SBJ/March 14-20, 2011/Marketing and Sponsorship

In K.C., mixing naming rights and doing the right thing

Every day, the unfinished steel and concrete structure in the western suburbs of Kansas City, Kan., better resembles the rendering of Sporting Kansas City Park, the $200 million, soccer-specific home of Sporting Kansas City. In late September 2010, Sporting Kansas City CEO Robb Heineman sent Lance Armstrong Foundation CEO Doug Ulman a picture of the rendering with the words of his foundation alongside, “Livestrong Park.” It was not a blind pitch, as both organizations did business with the Kansas City-based American Century Investments group.

Livestrong
GETTY IMAGES
From left, Robb Heineman, Doug Ulman, Lance Armstrong and Cliff Illig announce the deal last week.
“When someone approaches you with an idea you’ve never thought about, it seems crazy,” said Ulman, whose Livestrong organization is most associated with cancer research, Nike and the seven-time Tour de France champion. The picture sat on Ulman’s desk for two weeks, and to his surprise, it routinely caught the attention of his office visitors. “I started to realize there might be something big here, something innovative,” he said.

That was the first in a series of steps that led to last week’s announcement that Livestrong will become the naming rights partner of Sporting Park, which opens on June 6. The marriage of the cancer foundation and Kansas City’s recently rebranded professional soccer team (formerly the Wizards) is not the most novel part of the deal, which was the talk of sports marketing circles last week. In a unique twist, Livestrong is paying nothing for the rights or activation at the park. The team, instead, will cover all activation costs, and will pay the foundation an undisclosed percentage of all stadium revenue — including a guaranteed minimum of $7.5 million — over the six-year deal.

Both parties were quick to point to altruism as the force behind the deal. “The core tenet of this relationship is to support the [Livestrong] cause,” Heineman said. “We’d love it if we could give $20 million.”

Ulman, who played college soccer at Brown, told the team from the outset that Livestrong would not pay a naming-rights fee, and said that Livestrong would only come on board if there was “raised awareness and significant financial impact” from the partnership. A source close to the foundation confirmed that, since 2007, Livestrong has required partners to guarantee minimum contributions — usually $1 million to $1.5 million per year — to use the brand’s name.

Timing also drove the deal, and Heineman said that the four-year political debate over the stadium’s public financing meant the organization got a late jump in searching for naming-rights partners. Sources said the team simply found no suitors that would come close to the minimum $1 million to $1.2 million annual value the team and the league were seeking. Heineman admitted that the team pursued half a dozen traditional naming-rights opportunities, and that Livestrong was the “outlier.” But he insists that a lukewarm sponsorship market wasn’t the reason for the partnership.

“Yes, it would have been difficult to say no to a [deal] that would pay you $3 million for 10 years,” Heineman said. “We never got to contract terms with [anybody else]. But this is an opportunity that we could not have done with a traditional sponsor.”

Naming-rights analysts contend the team most likely found its options limited for traditional naming rights, considering the scarcity of Fortune 500 firms in Kansas City. Randy Bernstein, president and CEO of sports agency Premier Partnerships, which brokered the naming rights for FC Dallas’ Pizza Hut Park, said his firm could not find a sponsor to name the field at Arrowhead Stadium, where the Kansas City Chiefs play. “Kansas City is not one of the stronger corporate headquarters in the U.S., with Sprint a notable exception, and they obviously signed a long-term deal [in 2004] with AEG for the new arena in town,” Bernstein said. “National companies have a limited interest in Kansas City due to its market size and geographical location.”

Heineman said the stadium and the partnership with Livestrong are the centerpieces of the team’s new membership model, which invites fans into an online community where they engage with products and marketing from team partners. The membership is free, and members receive discounts to partner products and other perks, such as unlimited free tickets to away games and three free tickets to home games. Partners receive marketing data on the members.

“They are a really special and innovative ownership group,” said MLS Commissioner Don Garber. “They are in a small market but they have big goals and aspirations.”

Heineman said the team has already seen positive business from the deal — in the 24 hours after the partnership was announced, the club sold 400 season tickets, its greatest single-day haul in the team’s 15-year history. Looking ahead, he foresees the stadium hosting Livestrong concerts and other events and predicts that revenue from those events could equal any traditional naming-rights deal he could have secured.

Ulman said that plans for holding other Livestrong events at the facility were only in the discussion stage. “This is the first time we’ve had this type of access to a world-class facility,” Ulman said.

The deal raises questions of how the team will balance its leaguewide partnership with Adidas and an alliance with Livestrong, which has a long-standing relationship, and is closely identified, with Nike. The stadium’s logo does not include a Nike swoosh. But Heineman said that a team store at the stadium would sell Livestrong-branded Nike clothing, and that revenue generated from the sale of Adidas-made team jerseys and clothing would be included in the donation to Livestrong.

A spokeswoman from Adidas declined to comment. But one marketing executive believes Livestrong’s strong ties to Nike and its major presence on the building is detrimental to one of MLS’s biggest sponsors. “Even if there are no [Nike] logos, it’s well-known that Livestrong and Nike are almost interchangeable — it’s basically Nike Stadium, that’s what you’re saying,” said Lou Imbriano, former vice president and chief marketing officer for the New England Patriots. “If I’m Adidas, I’m not too pleased.”

Heineman said he does not see the Livestrong deal as risky to the Adidas partnership. “Adidas is a very important partner for us and we’ll do everything we can to make them feel good about the Sporting Kansas City brand,” he said.

The partnership also raises questions of how the team will deal with the millions in lost revenue — a traditional naming-rights deal could have earned the club $5 million to $10 million for a six-year deal.

stadium rendering
SPORTING KANSAS CITY
The stadium is scheduled to open June 6.
Heineman said the city of Kansas City, Kan.’s $147 million contribution in sales tax and revenue bond sales has helped ease much of the financial burden. He declined to say how much the team contributed to the stadium project and said that the stadium’s public financing was “irrelevant in our decision” to partner with Livestrong.

Several outside analysts noted the tax implications of the deal, citing the team’s ability to write off some of the partnership as a charitable donation. Heineman said he did not know how much the team would write off. “It’s not like we did this because of tax planning,” he added.

FC Dallas President and CEO Doug Quinn, who battled and survived a bout with throat cancer, said the Livestrong deal signals the start of a cause-marketing trend and pointed to FC Barcelona’s jersey deal with Unicef as the beginning of a move by sports enterprises to donate valuable inventory to charitable causes.

“I expect to see more of it,” Quinn said. “It could be a stadium, it could be a jersey, it could be a car, but I’m confident it will happen again.”

Staff writers Don Muret and Tripp Mickle contributed to this report.

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