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ISBN: 978-1-905685-28-8
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Naming rights - Global sponsorship analysis

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NAMING RIGHTS DURATION

The duration of naming rights deals is considered to be a good indication of market maturity. It is generally accepted that sponsorship is used as a strategic, rather than tactical, marketing initiative, and as such it is necessary to develop the programme over a number of years for full benefits to accrue.

In naming rights, the length of the deal is even more important because it requires both an acceptance and an actual change of behaviour among fans and the media for the sponsorship to work. Quite simply, changing the naming of a physical property on a regular basis invites cynicism and confusion and devalues the rights. Although any negative impact could be argued to fall mainly on the rights holder, as it is they who have to convince everyone to use the new name, for sponsors the benefit of a long-term deal is that they become intrinsically associated with both the rights holder and the city.

DURATION BY COUNTRY

It is no surprise, therefore, to see long average deals in the more mature markets such as the USA, Canada and Western Europe. The data is, of course, analysed only for those deals where the duration is disclosed (approximately 53% of deals). In countries where fewer than five deals have reported durations, they are arguably statistically irrelevant.

Table 2. Naming rights deals by duration by country (years)

Naming rights duration by country

Chart 4. Naming rights deals by duration by country

Naming rights deals by duration by country

As such, Chart 4 is probably more instructive than Table 2, as it strips out countries with low numbers of reported deal durations. It shows that North America in particular has embraced the concept of long-term deals, with an average of 14.4 years in the USA and 11.5 years in Canada. In Germany and the UK, supposedly the most mature sponsorship markets after the USA, the deal lengths are actually below the global averages.

Some caution needs to be read into these findings as many of the smaller deals throughout the world do not have reported durations but are likely to be short-term, whereas small deals in Germany and the UK, with low durations, are frequently reported.

DURATION BY VALUE

Table 3, below, shows that there is a very strong correlation between the size of the deal and its length. Indeed the duration of deals worth $5 million or above is more than five years longer than those below $2 million per year.

Table 3.  The relationship between naming rights value and duration

Naming rights duration by value
This suggests that there is much greater maturity and commitment to naming rights among sponsors with high levels of expenditure on prestige properties. In the USA, for example, all of the deals above $15 million p.a. are long-term:

  • MetLife Stadium - 25 years
  • (the proposed) Farmers Field - 23 years
  • Barclays Center - 20 years*
  • Citi Field - 20 years

* Deal originally negotiated at $20m p.a. but renegotiated to approximately $10 million.

In most cases, deals worth more than $5 million in the USA follow a similar pattern. In other countries, however, major deals are commonly under ten years in duration and in some cases for as little as three years.

UNEXPECTED NAMING RIGHTS CHANGES

One critical point to bear in mind regarding duration is that naming rights for major deals have seen frequent name changes due to bankruptcy of the sponsor (e.g. Enron Field, now Minute Maid Park) and corporate takeover. Corporate takeover is obviously much more common and what is notable here in particular is that the consolidation of financial services and IT industries has led to a number of naming rights changes in mid contract. To an extent, it is arguable that the new naming rights owner is at a disadvantage for several reasons. First, any fan loyalty/brand equity accrued by the existing brand, which is seen as an asset, perhaps even on the balance sheet of the company being taken over, will at best be diluted by the name change. Second, the name change in itself is of reduced value – as discussed, the more often a stadium name changes, the less favourable the public and media tend to be towards the new name.

Finally, the new brand owner might not consider a long-term naming rights deal to be a key part of its marketing strategy. That said, in a world of multi-billion dollar corporate takeovers, even a large naming rights deal is unlikely to be a major sticking point in negotiations and it is interesting to note that following such takeovers, the selling on of naming rights has been relatively rare.

Table 4.  Change of naming rights due to corporate takeover (USA)

Naming rights changes through corporate takeover

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