09 Nov’18

Is a Stadium By Any Other Name Just As Sweet? How Stadium Naming Rights Can Be an Effective Branding Tool

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The massive value of iconic brands such as Mercedes-Benz, SAP, and Pepsi are the result of many years of cumulative targeted efforts. Aside from all being ranked in the top 25 of Interbrand’s most recent brand value rankings, these 3 brands share another commonality – the sponsorship of a professional sports arena. The competition for the naming rights of sports facilities has risen immensely in recent years, with corporations spending hundreds of millions of dollars for added brand exposure (among a variety of other benefits). The strategy of stadium sponsorship from the perspective of branding is an intriguing subject. It seems to cover a large number of the Brand Equity pillars that valuable brands are built upon, such as Brand Association, Brand Extendibility, Brand Awareness, etc., which I’ve covered in previous posts. But with rising competition for the rights to brand an arena, comes rising costs, leading many to question the return on investment for such a large capital outlay.

In building Brand Awareness, increased exposure is undeniably important; however, most (if not all) of the companies that can afford the naming rights of a stadium have achieved a valuable level of Brand Awareness. Once a brand reaches a certain level, the challenge shifts to achieving “Top of Mind Awareness” – or being the first brand that consumers think of when prompted with your industry. This is likely the game that companies are playing when spending the money on naming rights. In 2006, Oracle reached a deal with the Golden State Warriors for the naming rights of its arena in the Bay Area. The Warriors were coming off of a 34-48 record, led by Jason Richardson and Baron Davis (names perhaps not recognized outside of the sports community). The team had unsuccessfully sought buyers for the rights in the years leading up to the Oracle deal and many questioned whether or not this was a sound business decision for the company. From the angle of traditional valuation methodologies or measures (such as share price), it is hard to observe the effects of these naming rights deals. For example, a study done by sports economist Michael Leeds out of Temple University from 1990-2004 found that naming rights deals did “basically nothing” to a corporation’s stock price. However, as many intellectual property experts will attest to, the value of IP (brand value in this particular scenario) is largely ignored in traditional measures of value – see for example the value realized by the “Toys R Us” IP assets even after the corporation was insolvent. In 2006, Interbrand valued the Oracle brand at about $11.5 billion. Fast forward to 2018, 3 Warriors championships later, led by international superstars Stephen Curry and Kevin Durant, and the value of the Oracle brand has increased to roughly $26.1 billion. It would be naïve to attribute this $14 billion value appreciation entirely to the Oracle Arena naming rights deal, but I would argue that it would be equally naïve to not attribute the increase at least in part to the rise of “Roaracle” Arena on the back of the Warriors franchise.

As previously discussed, the naming rights game is largely a competition for Brand Awareness amongst the world’s largest corporations, and in some cases, this is largely successful. A survey done by Market Strategies International found that 1 in 5 US consumers were able to identify AT&T as the sponsor of AT&T Park (the San Francisco Giants MLB stadium). Equally impressive, the survey found that 94% of Seattle residents knew the sponsor of CenturyLink Field (the Seattle Seahawks NFL stadium). Clearly, arena sponsorships can be an effective vehicle in driving brand exposure and brand awareness. But stadium naming rights can do far more for a brand. In a recent HBR article, Levi’s CEO, Chip Bergh, discusses Brand Revitalization and his efforts in returning the Levi’s brand to its former glory. Prior to joining Levi’s, Bergh led the Gillette brand for Procter & Gamble and oversaw the naming rights deal for Gillette Stadium in New England. Having witnessed firsthand the benefits of such a deal (particularly when the stadium houses a 5-time Super Bowl champion team and a 3-time league MVP), Bergh elected to pursue this strategy yet again as a part of his Levi’s brand revitalization effort. To re-build Brand Equity, Levi’s executed a $220 million deal for the naming rights of Levi’s Stadium in 2013 (the NFL stadium for the San Francisco 49ers). The company recognized that the stadium attendees (for football games and other events) would be the brand’s core customers, and the move would “put [the] brand back at the center of the cultural conversation.” The Levi’s Brand Image as a true lifestyle brand is strengthened by its appearance at NFL games and concerts, while the Brand Awareness is undoubtedly aided by its presence throughout the stadium and its increased media mentions. And although the deal was pricey, when Super Bowl 50 came to Levi’s Stadium in 2016, “some experts calculated that the brand exposure from that week alone was worth a significant portion of what [Levi’s] paid for the naming rights.” This deal has certainly been a key component in the revitalization of the iconic Levi’s brand.

Though naming rights for professional stadiums has become extremely competitive and costly, the value proposition is crystal clear for some. Mercedes-Benz, for example, owns the naming rights of 2 separate NFL stadiums within 500 miles of one another. Stadium branding seems to be an effective tool for brand managers seeking to bolster Brand Awareness, construct new Brand Associations, or improve Brand Image. It has also proven to be an effective strategy in brand revitalization as Levi’s has re-entered the cultural conversation. Although naming rights may not translate directly to operational improvement, the utility as a tool for building valuable brands cannot be ignored.

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