Wave of expiring deals attracts attention
CHICAGO – It’s the ultimate status symbol for a company looking to make a splash. It’s a tool for entertaining clients and rewarding employees for a job well done. It’s a statement: We’re here, and we plan on staying for a while.
And it’s a valuable revenue stream for teams looking to upgrade their facility, or build a new one altogether. It helps ensure the future of small-market clubs, and increases the advantage of the most profitable teams.
Corporate names are plastered on arenas and stadiums all over the world today, and the marquee sponsorship agreements are becoming more lucrative and intricate with each blockbuster contract. That’s why some of the top professionals in sports are paying close attention to an intriguing group of naming rights deals set to expire within the next five years.
“Everyone’s starting to think about this,” said Eric Fernandez, a senior vice president at MediaLink, LLC.
Fernandez was the executive director of sponsorships and events for AT&T for six years before joining his boutique consultancy firm in 2008. He played a key role in the agreements that cover AT&T Park in San Francisco and AT&T Center in San Antonio, and is interested to see what comes of this compact run of lapsing deals.
“You’re just really starting to see that teams are kind of licking their chops because they see that the market has exponentially grown for naming rights,” he said, “and I think you’re going to run into some really big issues with incumbent partners being actually willing and able to actually step up and do that.”
Edward Jones and the St. Louis Rams decided to continue their relationship, announcing a renewal of their naming rights deal last year that runs through 2025. But that still leaves lots of nice real estate that could be on the market soon.
The $70 million, 10-year agreement for the Home Depot Center in Carson, Calif., expires in May, and the contract covering the United Center in Chicago is up next year. The $47 million, 15-year pact for the San Jose Sharks’ HP Pavilion runs out in three years, followed closely by three big ones in 2017: Gillette Stadium in Foxborough, Mass.; Qualcomm Stadium in San Diego; and, Verizon Center in Washington. The contract for M&T Bank Stadium in Baltimore expires in 2018.
“I mean that’s a huge part of a team’s budget,” said Dan Migala, a founding partner of Property Consulting Group who worked for the Padres and has consulted for other major league teams. “How does that impact payroll, you know, all of those things as you start to move forward. I think it’s a very serious issue for our industry.”
Home Depot spokeswoman Jean Niemi said last month the company will not be renewing its deal for the home of Major League Soccer’s Los Angeles Galaxy and Chivas USA. The ability of Anschutz Entertainment Group, which owns the Galaxy, to find a strong replacement could be an important litmus test for a league that now plays in 14 soccer-specific facilities – with San Jose set to open a new field next year.
President of AEG Global Partnerships Shervin Mirhashemi said the company is “in the final stages of negotiations with a new naming rights partner” for the sprawling 125-acre complex that also includes facilities for tennis, track and field, baseball, basketball and other sports.
It could be a tricky process for AEG, which is for sale. Plus, crossover star David Beckham is gone after leading the Galaxy to consecutive league titles, and Sporting KC also is in the market for a naming rights deal after an embarrassing disagreement with cancer charity Livestrong led to the end of their partnership.
“The naming rights partnership for the venue and then the jersey front partnership are two of the larger revenue streams from a commercial standpoint for any professional soccer club throughout the world,” MLS spokesman Dan Courtemanche said.
The market for naming rights has changed dramatically since the deal for the United Center was announced in 1992, which reportedly cost the Chicago-based airline an average of $1.8 million a year.
Massive contracts for Reliant Stadium ($300 million over 30 years) in Houston and Citi Field ($400 million over 20 years) and Barclays Center ($400 million over 20 years) in New York reset the market altogether, but the deal that could have the biggest effect on the negotiations for the United Center is the American Airlines Center, home of the Dallas Mavericks and Stars.
“American Airlines Center is probably $6 to $8 million a year,” Fernandez said. “So you’re sitting here, if you’re the Bulls, you’re obviously saying, ‘We’re way under market value,’ which they are. ... If you’ve got United, you’re like, ‘OK, well, my budget’s not suddenly increased and I’ve had this deal that I’ve been able to project for a number of years.’ It’s like ‘Am I going to be able to sustain that?’ ”
Since the original agreement, United has gone through bankruptcy and merged with Continental. The airline industry and economy also have changed dramatically.
“We value our long-term partnership with the United Center and look forward to continuing to work together,” airline spokeswoman Mary Clark said in a statement. “We believe that the United Center and all of the other partnerships in our sponsorship portfolio offer us great opportunities to connect with our customers.”
United Center executive vice president Howard Pizer declined to comment.
If the negotiations with United fall apart, there could be several suitors for the high-profile facility in one of the country’s biggest cities. But any new partnership would face a series of challenges ranging from changing the signage at the arena to the difficulty of overcoming the connection to the United Center name.
It could be a familiar discussion in sports over the next couple of years.
“Really a perfect storm,” Migala said, “that there’s so many deals in the next two to three, four, five years that the financials are going to be different in how the market has changed with the naming rights over the last couple years.”
• Jay Cohen can be reached at twitter.com/jcohenap.