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Building a Strong Partnership for Long-Term Success
When you look at sports venues, I think you have to be very cognizant of the fact that a naming rights agreement with a stadium provides a lot of different benefits to both parties. The building enjoys the annual revenue, but it can’t stop there. Just getting a check from a sponsor for 10, 15, or 30 years is transformative from a financial standpoint. Oftentimes, the naming contracts are used to help finance buildings. So, it’s critical to have a great partner. From the perspective of the naming sponsor, though, it’s important to connect with the fans. And, in doing so, you’ve got to recognize that it’s a long-term contract.
Ensuring Mutually Beneficial and Engaging Sponsorship Contracts
It can’t just be signed and then walked away from. It needs to be evaluated on a regular basis. Is it working? Is it not working? Have we changed the way we do business in a way that might change how the fans interact with that sponsorship? Is the company being bought or sold over that time period? And so, the contract has to be done in a way that it’s increasing the pie for everybody involved. One example we can look at is Little Caesars Arena. Little Caesars Pizza is the naming sponsor for the Detroit arena. It’s also a family-held business of the Detroit Red Wings. So, the Ilitch family controls both Little Caesars Pizza and the Detroit Red Wings. It’s a related party transaction, but it has to be beneficial for both. It has to be a way to engage fans with the pizza brand and allow them to connect with it, and for the Detroit Red Wings to connect with the people who enjoy using that brand.
Thee Case of TWA Dome and the Importance of Ongoing Evaluation
We can also look at the TWA Dome in St. Louis, which was the name of the Rams NFL team’s stadium when they first entered St. Louis, and TWA was a marquee airline brand. So how did they activate that brand with fans of the Rams? The answer is that the contract describes how it will be done. It can’t just be “We’ll collect the check, and then move forward.” Well, TWA got bought by American Airlines, and American Airlines felt that it wasn’t really a great use of their money, and they had already invested in two other named arenas in the United States, in Dallas and Miami. So, they decided to terminate the contract at the first juncture of doing so. These are the kinds of contracts that, over 30 years, the partners need to be constantly looking at and reviewing whether or not the agreement is providing the benefits to both the fans and the sponsoring entity. Stadiums make money in a variety of ways.
Revenue through Ancillary Real Estate at Sports Stadiums
One of the more interesting ways is ancillary real estate. People associate stadiums with players, and with fans coming there to watch a game, but many stadiums also develop real estate around their buildings. If you take the New England Patriots for example, Patriot Place has a museum there, shopping, big-box retail, and also the stadium, which houses the Patriots of the NFL and also the New England Revolution MLS franchise. So, when you go there, not only can you spend money in their museum or watching a game, but you could also go there when there’s not even a game, and just go shopping and take in the New England sports experience. Similarly, the Dallas Cowboys make a fair amount of money from fans touring their facility, and fans can be involved and immersed in Dallas Cowboys culture when there’s not even a game going on.
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