SBJ/Jan. 17-23, 2011/Marketing and Sponsorship

Planned L.A. stadium makes case for 'pre-build' naming rights

Terry Lefton
After the story broke in September about Madison Square Garden's mega-sponsorship deal with JP Morgan Chase (SportsBusiness Journal, Sept. 6-12, 2010, issue), which was larger than some of the biggest naming-rights deals now available at NFL stadiums in East Rutherford, N.J., and Arlington, Texas, reliable sources told us that New York Jets owner Woody Johnson gathered his sales troops and chided them for being unable to attract those same dollars to the other side of the Hudson River.

So how do the principals who spent a billion or more building the new homes of the New York Jets and Giants and the Dallas Cowboys feel about the recent revelation that Farmers Insurance is close to a naming-rights deal for a facility in downtown Los Angeles that hasn't been approved nor begun construction?

While an agreement could still fall apart, those close to talks said a deal was close. Amazingly without even having an NFL tenant to play in AEG's proposed NFL stadium. If you can sell naming rights without site approvals, construction costs or a team, then the Farmers Insurance deal could signal a whole new business: virtual naming rights.

"That's a business I like, as long as the commissions aren't virtual," joked 16W partner Frank Vuono, whose involvement in naming-rights deals includes Edward Jones Financial's naming rights to the St. Louis Rams' home dome. "Remember also that a naming-rights deal attracts other founding partners, and banks definitely look at all of those deals when they are evaluating construction loans."

There is one great unknown here.

"None of us know if Farmers is paying anything now, but if they are, this really could be a new revenue line," said Randy Bernstein, whose Premier Partnerships is selling naming rights for the Oakland stadium that is home to the A's and Raiders. "The pre-build is the key, because that's when the name gets outside the sports pages."

Measuring a
name's value

The following naming-rights evaluation
data from 21 Marketing is based on
Monte Carlo modeling within Oracle
Enterprise Performance Management
software. It runs hundreds of thousands
of simulations to formulate an evaluation,
and the following data details annual
exposure value of a naming-rights deal
at these facilities.
Minimum value: $64,231,299
Mean value: $68,131,582
Maximum value: $73,083,209
Minimum value: $84,338,119
Mean value: $90,057,151
Maximum value: $98,114,727
Minimum value: $85,238,401
Mean value: $92,293,579
Maximum value: $100,377,933
Source: 21 Marketing
Because so much value in a naming-rights deal is prior to the venue opening, one can't question the strategy. "We are five years away, minimum," said Gemini Sports' Rob Yowell, who did the deal for Honda on the Southern California home rink of the Anaheim Ducks. "Those will be years of great exposure. … So Farmers is a winner regardless."

When asked to recall any parallels, experts cited Barclays' investment in January 2007 in the new Brooklyn arena, which won't open until mid-2012, that will house the NBA Nets. "This is Barclays all over again," said Rob Prazmark of 21 Marketing, Greenwich, Conn.

Both the exceptional nature of the L.A. market and the NFL's absence there for 16 years combined to foment the pending Farmers deal. Could it happen elsewhere? "There's only one NFL and only one L.A.," said Mark Noonan, president of FocalSport, Southport, Conn., which helped engineer Citi's deal of the New York Mets' home field. "This is a great pre-emptive strike by AEG to distinguish the viability of their project."

Bernstein recalled that he did a deal with Cisco for a proposed stadium in Fremont, Calif., for the A's. In that case, there was a team, but no stadium ever materialized. Premier is currently representing a group attempting to build a sports arena in Las Vegas, another locale where "pay-to-play" naming rights might be saleable.

"I'm not saying there isn't a lot of value to it, because Farmers has already built a new level of public consciousness," said Mike Reisman, a principal at Velocity/Team Epic, which assisted on the Prudential Center and Citizens Bank Park deals. "But until the stadium happens, it's the 'Seinfeld' of naming rights: a story about nothing."

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