every year after." The stadium has not been built, the site has not been approved and a team has yet to be acquired, and "no money will change hands unless each of those wishes becomes fulfilled." AEG President & CEO Tim Leiweke said that AEG has "had discussions with every NFL team that could potentially move ... although he declined to list them." Farmer notes NFL officials have "made it clear, however, that the L.A. vacancy will not be addressed until the current labor dispute between team owners and players is resolved." Majestic Realty Chair & CEO Ed Roski continues to prepare his stadium site in Industry, Calif., but several team owners and execs "have quietly indicated they prefer the AEG concept to Roski’s." Leiweke said that the Farmers deal "should stand as proof" that AEG Chair Philip Anschutz is "committed to getting the event center built" (L.A. TIMES, 2/1). Mirhashemi last night indicated that money will change hands prior to the stadium opening (Don Muret, SportsBusiness Journal).

LOOKING FOR MORE PARTNERS: AEG President of Global Partnerships Todd Goldstein said that the company is "seeking as many as a dozen additional founding sponsors for Farmers Field, in an effort to secure much of the funding for the project in place during the approvals process." He added that AEG would "make the stadium a destination for major concerts and college football games in addition to the NFL" (WALL STREET JOURNAL, 2/1).

IF YOU BUILD IT, WILL THEY COME? While it is unusual for a venue to sell naming rights before breaking ground, it is not unprecedented. Barclays in '07 purchased naming rights at the Nets’ planned Brooklyn arena. After numerous delays, Barclays Center is now scheduled to open in '12. 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 L.A. 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 if 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.

GETTING AN EARLY START: Kelso said another strong appeal to Farmers 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, Mirhashemi said, "Bringing football back to L.A. is a unique storyline that goes along with this particular project, but we believe this deal will confirm that naming rights work" (Lefton).

STADIUM NOT IN THE CLEAR YET: ESPN L.A.’s Arash Markazi reported even with the Farmers deal in place, AEG still has "several hurdles to clear before they can begin construction." The company must pass an "environmental impact review, complete the entitlement process and come to a long-term land lease agreement with the city." AEG also is asking L.A. for $350M in bonds that would "help build a new extension to the convention center that would replace the torn down West Hall and additional parking units" (ESPNLA.com, 1/31).

WE ARE FARMERS: DAILY VARIETY’s Stuart Levine reports Farmers "has been ponying more sponsorship coin in and around L.A. recently," including a three-year deal to rename the ATP World Tour 250 the Farmers Classic through '12. The company also title sponsors the just-completed PGA Tour event in San Diego (DAILY VARIETY, 2/1).
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