Sunday, December 10, 2006

Citigroup Inc Pays $400 Million For New Mets Stadium; Jets and Giants Next? - Naming Rights Deals Make Rebound

Stadium Naming Rights Deals Make Rebound

By Ben Klayman

Sports stadium naming rights deals seemed bad karma a few years ago amid accounting scandals and the dot-com bust, but they have rebounded with a vengeance, with bigger dollar amounts and more comprehensive plans.

Companies are no longer simply slapping a name on a stadium. They are devising complex brand-burnishing strategies involving logos, advertising and technology deployment with a view to boosting profits.

Financial services company Citigroup Inc. agreed last week to pay the New York Mets a reported record $400 million over 20 years for rights to name their new baseball park, set to open in 2009, Citi Field. In California, the Oakland A’s said network equipment maker Cisco Systems Inc. would pay $120 million over 30 years to name their new stadium Cisco Field, to be built in nearby Fremont.

“What you’re seeing today and why you’re able to get $20 million a year out of a relationship with Citibank, for instance, is that these are strategic alliances designed to drive business between the two organizations,” said David Carter, executive director of the USC Sports Business Institute.

The Mets-Citigroup agreement tops the 30-year, $300-million naming rights deal the National Football League’s Houston Texans have with Reliant Energy Inc., according to Bonham Group, a Denver sports marketing and consulting firm that has negotiated a number of similar deals.

Teams are only too happy to sign such deals as they look to squeeze every possible dollar from their properties, analysts said. And past scandals have not scared off either side.

The most infamous name change occurred in 2002, when the Houston Astros baseball team re-acquired their stadium naming rights from bankrupt energy trader Enron Corp. in order to sell them to Coca-Cola Co.’s Minute Maid.

Other sports venues have seen similar changes. The football stadiums of the Tennessee Titans and Baltimore Ravens, respectively, switched from names linked to a former unit of cable company Adelphia Communications and Internet services provider PSINet, both of which filed for bankruptcy.

As companies look to connect with customers, naming rights deals will remain lucrative for the teams, said Fred Popp, chief executive of SME, a New York sports branding and design firm.

“Clients need to bypass the brain and go right for the heart,” Popp said. “Sports brands are surrogates. They allow the typical consumer brand to engage the consumer in a highly emotional way, in a way that you just can’t establish with your product alone.”

Naming rights alone are not enough, however, The Mets deal also includes the right to put the Citi brand throughout the new park, the use by Citigroup of Mets logos, the bank’s purchase of advertising on the Mets’ cable network and the joint development of business opportunities.

The Cisco deal includes the sale by the company of 143 acres of land to the Oakland team for a new stadium. Cisco’s technology in the ballpark will allow services such as the ability to upgrade tickets in on-site ticket kiosks, order souvenirs or food using a mobile device, and view replays at your seat and save them to a personal Web page.

Cisco treasurer, David Holland, who negotiated the deal, said it aligns closely with his San Jose, California-based company’s business objectives, which include getting more of its technology into sports venues.

“In the past, we have not been a company that looks to hang our sign on these kinds of venues,” he told Reuters. “If you look at how Cisco’s business has evolved, particularly in the last few years and most recently with the acquisition of Scientific Atlanta, we are moving closer and closer to the (consumer) of our equipment.”

While still growing accustomed to new ballpark names, fans accept them as the price to be paid for competitive teams and lower taxes related to stadium construction.

“Nowadays, when you talk about the costs of stadiums, you understand eventually it’s going to go to the highest bidder,” said Mets fan Nick Parente.

“I’m just looking forward to the new stadium, in all honesty, because even though Shea was one of the older stadiums, it wasn’t one of the prettiest,” said the 37-year-old Hoboken, New Jersey, resident, who works in aviation insurance underwriting.

The Mets shouldn’t get too comfortable with their record-setting deal, however.

Analysts said the NFL’s New York Giants and Jets’ new football stadium—planned for 2010—features a large venue, two major teams in a popular sport and the New York market, suggesting yet another new record is likely.

San Francisco 49ers, Monster Park, Stadium Naming Rights, And Corporate Responsibilty

Oracle, who's name now graces the Oakland Arena, and Monster Cable, which placed its name on the stadium where the San Francisco 49ers play, have got themselves into a big mess.

Now that both companies have their names on publically-owned stadium, they're discovering they can't get away with treating the public poorly.

This Oakland Tribune article tells the story:

Naming rights not all companies get
Oracle, others find monikers on arenas bring community expectations

By Barbara Grady, BUSINESS WRITER - Oakland Tribune Article Last Updated:12/10/2006 02:50:10 AM PST
A cheerleading squad from an inner city Oakland high school and their parents are angry with Oracle Corp. ever since the company -- whose name is emblazoned on the arena of the Golden State Warriors -- turned the students away from an Oracle trade show.

A San Francisco neighborhood of immigrants and members of the San Francisco Board of Supervisors are upset with Monster Cable Products Inc. because the Brisbane company -- whose name is all over the 49ers football stadium -- has laid off 120 employees who have scant chances of finding new jobs.

What Oracle and Monster Cable are learning -- the hard way -- is that with the naming rights to big professional sports stadiums comes higher expectations about how the companies will behave in the community. Redwood Shores-based Oracle, one of the world's largest software companies, is paying about $3 million a year for Oracle Arena to be the name of the Warriors' home. Huge red Oracle signs are not only highly visible to every driver on Interstate 880, every pedestrian in the neighborhood and every basketball fan coming to the arena for games, but Oracle's name also appears in newspaper, magazine and online accounts of games played at the arena.

Monster, paying $6 million over four years for naming rights to the 49ers stadium, gets the same huge publicity benefit by having its name on the former Candlestick Park not far from Highway 101.

So when the Oracle signs piqued the interest of the cheerleaders from Castlemont High School, the coach, a parent and squad members decided one October afternoon to visit the huge Oracle OpenWorld trade show in San Francisco.

To their hurt and dismay, the students were turned away from the show. "They didn't have to act that way to teenagers," said Lillian Foster, coach of the Castlemont cheerleading squad. "They asked us not to come in because they thought all we wanted to do was pass out fliers."

Said Ethel Davis, grandmother to one student, "You have these kids trying to go to learn about computers and people are shunning them."

Strike one for Oracle community relations in the hometown of its arena. Oracle officials did not know about the visit and said contracted security guards, not Oracle employees, turned the students away.

"We would have gladly welcomed the students if we knew" in advance of their interest, said Bob Wynne, chief spokesman at Oracle. The squad later was hosted at a Warriors' basketball game and is in discussions with Oracle about a donation.

Still -- like Monster Cable -- Oracle learned a lesson. "Getting the naming rights has put more expectations on Monster to explain our actions as a business," said Daniel Graham, spokesman for Monster Cable.

Citing pressure from overseas competitors, Monster laid off 120 employees from its Brisbane plant in late October. Almost all of them were longtime employees of immigrant background and limited English skills, said San Francisco Supervisor Jake McGoldrick, who represents the district in which many laid-off workers live.

Now Monster Cable faces threats of losing naming rights to the 49ers stadium because of community anger over layoffs.

"He should take the letters M-O-N-S-T-E-R off the walls of that ballpark and we will gladly release him from the contract. He can use the money to help the workers," McGoldrick said of Monster Chief Executive Noel Lee. Lee founded the company 27 years ago in the Richmond district, which McGoldrick rep resents.

When Monster moved to Brisbane, many workers followed him. Monster gave four weeks severance pay and four weeks extended health benefits to the laid-off workers. But the workers want the same severance that Monster gave to previously laid-off workers, which is four weeks plus one week for every year an employee worked at Monster, according to McGoldrick and an association representing the workers.

"The City and County of San Francisco shares a special connection with your company since your name is attached to the stadium at Candlestick Point," Supervisors Aaron Peskin, McGoldrick and Ross Mirkarimi wrote to Monster Cable. "We have seriousÊconcerns about the layoffs. As a major employer in the Bay Area, Monster Cable's mass layoffs will be felt throughout the City and County."

Lee responded in a letter to the supervisors that four weeks of severance pay is more than what other manufacturers often do and that "we are one of the highest-paying employers in the local manufacturing industry" by paying $12 to $25 an hour. "To imply that we do not treat our people well is uninformed."

But sports marketing consultant Zennie Abraham, chief executive of Sports Business Simulations of Oakland, said the high public exposure a company gets from a sports stadium naming contract puts a higher obligation on that company to act on behalf of the community.

"The name is in the public's face and because that company is associated with a good organization -- for example, the Warriors -- the general expectation from the community is that the company is going to be good," Abraham said.

"Only a big company has enough money to demand that its name is placed on a facility, but they do it because they know they are going to get enormous marketing benefits," Abraham said. With that publicity, "it's absolutely inherent in naming-rights contracts (that) they open themselves up to community concerns."

In some stadium naming contracts, such as ones crafted by American Airlines in Dallas and FedEx in Landover, Md., the naming-rights contract comes with agreements to sponsor community programs in the city, he said. The most infamous mistake involving naming rights might have been Enron Park in Houston. After the Enron scandal erupted, the Astros quickly bought out the 30-year, $100 million naming-rights deal with Enron and found a new, more palatable sponsor, Minute Maid.