The state of the stadium naming rights market, and what it could mean for Spurs: An expert view

newschemeaerial

If there is one aspect of the new Spurs stadium scheme that generates more debate than any other, it is the question of naming rights.

This is understandable — the naming rights partner will become indelibly linked to the club, in the same way that, say, Emirates is now a piece of Arsenal’s fabric. It will become part of the daily conversation that we have as fans, and our matchday experience, and therefore it will matter profoundly to us.

As such, many Spurs fans dread that the naming rights partner may be somehow embarrassing (Pizza Hut Park), ethically questionable (say a badly behaved bank), or simply something that we don’t like, for whatever reason.

Ultimately though, there is no way that we are all going to be happy with the eventual partner, short of Harry Kane buying up the rights himself in lieu of taking a salary.

When I wrote extensively about the financing of the stadium earlier this year, the majority of comments I received were about my assertions on naming rights. I said that putting a value on a potential naming rights deal was like guessing the length of a piece of string, based on the wide range of income from previous deals that have been struck in the US and UK.

It is fair to say that a lot of people questioned this. Many claimed expertise in the sponsorship area — more, frankly, than I believed.

A frequent comment went: The NFL deal, and the potential of the stadium to be both an NFL and Premier League stadium, were a game changer in terms of securing a lucrative naming rights deal.

With naming rights a key part of the club’s funding strategy for the stadium scheme, Spurs will have conducted (or rather commissioned) a detailed analysis of the naming rights market, and come up with a figure that they can use in the projections for funding the project.

But how feasible is it really to put an accurate figure on what Spurs may get? How “real” will the impact of the NFL deal be when the club eventually puts the rights to market? And what is the state of the sponsorship market at the moment, particularly in the US where new stadiums are regularly built?

I wanted to get some expert opinion. So I got in touch with Michael Colangelo, the Assistant Director of the University of Southern California’s Sports Business Institute, and the Managing Editor of The Fields of Green, a website covering sports business. He very kindly agreed to answer my questions.

 

It appears that every year, there is a spectacular new stadium built for a franchise across the US major leagues. How crucial is a naming rights partner in terms of funding these projects?

Naming rights are extremely crucial, especially because they are used as a funding mechanism to build a stadium. Every time a new arena/stadium is built, one of the ways teams gain extra funding (through debt) is listing its projected income on naming rights. It’s all factored in. It would be very difficult to build a new stadium without projecting naming rights income into the capital structure.

How lucrative are these arrangements? For new projects, such as the Minnesota Vikings stadium, what sort of amount are NFL franchises bringing in from their naming rights deals?

Naming rights are the most lucrative form of sponsorship for most stadium construction projects. Naming rights deals are typically 20-25 years in length with a total of $100+ million at least for newer stadiums. The Minnesota Vikings deal with US Bank has been reported at 20 years at $220 million cost. Levi’s Stadium (49ers) is reported at $11 million/year. MetLife Stadium in New York is reported at $16 million/year.

Obviously the deals change on the size of the market, exposure, if the stadium will hold marquee events (Super Bowl, National Championships etc.)

How “easy” is it to strike these deals? By which I mean, is there a broad array of different businesses — not just finance industry, say — interested? And is there a “meeting of minds” between sponsors and franchises over how long these arrangements should last?

No deal with this much money involved is “easy.” There are multiple things to take into account when working with a naming rights partners. Many times teams want a naming rights partner who is also invested locally in their community. Levi’s has a San Francisco HQ. Target is HQ-ed in Minnesota and has naming rights for Target Field (Minnesota Twins). Gillette has the naming rights for the New England Patriots and is a local company.

As you can see there are a broad array of industries. Airlines, car companies, food/quick service restaurants, banks, financial institutions, and other companies see different benefits of being a naming rights sponsor. If there is room in the marketing budget then a major company could be a naming rights partner.

As for length of arrangements, they are generally long (20 years is typical). In some cases companies change names, are purchased, or no longer operate. Often times teams will then have to find another naming rights sponsor.

The new Spurs stadium will host two NFL matches per year initially. How appealing is this exposure to the US market to a potential sponsor, on top of exposure through association with a Premier League club? Or is two NFL games simply not enough?

Any company that is purchasing naming rights to the new Spurs stadium would be buying them for the entire benefit. Two games isn’t enough for a return on investment. It would make the most sense for a global company that wants exposure in the European market to partner with the stadium owners for naming rights. The more events/exposure the better for the naming rights partners. AT&T benefits from naming rights on Cowboys Stadium from every event held there, not just the 8 home NFL football games.

The stadium is widely seen as a home for a future NFL franchise, should the league opt to push the button on an expansion to London. How valuable a sponsorship opportunity would this be? And if so, how would this potential upside affect the club’s negotiations?

The NFL is doing the right thing by taking its time to expand outside of the U.S.. It has to make sure it has a viable market before putting a team in any major city, and the NFL is trying to build the game more every year by adding extra games in London. If it is financially viable (as well as competitively viable with travel etc.) the league will move to put a term permanently in London, but there is no rush to “push the button” so to speak.

NFL games at the venue still adds to exposure, so it should still be taken into account. Especially if its a Euro-based company trying to gain exposure in the US market. London games are often played early enough where it is the only game being shown on TV (or it is the nationally televised game). That potential upside could push the price of the naming rights higher than a normal stadium deal.

With audiences for the Premier League growing in the US, how appealing is the prospect of sponsoring a team such as Spurs? We’ve had Chevrolet, for example, spending big on Man Utd shirt sponsorship — is that considered a success, and sign of things to come?

This speaks more to the globalization of industry more than it does to just the world of sports. Every company is trying to gain exposure to international markets and sports is one of the easiest ways to do so. The Chevrolet deal is something people in the United States noticed. It is also helpful that Man Utd is one of the most well known teams in the world. Fans in the U.S. knew about Man Utd before the Chevy deal was signed.

Obviously the expansion of soccer fans in the U.S. is something Tottenham should take into account with any deal. The team has been shown more on NBC this year because they have been at the top of the table. As with anything in sports, teams get more exposure the more they win. If Tottenham is going to continually be at the top of the table it is better for their sponsors that want exposure in the U.S. market. It would not be surprising for more global companies to get involved in sponsorship/partnership deals outside of their market if they see a return on investment.

Spurs have talked about bringing in around £30 million per year in additional commercial income from the stadium, much of which will be from a naming rights deal. How realistic does this seem to you?

It’s important to note that not all of the deals will come directly from naming rights. A new stadium generates income in multiple ways outside of the just naming rights, although that will definitely be a part of it. New LED screens allow for more effective partnership deals and brand exposure. Boards around the stadium can have signage for the official car, bank, beer, soda, etc. of the team. Those partnership deals will also create revenue.

New stadiums also have more options for food, beverage, concessions, and apparel. There could be an increase in average ticket prices. The £30 million is achievable but the team will have to work hard with its partners to find the right deals.

About mechanics of these deals: The club has said that naming rights deals are normally struck mid-way through construction. Is this accurate, or are naming rights deals in US often struck before ground is broken?

It often depends on the market, but it is more likely that the deal is in place during construction than before the venue is built. There are multiple reasons for this — the design of the stadium may change, it is easier to price out a deal while the stadium is being built as naming right prices fluctuate (aka closer to the actual deal signage/activation happening), it allows for negotiation of the deal — and it isn’t rare for a deal be put into place a year before the stadium actually open.

Finally, just a bit of fun: can you give some names of potential sponsors who may have an interest? The two biggest naming rights deals in the EPL currently are Etihad and Emirates, but it’s surely time for something different. Can you think of any US corporations that may look it at it and think it of interest?

I try and stay out of the prognosticating business with deals like this. It’s tough to know where the global economy is going to be once the stadium is done being built. If banking is struggling those companies are less likely to sign deals. If the energy sector is down due to cheap oil prices it could take out energy companies.

In any case there will surely be interest. The Spurs new stadium will be hosting multiple events that provide sponsors with great exposure.

 

Thanks to Michael for taking time to answer my questions. For those interested in the business of sport, do check out The Fields of Green. For more Spurs chat, please give me a follow on Twitter, email or share your thoughts in the comments section.

 

Advertisements

13 thoughts on “The state of the stadium naming rights market, and what it could mean for Spurs: An expert view

  1. G Humphreys

    I’m pretty sure Daniel Levy has some ideas as to who may eventually take up the naming rights. A Spurs Director told me it’s a £200M package. However stadium cost has since gone up by £180M due to construction cost increases so it maybe more now.

    Like

    Reply
      1. G Humphreys

        My understanding was probably an Asian based company (I wouldn’t bet against AIA but just a personal view) would be more likely due to PL popularity. Obviously no names were mentioned but a deal of that magnitude has to be a global player. The Emirates deal at AFC is widely recognised to be “cheap” so hence it will take some time to finalise.

        Like

  2. THFC_Dan

    Why such elementary questioning?

    The “answers” given are blindingly obvious, indeed it’s common sense.

    It reads more like an education to you, than anyone else.

    Embarrassing.

    Dan

    Like

    Reply
      1. THFC_Dan

        Oh I’m sorry, I didn’t realise you only want comments that blow smoke up you.

        If you’re going to blithely dismiss, indeed mock, the contributions to your other blogs “…Many claimed expertise in the sponsorship area — more, frankly, than I believed…” then you really need to expect some blow-back. After all, that is what happens when you insult others’ intelligence and present yourself as some superior know-it-all.

        I don’t see what your “expert” has told you that wasn’t already known to anyone with a bit of common sense in their head? That’s why I find the questions asked to be bordering on the infantile. If you really needed to ask those questions, then it really DOES expose your own knowledge gaps, rather than fill anyone elses’.

        Like

  3. Paul Watson

    It’s fair to say that fella didn’t say much we couldn’t have guessed but it’s great you’re asking people like him questions on a continuous basis. Bravo.

    I wonder if a Chinese sponsor could become interested given NFL stating an interest in their market. Could really give a boost to China replicating what London have done. Plus EPL is huge there.

    Like

    Reply
    1. thespursreport Post author

      I thought comment on ties with local firms was interesting, not really noticed that with all the US deals. Wonder if it opens up possibility of a London firm using it to push outwards, rather than a global firm? I don’t take China talk that seriously, always next big thing in every contex

      Like

      Reply
    2. THFC_Dan

      Exactly. Added nothing.

      Might as well have been asking the guy about Cricket.

      Decent opportunity, poorly executed.

      Like

      Reply
      1. TTID

        Will you stop being pompous and rude!! Congratulations that you knew all of the answers to the questions posed!! Instead of mocking and being contrite, why don’t you take it upon yourself to try and educate and help the fan base as the writer of this site is!!

        Like

      2. thespursreport Post author

        THFC_Dan lives on the Skyscraper City forum, and is one of those people who sees themselves as some sort of a “guardian” of the blogosphere, protecting innocent people from ideas and articles that don’t entirely concord with their own world view. The psychology is fascinating, but as a blogger it is just something you have to put up with — 99% of people who comment on my blogs/social media are constructive when they disagree, and appreciative of the simple fact that this isn’t some clickbait site, rather the hobby of a Spurs fan who enjoys writing about the club and enjoys the conversations with fellow fans that stem from this. I certainly don’t post my articles up on Skyscraper City, but sadly THFC_Dan keeps on reading them despite his difficult experiences on my site so far. It’s more than a bit sad!

        Like

  4. Tom Roberts

    I would like the new ground to be called Nike Hart Lane because it is the only sponsor which I know which will sound similar to White Hart Lane

    Like

    Reply
  5. Pingback: A Spurs summer reading list | The Spurs Report

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s