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Players joined team and Levi’s execs to celebrate the deal last week.
Photo by: TERRELL LLOYD / 49ERS
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The San Francisco 49ers received fair value for selling naming rights to Levi Strauss & Co. for their new stadium, considering the club’s asking price was much higher several years ago, consultants familiar with the negotiations say.
Last week, officials with the 49ers and Levi’s announced a 20-year, $220 million deal for Levi’s Stadium, the $1.2 billion facility under construction in Santa Clara. The deal, carrying an annual value of $11 million, ranks No. 1 in the NFL for a one-team building and is second-highest in the NFL behind MetLife Stadium, home of the Jets and Giants, according to SportsBusiness Journal research. MetLife’s agreement is valued at a minimum of $17 million a year.
Consultant Rob Yowell studied naming rights for the team seven years ago while working for The Bonham Group. Yowell, now president of Gemini Sports Group, came up with a value of $15 million to $20 million based on hospitality assets, signage, perceived value of the NFL brand association with the 49ers, comparable deals and the anticipation of hosting the Super Bowl and a college bowl game.
That, however, was before the recession hit.
“When we ran the numbers on it, we were at a time and place where those numbers could’ve been achieved,” Yowell said. “To get $11 million a year is not a bad deal today. Levi’s is a marquee brand, a local firm and a big win for the 49ers. It’s not like those deals are falling out of the sky.”
The team hired CAA Sports in April 2011 to consult on naming rights, and together they started with a range of $15 million to $20 million a year, CAA Sports co-head Michael Levine said.
The 49ers reduced their initial asking price in part because they had six founding partners on board, Levine said. Those multiyear deals are valued in the seven figures annually.
“The nice thing about where the 49ers ended up is that the project had such a strong level of success that they were in position to open the stadium without a naming-rights partner,” he said.
A bonus was Levi’s taking ownership of apparel, a nontraditional category compared with banking and carbonated beverages, Levine said, which enables the 49ers to sign deals to fill those other platforms.
“It doesn’t preclude us from going out and bringing in other partners,” said Jed York, the 49ers CEO.
The naming-rights deal originated at a mid-December dinner with York and Levi Strauss President and CEO Charles “Chip” Bergh. A mutual friend arranged the evening to introduce the two Bay Area leaders, who met at Spruce, a restaurant in the Presidio Heights neighborhood of San Francisco. Over multiple courses, Bergh, a vegan, and York, who ordered the duck, began discussing the prospect of striking a long-term deal.
They discovered that, in one respect, a partnership would be as fitting as a favorite pair of jeans: The Niners were the first big league club to call the Bay Area home, and Levi’s, a 144-year-old company, clothed the original 49ers, the miners of the mid-1800s Gold Rush for whom the NFL team is named.
York knew the challenges associated with signing a long-term naming-rights deal. His family, owner of the 49ers, saw two naming-rights deals come and go at Candlestick Park, the team’s current home. Those long-gone agreements with 3Com and Monster were in the back of York’s mind as he broke bread with Bergh.
It helped the 49ers that Bergh had been down this path before, York said. Before taking over Levi Strauss in 2011, Bergh spent 28 years with Procter & Gamble, and he was part of negotiations on the extension of P&G brand Gillette’s naming-rights deal for the New England Patriots’ stadium.
“It was a fun night. … We were trying to feel each other out,” York said. “He knew the value of naming rights and how it worked in dealing with the Patriots. It helped speed things up when you would ordinarily have to sell and convince somebody. He knew what worked.”
York and Bergh were “like-minded CEOs” sharing a vision in innovation and sustainability at the stadium over the course of a 20-year marriage, said John Vidalin, the 49ers’ chief sales officer, who was involved in the negotiations.
The talks intensified over the last four months; meanwhile, the football team’s timing was impeccable. As discussions continued with Levi’s, the 49ers marched through the playoffs on their way to February’s Super Bowl.
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Construction continues at the $1.2 billion stadium, scheduled to open in August 2014.
Photo by: TERRELL LLOYD / 49ERS
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About two months ago, Levi Strauss & Co. hired Wasserman Media Group to evaluate the terms to ensure that the brand got what it paid for, said James Curleigh, president of the Levi’s brand.
Officials on both sides worked hard to get a deal done in time to announce it on Levi’s Community Day on May 8. It was important to Levi’s corporate that the naming-rights deal be part of the annual event, in which employees volunteer for charitable causes worldwide, Vidalin said.
The deal comes just before the NFL is scheduled to announce the site of the 2016 Super Bowl, on May 21. The 49ers and Santa Clara submitted a bid and are the front-runner for the game, the 50th anniversary edition.
Levi’s Stadium is set to open in August 2014. “Getting a deal done now makes it more powerful for the brand,” Yowell said. “Levi’s can now spend the next few years building equity. It’s the same thing as what Staples did in Los Angeles — it came out of the ground as Staples Center.”
Levi’s inventory includes prominent exterior and interior signs, including signs atop the two end zone scoreboards; two midfield suites; and naming rights to Club 501, a club lounge named after its signature jeans brand.
Sourdough Sam, the 49ers bushy-faced mascot, and the team’s cheerleaders will be decked out in Levi’s apparel, Vidalin said.
Other creative programs are in development, including platforms tied to mobile devices with technology that has yet to be invented, Levi’s Curleigh said.
“We don’t want to lock ourselves into anything specific right now,” York said. “We have a year to activate where we can launch some trial balloons to see how we can have fun with this.”
Levi Strauss & Co., which also has its name on the Levi’s Landing section in right field at San Francisco’s AT&T Park, was among more than 100 companies the 49ers met with over the past two years to discuss naming rights and other partnerships, Levine said. The list was cut down to about 30 firms, team officials said.
In addition to the six founding partners, five of which are related to technology, the 49ers plan to sell two more tech deals in addition to filling the automotive, banking and credit card categories, York said.
Some industry observers were surprised that the 49ers did not sign a tech firm to naming rights considering they sit in the heart of Silicon Valley.
“Technology companies aren’t looking at 20-year deals,” Yowell said. “Ten years makes them hyperventilate. They don’t know if they’re going to be around that long. Levi’s has been around for more than 100 years. What’s another 20?”
