×

T-Mobile drops millions on Las Vegas strip, gets signs

A new sports venue just opened with a live show right off the Las Vegas Strip, and for now the 20,000-seat arena is emblazoned with the T-Mobile logo.

Details on the deal are sparse, but the Las Vegas Review Journal reported that T-Mobile will be paying less than $6 million a year for a naming rights contract in the 10-year range. T-Mobile itself said those numbers were not confirmed and would only say the deal was "multi-year and multi-million." The arena's joint owners, AEG and MGM Resorts, also declined to comment on the specifics.

If T-Mobile is paying around $6 million a year, that would put the deal among the top 20 in the country on an annual basis, according to Revenues From Sports Venues' database (which does not include college sports). That's a lot of money, but not much more than just the spot cost of a single 30-second Super Bowl ad this year.

It's also far behind the most expensive naming rights — Barclays and Citigroup are each paying $20 million a year for two decades of rights to their New York venues. Here's how the nation's venue naming rights stack up (hover for more information):

T-Mobile's arena, which opened Wednesday, doesn't have its own sports team (yet), but the exposure on the lively Las Vegas Strip still seems like a good deal for the company, said Jim Grinstead, publisher of Revenue from Sport Venues, a trade publication.

"They're going to get national visibility out of it, the way you would with an NFL or Major League Baseball stadium," Grinstead said. "I don't think they overpaid in the least if those numbers are right."

The $375 million Las Vegas arena is T-Mobile's first foray into naming rights. The company is younger than many of its cell service competitors. Verizon has had its name on at least four venues (Arkansas, Washington, D.C., New Hampshire and Minnesota). AT&T has named buildings in San Antonio, Arlington, Texas, Tennessee and California. Sprint has a venue in Kansas City.

"It gives us both local and national impact," said T-Mobile CMO Andrew Sherrard. "We know we will reach more people in Las Vegas with our brand than if it were located anywhere else."

T-Mobile has seen significant revenue growth in recent years, and the company said last year that its user base was surpassing Sprint, then the third-largest wireless carrier in the country. Still, a $6 million a year contract would mean that the company would be spending close to 1 percent of its net income on the new deal, while Verizon's Manchester arena and even AT&T's 101,000-seat stadium are much smaller commitments as a percentage of the companies' billions in net income.

Are naming rights worth the price?

There is some debate about whether naming rights are worth their price tags. The benefits are hard to measure and admittedly not a sure-fire path to higher profits. After all, Citigroup was seeking a $300 billion bailout only a few years after buying the rights to the home of the New York Mets. And of course, we no longer call the Astros' park Enron Field.

According to a study of naming rights from 1990 to 2004, the deals had no impact on most companies' stock prices. Other research found that sponsoring firms in the NFL saw a direct effect when the associated teams performed well in high-profile games. Some firms, it suggests, could make back their entire stadium-naming investment from a single NFL game.

One thing that does seem certain is that naming rights are making a comeback. During the recession, major sports venues opened and couldn't find corporations willing to lend their names. The New York Jets and Cowboys both went without such sponsors at the beginning. Recently, a number of big deals have gone through in a seller's market.

"It's come back very strongly," Grinstead said. "The numbers sound big when you release them, but when you break them over the period of time and count the advertising in TV and print and in the venue, for the marketing cost it's a pretty good investment."