Some Fumbles in Arena Name Game

A cynic might argue that PSINet Inc. should have used red ink in 1999 when it signed a deal to pay $105 million to put its corporate logo on the Baltimore Ravens’ new football stadium.

Less than three years into its 20-year contract, the Ashburn, Va.-based company has acknowledged that it soon might run out of cash and be forced into a bankruptcy filing.

“This isn’t the kind of publicity that the Ravens were thinking about, particularly not as Super Bowl champions,” said Dean Bonham, a Denver-based sports marketing consultant.

PSINet isn’t the only troubled company with its name up in lights at a football stadium, indoor arena or baseball field. Savvis Communications Corp. last summer shelled out $70 million to put its name on the arena where the St. Louis Blues hockey team plays. The company now says its financial future is uncertain because its largest customer--which also is its major shareholder--filed for bankruptcy in February.

Miami’s Pro Player Stadium began looking for a new sponsor last spring when Pro Player’s parent company, Fruit of the Loom, filed for bankruptcy. And the St. Louis Rams need a new marketing partner because the namesake airline at the TWA Dome is being acquired out of bankruptcy by American Airlines.

Corporate sponsors can be sidelined unexpectedly. It’s bad news for franchises because sports teams typically end up in line with other unsecured creditors.

PSINet, founded in 1989, and Savvis, which opened its doors in 1995, are members of a cadre of technology firms that have sought to use highly visible sports marketing deals to establish brand awareness. Along with such companies as CMGI, Network Associates, Qualcomm and 3Com, they have struck expensive, long-term deals that put their names atop sports arenas.

There is evidence that some technology firms might be better served spending their marketing dollars elsewhere.

“The dot-coms had a somewhat similar situation a year ago when many of them were spending their entire ad budgets on a 30-second Super Bowl spot,” said Eric Pinckert, a senior vice president with SiegelGale, a corporate brand consulting firm.

“Maybe some people didn’t do as much diligence as they should have,” said Jeff Knapple, chief executive of Los Angeles-based Envision Inc., which brokered the Savvis deal. “But there’s still a high level of interest in these deals. They’re still one of the highest-profile marketing opportunities around.”

The naming-rights deals that have produced CMGI Field (new home of the NFL’s New England Patriots), 3Com Park in San Francisco, Network Associates Coliseum in Oakland and Qualcomm Stadium in San Diego aren’t designed just to get corporate names in fans’ faces.

“Many of these companies are trying to make an impression on Wall Street,” said Sean Brenner, managing editor of IEG Sponsorship Report, a Chicago-based newsletter. “It can also help a company reach potential business customers and strategic partners.”

CMGI, which went public in 1994, views its naming-rights package as a signal that the company has become a major corporate force. More than 50 major athletic facilities now carry corporate names, up from just a handful 10 or 15 years ago.

Many of these signing deals involve powerful, well-established marketers--including Pepsi-Cola (Pepsi Center, Denver), United Air Lines (United Center, Chicago) and American Airlines (American Airlines Center in Dallas and American Airlines Arena in Miami).

Louisville, Ky.-based Tricon Global Restaurants, parent of the Kentucky Fried Chicken chain, in March dangled a $100-million offer in front of the Vancouver Grizzlies, the troubled NBA franchise that is looking for a new home. Federal Express promptly weighed in with an unspecified offer designed to lure the Grizzlies to its hometown of Memphis, Tenn.

Although the naming-rights sector has enjoyed explosive growth in recent years, it is difficult to quantify the success of the signage deals. Despite the $120-million price tag on its Patriots deal, CMGI acknowledges that there is “no existing research that would help quantify the value of a comprehensive, long-term deal of this nature.”

The math gets fuzzy because deals are driven largely by the number of times corporate names and logos get flashed in front of consumers.

The price of new deals generally is based upon recent transactions. CMGI, for example, defends its $7.6-million annual payment to the Patriots as a relative bargain because it gains prominent exposure in the nation’s sixth-largest media market. CMGI notes that FedEx has agreed to pay the Washington Redskins $7.6 million a year in a slightly smaller media market.

Signs, though, are just one element of increasingly sophisticated packages. A decade ago, sponsors were willing to trade a check for a sign. But more recent deals include features that help sponsors recoup some of their investment.

Electronics giant Philips, for example, is paying $185 million in a multiyear deal to put its name on the home arena of the Atlanta Hawks, an NBA franchise owned by AOL TimeWarner. The deal also gives Philips’ sales team access to the media giant’s employees, who buy goods and services. Similarly, CMGI’s operating units do business with the Patriots franchise.

“It’s not just about slapping up a name on the side of the building,” said Knapple, who brokered the Philips agreement. “It’s about integrating your business with the [franchise’s] ownership group. It’s about building business relationships.”

Some highly publicized marketing gambits can run into trouble even before a sign is installed.

Irate Denver fans, who want to keep the fabled Mile High Stadium name alive when a new NFL stadium opens, have sued a local agency for selling naming rights to financial services firm Invesco for $120 million.

And the rumbling began almost immediately in Chicago after the City Council cleared the way for the NFL Bears to solicit a corporate sponsor for Soldier Field, named in honor of World War I veterans.

“What’s next, billboards in the VA cemetery?” asked Robert Chandler, founder of Robert Chandler Associates ad agency in Marina del Ray. “I think there’s a risk of wretched excess in these naming deals, and at some point the public is going to push back.”

Marketers also caution that a bright sign can become a target when things go awry.

“Once you’ve put your name on the front door, there’s no way to go back,” Pinckert said. “When you’re going through hard times, like [Southern California Edison parent] Edison International is, you’re going to be very visible.”

Despite the risks, surveys show that consumers tend to remember the names of corporate sponsors, said Jed Pearsall, president of Performance Research, a Newport, R.I.-based market research firm.

Savvis and PSINet did not return telephone calls seeking comment, and sports franchises involved in the deals are staying on the sidelines.

“PSINet is a partner of the Ravens, not just a sponsor,” a spokeswoman for the team said. “We have a strong relationship that has been mutually beneficial. We look forward to continuing our partnership.”

A St. Louis Blues spokesman declined to comment. But the value of the Savvis stock included in the franchise’s $70-million, 20-year naming-rights package has plunged from $17.25 a share to less than $1.

Sports marketers say the Ravens might escape a major financial hit no matter what happens to PSINet.

“There are a smaller and smaller number of opportunities available,” said Brenner, the Chicago-based newsletter editor. “And the Ravens are coming off a Super Bowl [victory], so they’ve guaranteed themselves and their sponsors incremental national exposure.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

The Name Game

Naming-rights deals have proliferated in recent years as new basketball, football, hockey and baseball venues open. Some representative deals made during the last year:

*

Source: IEG Sponsorship Report