THE BUSINESS OF STADIUM NAMING RIGHTS
Updated: Nov 21, 2020
This article was originally published on August 7th, 2019.
Sports purists decry that corporate stadium naming-rights deals are another step in the crass commercialization of sports. While team owners see the deals in a different light; a well-negotiated package that can bring in hundreds of millions of dollars in revenue for a team.
Ever since the Pittsburgh Steelers moved to their new stadium on the city's North Shore, in 2001, the 68,000-seater venue has been known as Heinz Field.
The original 20-year deal signed by the Steelers and Heinz was reported to be worth $57 million. Meaning the Steelers receive $2.85 million each year.
However, Heinz looks highly unlikely to extend its current deal. One reason for the split is that Heinz is no longer headquartered in Pittsburgh. The company is now based in Chicago following its 2015 merger with the Kraft Foods Group.
Kraft Heinz is still in negotiations over extending the deal, but that the distance between the two parties’ valuations is ‘vast’. The exorbitant costs for a brand to slap its name on a stadium, in today’s sports climate, makes brands ask: it’s actually worth it?
History of Naming Rights
In the mid 20th century it would have been unusual to see a stadium or arena named after anything other than a person or geographic location.
While nowadays the opposite is true, to see a stadium in North America going by a nondescript moniker is even stranger.
So how did our stadiums become billboards capable of seating thousands of people?
In 1953, Anheuser-Busch bought the St. Louis Cardinals, with the idea to rename the ballpark "Budweiser Stadium," after the company's most popular product.
National League Commissioner Ford C. Frick would step in to stop the deal, citing public relations concerns about naming a ballpark after a brand of beer.
However, Frick was unable to stop Anheuser-Busch president August Busch, Jr. from renaming the stadium after himself. Therefore, the Cardinals would open the 1954 season in Busch Stadium.
Anheuser-Busch would still build a large Budweiser eagle, atop the left-field scoreboard which would flap its wings after a Cardinal home run.
In 1955, Anheuser-Busch would also introduce a new economy lager branded as "Busch Bavarian Beer." This would see the company managing to get around Frick's ruling and allowing the ballpark's name to be branded by what would eventually be Anheuser-Busch's second most popular beer brand.
The $2.85 million that Kraft Heinz is currently paying to the Steelers per year, is well below modern standards.
Examples of deals signed by the Steelers NFL rivals include the Philadelphia Eagles. Who recently penned a 14-year renewal, with asset management firm Lincoln Financial Group worth a reported $167 million, providing the franchise with approximately $12 million per year.
SoFi will also reportedly pay $20 million per annum for its pending 20-year deal to put its name on the new Rams/Chargers stadium in LA. Add this to the deal American Airlines has done with the new stadium, to pay $90 million over 10 years, to sponsor the plaza and main entrance.
Outwith the NFL, Scotiabank set a record with their $639 million 20 year deal for the naming rights to the building that houses Toronto's Maple Leafs and Raptors.
Is It Worth It?
Stadium naming rights are a commodity that should not be underestimated in the modern world. It could be argued that it is more valuable than ever before.
From a business perspective, this type of branding is not meant to convince people to buy your product. It's simply to remind people the product exists and increase those brand impression rates.
Compared to TV advertising, it's a bargain, a 30-second television spot costs about $2.5 million during the Superbowl. The stadium with the brand name will be front-row-center for the two weeks leading up to the game as well as the prominently displayed branding message during the game.
Moreover, something that is often overlooked is the digital side of naming rights. Games such as Madden offer free marketing to the 1.7 million households, who purchase these video games each year. Many being the elusive 18-35-year-old male demographic that marketers crave so much.
Outwith the normal gaming Madden as an eSport is also starting to take off. Which sees events reach almost 100,000 viewers, in the key demographic.