Is a Naming Rights Deal Worth the Price?
By Paula Beadle
T-Mobile recently announced a 25-year naming right partnership with the Seattle Mariners worth $87.5 million—approximately $3.5 million a year for the next 25 years. Like many sponsorship pros, my immediate reaction was to applaud both sides of the table. When done right, naming rights deliver a valuable return on investment for sponsors and properties.
My next thought was—what’s in it for the visitors? Certainly, both the Mariners and T-Mobile understand that a naming rights deal is not simply about signage on the building, but also answers the question fans ask, which is how the sponsorship will benefit them. The best naming rights sponsorship programs most definitely benefit the fans.
John Legere, T-Mobile’s CEO said it well, “T-Mobile Park isn’t just some corporate-branded sponsorship to us … this is about supporting the community and our hometown Mariners in building a World Series-caliber team!”
I appreciate his comments and I also encourage him to be unapologetic. Sponsorship is a smart marketing strategy that works and will deliver huge returns to T-Mobile—assuming the deal includes signage, hospitality, broadcast and digital advertising and customer promotions.
If you are contemplating buying or selling a naming rights sponsorship, consider the following:
Naming rights should not be used to recognize a company who has made a financial donation. Companies who give grants should have no expectation of benefits and certainly should not be given a naming rights sponsorship in perpetuity to show gratitude for a one-time gift. “Lifetime naming rights” is a very long time and there is no way to predict everything that could happen over time.
A million-dollar gift over 25 years is $40K a year. What happens when the building is torn down in 25 years? While corporate sponsorships and philanthropic gifts both provide tremendous value, it is extremely important to be diligent about the approach and the execution, given the different risks and intents.
To illustrate the differences between sponsorship versus philanthropy, take the example of naming rights for a park. If a park was to receive a gift of $100,000 to name it, that asset would be removed from the inventory of sponsorable assets. Alternately, if a sponsorship was sold for naming of the park at $25,000 per year, within four years the sponsorship fee will equal to or exceed the value of the one-time gift.
Philanthropic gifts are private, individual or corporate donations made without expectation of promotional or marketing benefits. Some gifts may have minimal acknowledgement.
One of the primary distinctions between corporate sponsorship and philanthropic gifts is the specified term of commitment for a corporate sponsorship. Corporate sponsorships are secured for a specific term and always have a contract that defines the quid pro quo marketing relationship. Corporate naming rights sponsorship deals usually have minimum terms of 10 years and some of the big stadium naming rights deals have terms up to 30 years.
Both sides need to consider how the naming rights sponsorship is going to benefit the visitor. As a sponsor, what assets will be provided that allow you to interact with visitors in a meaningful way?
As a sponsor, ensure you have a first right of opportunity to be a part of future programs and promotions. Negotiate a contract that has flexibility as your business changes and evolves. Incorporate performance metrics to ensure the building maintains a certain standard.
As the property, ensure that any change in company name or logo that would require a signage change is at the expense of the sponsor. Additionally, if the company goes out of business, consider who pays for the signage removal. This realization may seem like one of those “it will never happen” scenarios. But it happens.
There are two interesting naming rights situations in Seattle that are examples of deals that could have benefited from this type of scenario planning—the WaMu Theater and the Key Arena. Both of these venues still hold the names of original sponsors though no money has exchanged hands for years. It’s virtually impossible to sell a naming rights to a new sponsor when the deals fall apart or come to an end.
So, the lesson for properties is to minimize your risk by securing long-term deals with a plan to rename the venue. Better yet, choose a name that can be adaptable. A naming rights deal where the venue, sponsor and visitor all benefit is the only way to ensure a win-win-WIN!
About the author: Paula Beadle is the president of Caravel Marketing. She is a results driven trailblazer with a proven record of creating order out of chaos. By developing and managing innovative sponsorship initiatives, generating incremental revenue, and successfully coaching thriving teams, executives and boards, Paula has helped numerous organizations discover and achieve their goals.