The corporate name game

LIKE ANY UPSTANDING AMERICAN SPORTS fan, I have an overwhelming desire to boo the latest trend in professional athletics--naming rights. Where once there was Boston Garden, Comiskey Park, and Tiger Stadium, facilities that gave loyal followers an abiding identification with a team and city, we now have the Fleet Center, U.S. Cellular Field, and Comerica Park. I mean, really, will anyone mourn when the National Car Rental Arena is torn down? In some cases, stadiums change names in the blink of an eye, as companies go bankrupt (as when Enron Field in Houston, Tex., became Minute Maid Field) or merge (as when the CoreStates Center in Philadelphia, Pa., became the First Union Center and then the Wachovia Center).

Actually, naming rights have been with us almost as long as professional sports have. Many team names actually evolved from them. The National Football League's Green Bay Packers were named after a meat-packing company that backed the team financially in its early years. The National Basketball Association's Detroit Pistons originally were the Fort Wayne (Indiana) Zollner Pistons, named for the Zollner Piston Company. Such team naming rights may be coming back in fashion, as the Chicago Bears (originally the Decatur Staleys, named for a starch manufacturer) recently signed a deal that rechristened them "The Chicago Bears as presented by Bank One."

Naming rights for stadiums are a considerably more recent innovation. The first such deal came in 1973, when the Buffalo Bills sold the right to name their stadium to Rich Foods, Inc. Until 1990, however, such a deal was an aberration, as only a few facilities bore corporate names. By the mid 1990s, though, attitudes had changed, and by the early 2000s, half the baseball and football stadiums were corporately named, and over three-fourths of basketball and hockey arenas had sold naming rights to private corporations. Even colleges have begun to sell the rights to their athletic facilities, such as the Comcast Center at the University of Maryland.

As naming rights have grown more popular, they have come to involve more than simply a corporate logo above the entrance. For example, Lincoln Financial's recent purchase of naming rights for the Philadelphia Eagles' new facility also gives it a variety of perks, ranging from commercial time on broadcasts to luxury suites at home and road games. Despite the expense, $139,600,000 over 20 years, Lincoln Financial officials believe the purchase makes good business sense for the company. Indeed, the popular wisdom, according to D. Todd Green, the managing editor of Team Marketing Report, is that "A naming rights agreement helps to position the company's brand at the top end of the spectrum while allowing it to speak to several marketing segments at one time."

Recent events suggest that naming rights may not deliver as high a return as Lincoln Financial officials expect. Several firms that purchased naming rights have declared bankruptcy. Among the facilities whose "'backers" have gone belly-up are Adelphia Coliseum in Nashville, Tenn.; Conseco Fieldhouse in Indianapolis, Ind.; Enron Field in Houston, Tex.; US Airways Arena in Landover, Md.; National Car Rental Arena in Miami, Fla.; Trans World Dome in St. Louis, Mo.; and finally, WorldCom's MCI Center in Washington, D.C.

In addition, several other corporate sponsors experienced severe financial distress. This led some of them, such as CMGI and 3-Com, to give up their naming rights. Others, such as Ericsson, Reliant Resources, and American and Continental Airlines, retained their rights despite losing at least 70% of their stock value in 2002. While the difficulties faced by corporate sponsors do not prove that naming rights are a bad deal, the fact that companies that own them had such severe stock declines--more than twice that of the Dow Jones Industrial Average--has led Chris Isidor of CNNMoney to claim that a "stadium sponsorship curse" exists.

The problem with studying a marketing ploy such as naming rights is that there is no clear way to determine its impact. Tree, it is possible to conduct a survey to check whether the rights have affected the firm's name recognition. However, it is a long way from knowing about the Gaylord Entertainment Group (sponsor of the Gaylord Entertainment Center in Nashville) to patronizing them. There is no clear way to trace purchases of a company's product to the company's purchase of naming rights.

Nevertheless, my colleagues and I conducted what economists call an event study. It did not attempt to measure the direct impact of naming rights on profits. Instead, we looked at the impact of a company's purchase of naming rights on the return to stockholders. We examined 44 facilities for teams playing in the four major professional sports (baseball, basketball, football, and hockey). Obviously, our sample does not include all naming rights deals. We used only those venues whose naming rights had a clearly identifiable announcement date and involved a company that was publicly traded on a U.S. exchange.