I Will Sponsor You Forever
Posted: 10/23/2009 8:19:32 AM by
Jim Andrews | with 1 comments
Ah, the words every property yearns to hear. Or not.
I have been struggling with what to think about the announcement this week that Staples has renewed its naming rights deal for the Staples Center “in perpetuity.”
My first thought was that since we’re talking about a venue in Los Angeles, maybe both parties expect “The Big One” to come along sometime soon—so the concept of perpetuity isn’t quite the same as it would be in less quake-prone parts of the world.
I’m trying to understand the rationale behind a “forever sponsorship” and who it benefits the most. The frustrating thing, as always, is that it is impossible to truly analyze a deal without knowing its particulars. But that won’t stop me from trying.
An “in perpetuity” agreement seems to make more sense from the property perspective. The rightsholder—in this case, AEG—is guaranteed a revenue stream from naming rights without ever having to go back out into the marketplace.
Taking that a step further, the deal seems to indicate that AEG does not have a lot of confidence in the naming rights market over the long term. If it did, it would look forward to having the chance to re-negotiate or re-sell the rights in 10 years, when Staples’ original 20-year deal would have expired. That is a very interesting position for a leading sports property owner to take.
From the sponsor’s perspective, I’m not sure I see a compelling reason to lock the company into the longest-term deal possible, unless the price was so low that it could not be refused. (And I don’t see AEG going to that extreme.)
Of course, there is also the matter of how “in perpetuity” is actually defined in the contract. I exchanged emails with Mary Hutchings Reed, who knows more about sponsorship law and contracts than anyone else I know, about that. Here was her take:
“Most contracts which purport to be “perpetual” often actually have some kind of termination clause, even if that termination clause is extremely difficult to enforce, such as a clause requiring multiple successive breaches, arbitration, etc. Sometimes there is a post-termination clause which prevents re-naming for some long period of time, which would also operate to extend a contract to a lifetime, if not, strictly speaking, “perpetuity.”
If anyone from Staples or AEG would care to shed more light on this historic deal, I’d love to hear it, as I would your thoughts on the matter.
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Filed under: naming rights, negotiating, trends, venues, contracts