Bill Miller of the Leib Group
examines the future of Naming Rights.

ver the course of the past decade, naming rights have virtually become a required revenue source for sports facilities. This fact makes the plateau we have seen in the naming rights field in key areas such as dollars generated, innovative opportunities and sales methodology troublesome for many industry executives. This has led teams and facilities around the world to ask what will happen to naming rights as the new century starts.

While the concern many hold about the 'decline' of naming rights is somewhat warranted, any declarations of a decline in naming rights are premature and this key revenue source will continue to shine in the coming years.

In fact, it is my belief we are witnessing a natural plateau in the naming rights industry and that the fourteen potential developments discussed in this article will help reinvigorate the field over the next decade.

Sales and Methodology

NEW SALES METHODS: Many minor league and amateur teams believe they do not have the resources to sell naming rights. Alternatively, some teams believe naming rights are so prevalent that they are self-explanatory and 'sell themselves'. Such attitudes may be misguided but they do exist and will lead to more unique sales methods in the future.
For example, the auctioning off or pairing of sponsors and facilities on a website dedicated to naming rights or sports sponsorship opportunities will probably occur within the next two years. Several amateur teams have tried auctions on Ebay and through traditional auctions but a dedicated website will probably be necessary to bring true value for both parties.

SELLING ALL THE RIGHTS TO ONE SPONSOR: In an attempt to avoid clutter and confusion, facilities may offer large multi-branded companies the opportunity to acquire every potential naming rights opportunity in the facility in one agreement. For example, a company like General Motors could acquire the naming rights to an arena and name the luxury suite level for Cadillac, the club seat sections for Oldsmobile, the general seating section for Buick, and so on.

SPONSOR-BUILT FACILITIES: With the price of naming rights opportunities continuing to increase, sponsors will construct a facility, retain the naming rights and lease the building to the teams at little or no cost. The company will retain the development rights around the facility and control the branding of the building. Teams will receive the facility's revenue sources and both parties will benefit.
  

Contract Terms

PROMOTIONAL COMPENSATION: In light of the escalating price of naming rights agreements, and with the infusion of lower level sponsors, we will see more alternative forms of compensation used by sponsors to pay for naming rights agreements. Joint marketing efforts between teams and sponsors on mailings, products and other similar items will become common. For example, several agreements already grant advertising space on sponsor products to teams in lieu of cash payments.

EQUITY: Teams selling naming rights entice sponsors on the increased exposure and marketing potential of the deals. Sponsors may ask teams to back up their promises by offering team ownership stock options in lieu of cash payments. After all, sponsors argue, if a sponsor is deriving the benefit from the relationship, the stock value should go up. Such opportunities could be beneficial for teams as they offer a potential value lift that a standard cash payment would not.

STUB PERIOD PAYMENTS: One of the unseen benefits sponsors have received in most naming rights contracts is that while the term does not usually start until the facility opens, the sponsor begins deriving the media exposure benefits immediately. Payments for this stub period between the completion of the contract and the opening of the facility will become routine. The recent Reliant Energy deal for the new NFL stadium in Houston is an example of this potential trend.

SHORTER TERM: As the compensation amount for larger deals continues to rise and smaller companies begin to acquire naming rights, we may see shorter contract term periods as sponsors fear being placed on the hook for long-term contracts. Facilities could benefit from such an approach assuming dollar amounts continue to escalate as the compensation paid in subsequent deals could be even higher than the original contract.

PAY FOR PERFORMANCE CLAUSES: To a certain extent, facilities and teams sell sponsors on the potential value of a naming rights agreement without quantifying the elements of the deal. Sponsors will begin to challenge facilities to back up these promises by offering incentive clauses to buildings that deliver media exposure and customer opportunities to the sponsor. The level of success in implementing this approach by the sponsor side will depend upon the leverage it has. This will not become commonplace but can be used in situations where the sponsor is tentative on doing the deal or in the dollar amount and the facility needs to close the deal. Teams and facilities should, of course, be rewarded for making these goals with higher payments.

Sponsor Benefits

EMPLOYEE AND STOCKHOLDER BENEFITS: Ironically, the groups that often complain the loudest when discussing naming rights agreements from the sponsor side are the company's stockholders and employees. The reason being these groups often view the dollars paid for naming rights as dollars that are being taken out of their pocket either as dividends or salaries.

Sponsors and facilities will work together to provide benefits to the company's employees to minimise any repercussions. We will undoubtedly see more items such as discount days, facility picnics, golf outings and other similar benefits, that allow stockholders and employees to derive direct benefits from their company's naming rights contract.

BUSINESS OPPORTUNITIES: Naming sponsors and facilities will enter into even greater levels of partnership with companies being able to conduct their business at the facility. This requires more dedicated space in the building that the sponsor will have to pay for. Of course, this intellectually runs counter to the shorter-term trend discussed earlier as facilities will want to tie up sponsors to longer-term deals once they dedicate a great deal of space to a sponsor. This intellectual tug-of-war will be one of the key factors influencing the pricing of naming rights agreements over the next decade.

MUTUAL BENEFITS: In light of the expanding partnerships naming sponsors and facilities will have to enter into, a natural evolution is to study ways in which the parties can develop economic benefits for each other. The exchanging of customer database lists and encouraging sponsorship agreements between the team's sponsors will grow in use. The business opportunities a team can assist its naming sponsor to create with its fan base and sponsors are a tremendous untapped resource that sports franchises have failed to capitalise upon. Likewise, sponsors can help teams tap into the community by cross marketing and sharing information.

Other Naming Rights

It is important to remember a team's naming rights opportunities are not limited strictly to the facility as franchises possess other intellectual property they can determine the name for. These opportunities are ideal for every franchise because they do not depend on the team's lease with its stadium or arena to be put into place.

INTERNET NAMING RIGHTS: Much like interior naming rights, teams are continually looking for ways to increase revenue while sponsors are looking for ways to create media impressions and reach potential customers. The next obvious step in naming rights is to have teams give the right to name their Web address to a naming sponsor. The name of www.xyzcompany/abcteam.com could occur in the very near future. We have already seen this in the movie industry and we are likely to see it in the sports industry very soon.

TEAM NAMING RIGHTS: Tying a team's name, if even in a subtle fashion, with that of a building creates the ultimate brand that a sponsor would crave. For example, a team could be named the Monarchs if a naming sponsor had the words king or monarch in the title. League rules may preclude this on the major league level, but the concept could be embraced on the minor league level.

The plateau that many sports industry executives have expressed worry about was inevitable in light of the explosive growth that the naming rights field has seen over the past fifteen years. Bigger compensation, more amenities and the increasing number of opportunities are just some of the developments we have seen during this period. Instead of worrying about this inevitable plateau, team officials should consider the aforementioned potential new trends in the naming rights field and the evolution of this essential revenue stream.

Bill Miller is Executive Vice President-Professional Sports at The Leib Group, LLC, a Mequon, Wisconsin based sports facility consulting firm. He has served as a consultant for numerous naming rights projects at facilities throughout North America. He can be contacted at; wsmrattlers@yahoo.com

Miller recently authored Facility Naming Rights, his latest book on naming rights agreements that is available from Front Office Publications at; www.frontofficepubs.com