Are Naming Rights Deals A Good Buy?
Every time a company buys naming rights to a stadium, their executives get challenged. Is this really a good deal? Why does it seem like companies who have put their name on stadiums face greater economic trouble than those who pass on the idea?
I think the latter might be more perception than reality –- that the percentage of companies that sign naming rights deals and then file for bankruptcy are somehow much greater than those that don’t sign deals and don’t file for bankruptcy.
Answering whether naming rights deals are good deals depend on two things: price and activation.
In order to sell these rights, teams show companies what the “impression value” of the stadium is. That is, how many times will the company’s name be mentioned in the media.
The numbers being shown to these companies -- ranging from millions of impressions to hundreds of millions of impressions a year –- are real. But there’s a big difference between having a 30-second ad and having your company’s name mentioned 30 times. I’m just throwing it out there, but I think that tens of thousands of impressions can equal what one 30-second ad can do as far as driving business to a company.
We just had on Wes Thompson, CEO of Sun Life Financial , whose company reportedly paid an average of $4 million over five years to put its name on the stadium where the Miami Dolphins play.
Because this is the seventh name change the stadium has had, the impression value has already been severely compromised. Simply put, fewer people are willing to call it by its official name because they’ve been put through the ringer. So Sun Life’s first job is to find out exactly how much it has been devalued — even with the Pro Bowl and the Super Bowl coming up.
But the next job is to convince fans why they should have their insurance through Sun Life. That is the essential leap that makes naming rights worth it or not.
Thompson mentioned that this was an opportunity to increase brand awareness and that the stadium was a great destination, but Thompson didn’t mention exactly what Sun Life was going to do with the rights.
Perhaps Thompson needs some time, but that’s not a great start. Because it’s an insurance product, it requires more of an effort than say a beer brand like Land Shark, which previously had the name to the stadium.
Is Sun Life going to offer some sort of deal where the longer you had Dolphins season tickets, the lower they are willing to go on your insurance as compared to the product offered by their competition?
We know Sun Life employees will be in their luxury box entertaining corporations, but how many Sun Life employees will be walking throughout the stadium talking to fans?
- Slideshow: Stadium Naming Rights Gone Bad
Perhaps I didn’t pry enough on specifics, but I’m skeptical of what Sun Life is going to do because I’ve found that most naming rights deals are ego buys with very little activation. Most naming rights deals aren’t worth it because the company itself doesn’t make it worth it.
Because of this deal, I now know the name Sun Life Financial. That’s the first step. Getting me to actually put my money with the product or service the company offers is the second step. And, at least for me, it’s a step that not a single company that has ever landed naming rights has ever accomplished.
Questions? Comments? SportsBiz@cnbc.com