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At Your Leisure - 23 April 2007

The Name Game

Sports sponsorship is big business. The industry is a multi-billion dollar concern. The benefits of associating a brand with a sporting event or club can be worth millions to business organisations. The revenues generated by business sponsorship of sport are often a vital part of the financial structure of clubs or events.

This At Your Leisure looks into sponsorship in the USA and the UK. It focuses on the contribution made by sponsorship to the funding of major sports events such as the London 2012 Olympics. It also takes a look at the business of naming rights in sport and beyond.

How can major events sponsors be protected against ambush marketing? What value can be attached to naming rights deals? What are the pitfalls of such contracts? How is the idea of naming rights being rolled into new non-sports areas?

The World Cup, the Olympics, a new stadium, a new species of plant or animal; what's in a name for the parties involved?

Sponsorship of major sporting events

In the 2006 football World Cup, there were a total of fifteen official sponsors. In the 2010 and 2014 competitions, football's world governing body, Fifa, are cutting the number of sponsorship packages to six. This follows a growing trend among rights owners; as traditional advertising channels become commercially saturated, the last thing that rights owners want to do is create oversupply in the sponsorship market.

Major events usually involve two different sets of rights:

  • 'Qualitative rights' guaranteeing the exclusive right to promote your brand, within a certain category.
  • 'Quantitative rights' for exposure on the media channel, through what are known as 'break bumpers' or through perimeter hoardings.

Traditionally, brands adopt the second approach, but how should sponsoring organisations adapt to the demands of the 2012 Olympics in London? The Olympics are unique in being advertising-free, with no perimeter hoardings and no advertising breaks permitted. The Olympics' ethos is about sport and not business.

But of course the Olympics are a huge commercial operation, offering a massive business opportunity to advertisers and sponsors. The challenge for these organisations is to make best use out of these unique Olympic ideals. The key aspect for the Games' organisers is how to offer businesses anti-ambush protection.

Ambush marketing is where a business which has not paid for the right to be associated with an event 'rides' on the access granted to another, often competing, business. Examples abound of the use of such tactics: see the Wanna Argument on Sports Sponsorship to find out more. If any business organisation pays for sponsorship rights it wants to be protected from such ambushes.

The high street bank Lloyds TSB became the first sponsor of the London Games to be announced in March 2007. It is thought that the bank will pay at least £80 million to be one of the top-tier 'partners' of the event.

The Organising Committee for the London Games, known as LOCOG, needs to find approximately £750 million from partnership deals. As well as the Lloyds-TSB deal, LOCOG needs to find four or five more top-tier partners. These will be business organisations from each of the following sectors: telecommunications, car, airline and utility/fuel industries.

Top-tier sponsorships will account for between £400 million and £500 million, the rest will come from 'tier two' partners, merchandising and ticket sales.

The right to be linked to once-in-a-lifetime events such as the Olympics is tempting for some major businesses. But the commercial world is also interested in getting involved with other sports events, clubs and associations. One of the newest channels for this form of sponsorship, in the UK at least, is the market for stadium naming rights.

Sponsorship and naming rights

Naming rights for sports stadia is far more widespread in the USA than in Britain. There are four major professional US sports leagues:

  • National Football League (NFL in American Football)
  • National Hockey League (NHL in ice hockey)
  • National Basketball Association (NBA)
  • Major League Baseball (MLB)

On average, two-thirds of teams occupy named stadia (also known as facilities). The average annual value of naming rights agreements in the USA is thought to be between $2m and $4m.

In the UK, naming rights to sports stadia are less likely to be marketed. However there are some well-known examples of facilities which have had their rights exploited in this way:

  • Arsenal FC's new stadium, replacing the club's original home, Highbury, is located in Ashburton Grove, Islington, but is known as the Emirates Stadium as part of a 15 year sponsorship deal, worth £100 million
  • The JJB Stadium, home of Wigan Athletic FC.
  • Bolton Wanderers FC stadium, the Reebok Arena
  • Stoke City's Britannia Stadium.
  • The KC (Kingston Communications) Stadium, Hull City's home ground.
Inside Arsenal's Emirates Stadium

Inside Arsenal's new stadium - it's a lot bigger and swisher than Highbury, but how do most fans feel about the move? Copyright: Teun van Thiel, from stock.xchng.

Many other newly-built facilities instantly become naming rights 'properties'. It is harder for an existing facility to have its name changed than to attach a commercial name to a newly-built stadium. A sponsor has less to gain in naming rights to an established club's stadium than with a new facility. Look out for a major naming rights deal to be agreed for Liverpool FC's new stadium.

What can go wrong with naming rights deals?

  • Local opposition, especially when the rights buyer has no existing connection with the area.
  • Inertia over the name change can occur when it is hard to forget the original name of the facility, for example with Candlestick Park, San Francisco.
  • Team jinx, when the change to a stadium's name is followed by an inexplicable loss of form.
  • Sponsor's jinx, when a change is accompanied by a negative impact on the sponsoring company's performance.
  • 'Poison' Public Relations (PR), when events in the news adversely affect the relationship between the club and its sponsor. For example, if team members are involved in court cases, or if the sponsor fails to live up to its ethical responsibilities.
  • If the sponsoring organisation becomes insolvent or enters administration.

The MLB franchise, Texas Rangers, changed their branding strategy early in 2007, when the team cancelled their contract with their stadium sponsor.

In 2004, Ameriquest Mortgage Co. agreed to sponsor the Rangers' ballpark to the tune of $75 million over a 30 year period. The deal, worth $2.5 million per year, was terminated by the MLB team in the face of their sponsor's poor financial performance.

Ameriquest are owned by US 'sub-prime' lender, ACC Capital Holdings Corp. Instability in the sub-prime mortgage market has affected many businesses in this sector. Observers fear that this reveals an underlying weakness in the American economy.

Non-sports naming rights

What else is available to possible naming rights deals? Recent evidence suggests that the concept may become widespread. For instance even the right to name living creatures and plants has become a marketable commodity.

Patrons of Diversity are a German research body who offer a range of orchids and frogs whose names can be bought for a consideration (a minimum donation of Euro 2600). This sum allows the individual or business to assume the status of sponsor of the creature or plant. Once rigorously checked and peer-reviewed, the description of the species is published and becomes officially recognised. The name chosen by the purchaser then becomes scientifically accepted, who receives a sponsorship certificate, a picture of the adopted species and a print of the identifying scientific text.

A monkey with bizarre ears

If you're a rare, undiscovered monkey, watch out! Someone might come along and give you a silly name... Copyright: Joe Glasgow, from stock.xchng.

In a more bizarre case, in 2005 Cornell University announced that it had named three species of beetle after three key members (at the time) of the US administration: Bush, Cheney and Rumsfeld. This was not, apparently, a prank. The scientists in question say it was a genuine expression of respect paid by the pair of entomologists. No offence it seems was intended, despite it emerging that the creatures named after the politicians were in fact slime-mould beetles. No offence was taken either by the recipients of the 'honour'. It was reported that President Bush was so pleased that he rang one of the scientists to thank him.

In another case of unusual naming rights, Wildlife Conservation Society researcher, Dr Robert Watson, who had discovered a new species of monkey in Bolivia, wanted to protect its rainforest habitat so much that he decided to auction the naming rights to the primate, the Madida monkey.

The highest bidder was an online casino, whose marketing strategy involves garnering media attention from high profile auctions. Paying $650 000 to name a creature may seem at first to be an expensive strategy, but is it? How many Madida monkeys can you buy for a two-week prime time TV advertising campaign? The casino operator's gamble was that many news outlets would name-check its Web site, thus 'buying' cheap exposure of its brand. Biz/ed is, of course, too canny to fall into this trap. However, for all you Latin experts out there, the official name of the Madida monkey is now, 'Callicebus aureipalatii'.

Conclusion

It seems that naming rights can be applied far and wide. We have seen that sports clubs, universities, scientific institutes increasingly understand that they are, in fact 'rights owners', free to offer for sale or rent, the name of their properties, facilities or discoveries.

The value of these rights properties can range widely, depending on factors such as:

  • The uniqueness of the right.
  • How long the right will last.
  • The commercial benefit they stand to gain from buying the naming right.

Naming rights offers businesses advantages over traditional promotional activities such as advertising. They offer individuals the chance to immortalise their own name in association with rare or newly-discovered species. But they do not offer an automatic 'win-win' outcome for rights owners and buyers. The strategy must be well-planned and executed. Sometimes things can go wrong - just think of the slime-mould beetle, for a start!

Sources of further information

Tasks and Activities

  1. Read the article from Red Mandarin (first entry in sources of further information above). Why should rights owners beware of long duration naming rights contracts? What dangers are there in agreeing to ten, twenty or even thirty year deals?
  2. Why would some individuals want to have their name associated with new species of flora and fauna? Give reasons why people might want to buy into the deal offered by organisations such as Patrons for Biodiversity?
  3. Imagine you are the Chief Executive of Liverpool FC. What are the pros and cons of the following decisions on naming rights for your club's new stadium?
    1. A twenty-year contract with a major global food retailing brand.
    2. A five-year deal with an insurance company with headquarters in North West England.
    3. No sale of naming rights for the new stadium.
  4. Find out about Galpharm's acquisition of naming rights for Huddersfield Town FC's ground, formerly known as the Alfred McAlpine Stadium (third last entry in sources of further information above). How has the club tried to 'smooth' the introduction of the name change? How effective do you think their actions have been in dealing with any potential opposition from supporters?
  5. In the run-up to London 2012 what ambush-marketing tactics might Lloyds TSB's competitors try to employ? Use the final link in the sources of further information above to find out what protection main sponsors of the Olympics have against these tactics?