A Jay-Z concert tonight will mark the long-awaited, much-ballyhooed opening of Barclays Center, the new home of the Brooklyn Nets. The basketball arena is named for the London-based international financial services company. How does a company get naming rights to a stadium?
It approaches the team that plays there. Professional sports stadiums are usually owned by the municipalities in which they’re built, and one or more teams rent the stadium. The city (or county) and the team work out a contract to determine who gets what revenue from the stadium. In these agreements, it’s almost always the case that the team gets all the revenue from stadium naming rights. (One exception is Sports Authority Field in Denver; the $36 million in revenues from the 2011 naming agreement are split 50/50 between the Denver Broncos and a government body called the Metropolitan Football Stadium District.) Since talks between team owners and corporations seeking naming rights are private, we can’t know exactly how the deals are negotiated, but it seems that the wooing can go in both directions, and terms and conditions of the sponsorship are limited only by the participants’ creativity.
The amount a company pays for naming rights depends on the city, the terms of the agreement, and the length of the agreement. Barclays agreed to pay $400 million for naming rights of the Nets arena lasting 20 years (a per-year record for most expensive stadium naming deal, tied with the New York Mets’ Citi Field). Generally, naming rights to new stadiums are worth more than naming rights to old stadiums, because fans are apt to continue calling re-named stadiums by their old names. (Candlestick Park, the home of the San Francisco 49ers, revertedto its original name after naming rights deals with first 3Com and then Monster expired.)
A few American sports stadiums bore corporate names in the early- to mid-20th century, including Chicago’s Wrigley Field and St. Louis’ Busch Stadium. But they were really named for team owners who also happened to own eponymous companies (a chewing-gum company and a brewery, respectively). In the ‘60s and ‘70s, new stadiums were usually named after individuals or teams, with some exceptions—the New England Patriots’ Schaefer Stadium (since replaced by Gillette Stadium) being one of them) being one of them. The corporate naming trend didn’t get going in earnest until the early 1990s, when teams realized that stadium names were an asset they could sell.
Companies are clearly willing to invest money in naming rights, but enough companies have faced trouble after engaging in these deals that some sports fans believe in a stadium-naming curse. (Barclays joined the likes of Enron and American Airlines as a victim of this curse when it was implicated in the Libor scandal this summer.)
The rise of corporate naming rights coincided with a dramatic shift in the proportion of revenues taken in by teams compared to cities. Before the late ‘80s and early ‘90s, cities would get not only rent money but also a decent share of a stadium’s other revenue streams: concessions, ads, parking, and the like. (Teams usually got to keep ticket revenue.) Today, some teams pay only a nominal amount of rent for the use of stadiums, and they typically keep all the revenue that a stadium nets. Cities are left with tax revenue from these accessory revenue streams (but sometimes even tax money goes to the team). Hypothetically, cities still benefit from the prestige of owning a major-league stadium and from the increase in tourism that stadiums ostensibly bring. In reality, though, stadiums usually cost more than originally planned, and their supposed economic benefits rarely materialize.
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Explainer thanks Rick Eckstein of Villanova University, co-author of Public Dollars, Private Stadiums: The Battle over Building Sports Stadiums, and Neil deMause, co-author of Field of Schemes: How the Great Stadium Swindle Turns Public Money Into Private Profit.