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What's In A Name?

Forbes, September 18, 2008

By Kate Macmillan

Football purists detest stadiums named after corporations. Who can blame them?

Once upon a time we had "the catch"--Dwight Clark's amazing grab of the winning touchdown pass from Joe Montana in the 1982 NFC championship game at Candlestick Park, affectionately referred to as the "Stick." Now we have Eli Manning to Plaxico Burress for the winning score in Super Bowl XLII at some place called University of Phoenix Stadium. No wonder Chris Berman is going bald.

But for owners--who do not have to share the cash they get from them with the other NFL owners--naming rights make a big difference on the bottom line and on how much money they have to spend on signing bonuses.

NFL naming-rights deals go back to the early 1970s, when a few local companies paid a small fee to put their names on new stadiums. The Buffalo Bills played in Rich Stadium, named for food distributor Rich Products Corp., which paid a total of $1.5 million for a 25-year deal. The New England Patriots' threadbare home was named Schaefer Stadium after a local brewery that put out an equally cheap product. Neither deal garnered much attention, since both carried family names.

The economics of naming rights changed in the 1990s when Jerry Richardson, who bought the expansion Carolina Panthers in 1994, used the proceeds from Ericsson's (nasdaq: ERIC - news - people ) $20 million, 10-year rights deal to help finance his stadium. Then in 1999 Daniel Snyder, who used borrowed money for most of his record $750 million purchase of the Washington Redskins and Jack Kent Cooke stadium, struck a $205 million, 27-year deal with FedEx (nyse: FDX - news - people ) for the naming rights to the stadium.

"Naming rights have become the primary way, from a sponsorship perspective, to generate revenue," says David Bialek, president of ANC Sports Marketing in Purchase, N.Y. "Two-thirds of NFL teams in the last decade have built or are in the process of building new stadiums. It's just become part of the business model when putting up a new building."

Bill Chipps of the IEG Sponsorship Report says the preponderance of naming rights deals can be traced to increased consumer control. With on-demand television, Internet shows and satellite radio, consumers are harder to reach. NFL fans, however, are the exception; the league commands solid television ratings, and its stadiums sell out regularly.

The biggest difference between early deals and today's is sponsors' expected return on investment. "It used to be: 'The CEO likes golf, so let's sponsor some golf stuff,'" says Rob Vogel, president of the Bonham Group, a Denver-based sports marketing firm that brokered recent stadium deals for the Indianapolis Colts, Detroit Lions and Seattle Seahawks. "Today companies really look at how sponsorships can drive their business and provide direct interaction with consumers." Example: Qwest Communications (nyse: Q - news - people ), which sponsors the Seahawks' stadium for an average of $5 million a year, is also the team's exclusive telecommunications supplier.

There are still extra perks thrown in. For example, Gillette, which ponies up $7.5 million a season for the naming rights to the New England Patriots' stadium, not only brings clients to games, but also hosts meetings and other events at the stadium throughout the week. There is also a weekly ticket raffle for Boston-based employees. But the main return on investment for Gillette is visibility. The Patriots have played in more nationally televised games than any other team in the NFL since 2002. The company also gets free plugs every time a Patriots player is interviewed post-game in front of his locker, where Gillette deodorant or shaving products often appear in the background. One of the most underrated bonuses a sponsoring company receives is having its name on highway signs leading to a stadium. That company can reach a broad, captive audience--and even non-sports fans--all year round.

For financial companies with a less tangible product, teams will highlight the opportunity to target a more affluent niche audience, including team owners and their business contacts, season ticket holders and others in the VIP area or luxury suites. A case in point is Lincoln Financial Field, home of the Philadelphia Eagles.

"The reason to do the naming rights was to increase brand awareness among consumers and financial advisers," says Lincoln spokeswoman Laurel O'Brien. "Client entertainment is certainly important to us, and we do fan programs on game days. We think it's a successful partnership."

Sponsors measure the effectiveness of the partnership by looking at sales, monitoring consumer awareness and evaluating client relationships.

"Brands might say, 'If we had 40 clients out to the stadium, how many have we retained, and to how many did we make a sale?'" says Liz Panich, director of consulting for Chicago's Millsport/The Marketing Arm.

As naming-rights deals have become more sophisticated, both teams and brands have increased their due diligence. "If you have your name on a stadium that isn't a premier sports arena, that can detract from people's feeling for the product," says Gillette spokesman Mike Norton. Furthermore, brands want to make sure ownership won't sell a team or move to another city.

The Houston Texans currently have the most expensive naming rights deal in the NFL, a 32-year, $300 million contract signed with Reliant Energy (nyse: RRI - news - people ) in 2000, two years before the team started playing. Reliant actually sponsors five different buildings within the former Astrodomain Complex, though the retractable-roofed stadium is its crown jewel.

Naming-rights deals can backfire. Consider the San Francisco 49ers' Candlestick Park, which was renamed "3Com Park at Candlestick Point" from 1996-2002, then "Monster Park" from 2004 until this year. San Franciscans refused to acknowledge the new names, and talking heads on ESPN made fun of them. Suffice it to say, 3Com and Monster were probably less than pleased with their return on investment.

In the next two years, the NFL's most valuable franchise (the Dallas Cowboys) and two teams from its richest media market (New York's Jets and Giants) will be opening new stadiums. Neither stadium has a naming-rights partner yet, but each deal is expected to exceed the Texans' record for a football stadium.

"You've got to believe that the Giants/Jets deal will command the most money," says Richard Sherwood, president of Front Row Marketing in Philadelphia. Not only are the two teams in the country's top media market, but NFL telecasts have a national audience, while baseball is more regional. "Plus this deal doubles the exposure," he adds. "You've got 16 home games instead of eight." Vogel predicts New York's status as a world financial capital could provide a splashy entrée for a foreign company, particularly in light of the weak domestic economy. "What better way to bring your brand to New York than putting your name on that stadium?" he asks.

But don't count out Jerry Jones and his Dallas Cowboys, who have been rumored to be in talks with Texas-based AT&T. Says Vogel, "AT&T (nyse: T - news - people ) could not only have exclusive rights to things like wireless broadband within the stadium, but they could create exclusive content that could then be accessed by people across the world."

That will not make old-school football fans happy. But there is no denying it is making team owners a lot richer.