Answers
Nov 15, 2018 - 09:44 AM
It’s so common for American stadiums to be named after companies that Americans often forget it’s kind of a strange practice. Other countries don’t necessarily have the equivalents to a Wrigley Field -- although some do. (Wrigley Field was named by William Wrigley in 1926, who might have just wanted to put his own name on something. However, other brands soon followed suit.)
Sports stadiums tend to carry positive associations: they offer a popular form of recreation. Companies are banking on this positive association when they buy stadium naming rights.
Although buying stadium names may not have a positive ROI, it can positively impact a brand’s image. The number of brand impressions from a stadium name soars compared to other marketing methods, like television commercials.
These brands might also be hoping to gain the business of committed sports fans. Smaller brands that have to focus on ROI aren’t too likely to buy a stadium name, but those big enough to lose money but invest in their image will.
Of course, some brands that buy stadium names end up bankrupt, while others end up thriving. It’s not necessarily a wise long-term investment, but it has some positives for brands that aren’t struggling in other ways.
So, for those brands with enough cash to throw around, naming a stadium might be worth it. But is it ethical?
You may not be a sports fan, but if you live in a city with a sports stadium, you likely pay for it as a taxpayer. Stadium subsidies allow public funds to be used for renovation, construction, and more.
If a company pays a massive naming rights fee for the stadium, all that money goes to the team owner. Owners have no obligation to re-invest the money in the city, the team, or the stadium.
But the public continues to pay taxes to keep the stadium thriving. No matter how much money is invested in the stadium name (or made from it), the public never sees any of the ROI.
Since the brand that bought the name isn’t necessarily seeing an ROI either, the only person coming out on top is the team owner.
The right thing would be for those owners to invest the naming-rights money in the city, or at least the stadium, in a way that benefits the taxpayers who help fund it. But when business invests in a city, the city’s inhabitants rarely get the benefits.
Just look at Amazon’s new headquarters. (It’s not sports-related, but the situation is analogous.) The tech giant recently announced that it would split its second headquarters between New York and D.C. This “well, duh” announcement followed months of hype over which city it would choose.
Many smaller, struggling cities, like Pittsburgh, also vied for Amazon’s attention. But the profits from the second headquarters were never going to be invested in the city itself, so these small cities really dodged a bullet.
Amazon is notorious for importing workers to new locations, so it likely wouldn’t hire many locals. But local rents would rise, local traffic would get worse, and local companies might close.
In the bidding war for Amazon, cities promised millions of tax dollars to attract the company. As CNN reported, “Amazon does not need -- and should not be going after -- taxpayer dollars that could be better used on schools, parks, transit, housing or other much needed public goods.” CityLab even suggests that these bidding wars for business should be illegal, because the citizens who pay for them don’t actually benefit.
Tax dollars are supposed to get invested in the city where the people who pay them live. But when business profits reign supreme, it rarely works that way.
I don’t see an issue with a company paying to name a stadium after itself, even though the name might sound silly and the brand might lose money. The real issue is the fact that taxpayers help finance local stadiums, while the naming rights payouts fly, like home runs, out of the stadium and into the pockets of team owners.
Mar 30, 2020 - 01:36 AM
There is probably no ROI. But the executives of the company get to stroke their egos at the expense of shareholders. If it is the owner then they get a tax write-off for their egos and get to rub shoulders with athletes. But most rich owners of companies buy sports teams instead with their own money, which can turn out to be a good investment long run as well. reply -------------------
Worked for Carrier. They paid a one time fee of $2.75 million for the naming right to the Carrier Dome in perpetuity. That was over 40 years ago. Not sure how much extra business it has brought their way but surely enough brand awareness to cover the initial $2.75 million.
Jun 04, 2022 - 03:08 PM
https://axiomalpha.com/the-economics-...
Their methodology is to look at the company's financial performance over at least 15 years while paying for naming rights, and then compare this to a broad index of similar other companies over the same period.
In almost every case, the company that paid for naming rights underperformed the broad index. And so the conclusion is that if a company makes poor decisions on how to allocate marketing dollars, they likely make other similar bad decisions i.e. paying for stadium naming rights is a proxy for judging quality of management.
The concern I have with their methodology is: Would the financial performance of the said companies have been even worse if they hadn't paid for naming rights?
The one example where a company came out ahead was Qualcomm, because they paid very little (compared to others) for the naming rights. Here's the relevant excerpt:
"Several things pop out of the details of Qualcomm’s agreement to purchase the naming rights to the San Diego Chargers’ stadium in 1997. The first is that Qualcomm paid a truly tiny sum ($18 million) for 20 years of naming rights.
The second is that they paid this entire $18 million sum upfront rather than spreading it out over the duration of the agreement.
The context for how this deal happened is that the city of San Diego was desperate for funding to finish an expansion of the stadium. Qualcomm stepped into the gap and got a 5-10x cheaper price than other companies paid around that time for similar name deals.
In other words, Qualcomm didn’t go looking for a stadium naming deal. Instead, they acted opportunistically to seize an opportunity to make a deal with a desperate local government at a price that was only 10-20% of what other companies were paying for the same types of deals."
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