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May-June 2011 l Volume 2, Issue 2 and the

Best Practices for Negotiating Naming Rights and Sponsorship Deals By Irwin A. Kishner and Julie Albinsky with package deals becoming more com- reverted to )5 speak to mon and teams creatively generating more the reputational risk in associating one’s aming rights and sponsorship deals and more sponsorship opportunities–for organization with another entity. There Nare, of course nothing new, but never example, at , the home of the is, of course, no way to predict an Enron- before have we seen such a proliferation in Colorado Rockies, Coors has exclusive type scandal or extreme fan backlash to the number and permutations of such deals pouring rights in addition to other tie-in corporate sponsorship; however, it is vital as there have been in recent years. For the arrangements3, while financial institutions to build contingency plans into naming most part, such arrangements have been (Citizens Bank, Wachovia, Barclays and rights and sponsorship deals. For example, success stories, mutually beneficial for teams M&T Bank to name a few) have various termination provisions are important–what and corporate sponsors; however, some vital tie-in arrangements such as the right to will trigger either party’s right to terminate lessons have emerged for negotiating and install ATM’s at the stadia that bear their (e.g., public accusations of moral turpi- structuring such arrangements. names4; another example is Anheuser- tude? indictment for a felony? conviction for a felony? bankruptcy?) and how fees Throughout history, institutions such Busch’s 6-year $1.2 billion deal with NFL and/or royalties will be addressed in case as schools and hospitals as well as public which includes licensing, marketing, media of termination are points that should be spaces have been named after benefactors. and team sponsorship. thoughtfully negotiated and meticulously The first , , was named Teams and leagues are drawn to such worded in the agreement. It is also impor- after the Cubs owner and chewing arrangements because they present a sig- gum magnate William Wrigley in 1926. tant for teams that are entering into naming nificant revenue stream, and corporate Today, naming rights and sponsorship deals rights or sponsorship arrangements, such sponsors vie for and pay top dollar for the are booming. More than 80 out of the ap- as the 49ers who are giving naming rights invaluable advertising and goodwill. Most proximately 120 teams in the NFL, NHL, sponsorship another go, reportedly actively such arrangements are a success for both NBA and MLB have their home stadia or seeking a naming sponsor for their new sides, but there have been several cautionary 6 arenas named after corporate sponsors,1 $937 million stadium , to coordinate with tales. The Astros’ stadium naming rights college and universities have begun seeking the corporate sponsor to develop a public deal with the Enron, which the team was out corporate sponsors for their relations strategy both from the outset and forced to quickly dismantle after the 2002 (for example, the KFC Yum! Center at in real-time response to shifting media and scandal, and the 49ers naming rights deals the University of Louisville) and even the fan opinion. with 3Com and Monster Cable, which Basketball Hall of Fame is looking to get Another risk that must be dealt with in into the game, reportedly actively seeking a were reviled by fans and local media (who naming rights and sponsorship deals are corporate naming rights sponsor.2 Naming continued to refer to the stadium as Candle- lockouts and other work stoppages which stick Park and finally passed a referendum rights and sponsorship deals are evolving, 5 Shelley DuBois, “The Best and Worst Stadium requiring the name of the stadium to be Naming Rights Deals,” March 30, 2011, avail- 1 Sam Hollis, “Stadium Naming Rights–A Quick able at: http://money.cnn.com/galleries/2011/ Tour,” March 13, 2008, available at: http://www. 3 Robert J. Sherwood, “Nine Strikes and You’re Out!,” fortune/1103/gallery.stadium_names.fortune/index. couchmansllp.com/documents/d-080313-sh_Nam- August 28, 2002, available at: http://www.forbes. html (last visited June 3, 2011). ingRightsArticle.pdf (last visited June 3, 2011). com/2002/08/28/0828sf_print.html (last visited 6 Curtis Echelberger, “CAA Hired to Sell Naming 2 Tabetha Esry, “Basketball Hall of Fame Plans to June 3, 2011). Rights for San Francisco 49ers’ Proposed Stadium,” Sell Title Sponsorship,” March 24, 2011, available 4 Billy Solun, “Making A Name For Yourself Doesn’t April 27, 2011, http://www.bloomberg.com/ at: http://www.theemzone.com/vnews/display.v/ Come Cheap,” September 7, 2003, available at: news/2011-04-27/caa-hired-to-sell-naming-rights- ART/2011/03/24/4d8a0bd3747a2 (last visited June http://www.highbeam.com/doc/1G1-119675888. forsan-francisco-49ers-proposed-stadium.html (last 3, 2011). html (last visited June 3, 2011). visited June 3, 2011).

Copyright © 2011 Hackney Publications (hackneypublications.com) 2 May–June 2011 Professional Sports and the Law can occur because of natural disasters or of media such as Twitter require careful field.8 Sports teams are also exploring collective bargaining disputes, such as the wording in contract provisions regarding new branding opportunities, such as the currently ongoing NFL labor dispute. what rights are being granted to a corporate Dodgers and Lakers-branded water that Although a naming rights or sponsorship sponsor. For example, a corporate sponsor is distributed by Branded Bottle and sold deal is profitable to the corporate sponsor may request guaranteed mentions of its name in the Los Angeles Area.9 In creating such regardless of such events, because the spon- in connection with the team in all media, new opportunities, teams and sponsors sor’s name is part of a local and beloved now existing or hereafter invented, while should be aware that league approval may sports institution, garnering invaluable the team will want to explicitly delineate the be required and, if the stadium or arena advertising and community goodwill, the forms of media involved in order to leave is publicly owned as opposed to team sponsor is likely to request that payments space for other (perhaps as yet unforeseen) owned, the approval of local government be pro rated for the time period that the sponsorship opportunities and to prevent may be required as well for any naming stadium is not in operation. The team inadvertently granting conflicting rights to rights to the stadium. While major league may wish to counter with an offer of different sponsors because of ambiguity in teams have a certain level of autonomy, additional advertising or branding tie-in there are certain rules imposed and rights contract language. As in any deal, leverage opportunities in compensation (e.g., the reserved by the leagues. League rules vary; in such negotiations will depend on the sponsor’s sign may be lit up and displayed for example, the NFL prohibits corporate popularity and success of the team as well during concerts and other events held logos of any kind on the field, while the as the sum involved, among other factors. at the stadium, instead of just for team NHL allows teams to sell four advertising Negotiating leverage also plays a role in games), which would allow the team to positions on the ice.10 Leagues also have how successfully a team may be able to avoid maintain its revenue stream at a time varying rules regarding licensing of the exclusivity period and right-of-first-offer when it is especially needed. It would be team logo or other intellectual property; prudent for teams to take a cue from the provisions in naming rights and sponsor- typically, the league has the right to enter NFL–in anticipation of a possible 2011 ship deals. A corporate sponsor will likely into national agreements on behalf of all lockout (which did come to fruition), the require that at the end of the contract term, of its member teams and the teams retain NFL renegotiated its television contracts the team must negotiate exclusively with various local licensing rights. to provide that networks would pay for the sponsor for a set period (one month Another concern for teams in creating scheduled games that were not played due would be typical) and/or that if the team new sponsorship opportunities is violating to a lockout.7 The NFL thus protected receives deal offers from other sponsors, the contractual rights of its existing spon- itself from grave financial consequences the team must offer the same deal to the sors. If a team granted the title of official and preserved at least one (albeit very current sponsor on the same terms. It is in beverage to , for example, it may be significant) revenue stream while other the team’s interest to avoid such provisions contractually prohibited from entering into revenue sources are comprised due to the since they are restrictive, and often lead different sponsorship arrangements with lockout. Teams should attempt to garner to uncertainty and thus pose a litigation Pepsi’s competitors or companies that Pepsi such protective provisions for contingen- risk. On the other hand, a favorable pro- does not wish to be associated with (e.g., in cies such as lockouts; although, of course, vision that teams should seek to negotiate the interest of maintaining its family friend- it should be noted that the networks agreed is, instead of a locked-in fee structure, ly image, Pepsi may not wish to have signs in the NFL’s case because NFL games draw increasing fees and premiums for positive advertising adult magazines displayed at the enormous audiences and thus the NFL performance, such as a winning streak, stadium where it is the official beverage), had great leverage. post-season games and championships or and may also be prohibited from granting In negotiating naming rights and sponsor- high media ratings. the title of official water to another company ship agreements, attention should be given Sports teams are continually carving since that may, depending on the contract, not only to unfavorable contingencies, but out new and creative sponsorship oppor- also to issues that arise from the evolving and 8 Don Murret, “Lexus Buys Naming Rights to Panthers’ tunities, such as the Florida Panthers who Rink,” April 4, 2011, available at: http://www.sports- ever expanding nature of naming rights and recently signed a deal to name the ice floor businessdaily.com/Journal/Issues/2011/04/04/ sponsorship deals. Constant technological Marketing-and-Sponsorship/Lexus-Panthers.aspx of their arena, BankAtlantic Center, Lexus (last visited June 3, 2011). advances and the development of new forms 9 Terry Lofton, “Liquid License,” March 21, 2011, Rink–this is only the second of such nam- available at: http://www.sportsbusinessdaily. 7 Lester Munson, “An NFL Labor Impasse Primer,” ing rights deals for playing surfaces, the first com/Journal/Issues/2011/03/21/Marketing-and- March 11, 2011, available at: http://sports.espn. Sponsorship/Lefton-column.aspx (last visited June go.com/espn/commentary/news/story?id=6207473 being Mall of America’s three year deal to 3, 2011). (last visited June 3, 2011). put its name on the Vikings’ Metrodome 10 See footnote 8.

Copyright © 2011 Hackney Publications (hackneypublications.com) 3 May–June 2011 Professional Sports and the Law create a conflict. In addition to foregoing dispute that naming rights and sponsorship conflicting sponsorship arrangements, the arrangements have proven to be meaning- tions throughout the U.S. and abroad, including numerous stadium and team and corporate sponsor should negoti- ful revenue generators for teams and great arena naming rights and sponsorship ate and address how to handle and protect investments for companies, and we will deals, stadium financing, media, both parties’ contractual rights in the event likely see many more such arrangements in the near future. l advertising and licensing agreements, of (that is, a marketing joint ventures, franchise transfers and strategy where a company capitalizes on financings, and major event tourna- Irwin A. Kishner is the Chair of an event or team name without paying a ment promotions. fee; one classic example is Nike papering the Corporate Department and a Atlanta in ads during the 1996 Olympic Member of the Executive Commit- Julie Albinsky is an associate in the tee of Herrick, Games, thereby benefiting from the focus Corporate Department of Herrick, Feinstein LLP. Feinstein LLP. Julie concentrates on the Olympics without paying for the Irwin repre- her practice in general corporate privilege). sents a number In contemplating and negotiating of professional law and has worked on a variety of naming rights and sponsorship deals it is sports franchises sports-related transactions, includ- ing franchise acquisitions, athlete always prudent to proceed with a certain and has acted sponsorship agreements, licensing and amount of caution, and with the benefit of as counsel on various sophis- intellectual property agreements, and good advice as well as lessons learned from ticated transac- joint ventures. recent history. That being said, few would

Copyright © 2011 Hackney Publications (hackneypublications.com)