Feature-Writer Kevin N. Kovalycsik Discusses How Barclays Bank Plans
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FEATURE — NAMING RIGHTS In March 2006, the New Jersey MetroStars were sold to Red Bull. The reported US$100million sale price for the franchise included US$45million for a stake in the stadium’s ownership, US$25million for the team itself, and US$30million Feature-writer Kevin N. Kovalycsik discusses how Barclays Bank plans to quietly for stadium naming rights conquer the world of finance, alongside the ‘Looking Glass’ strategy of the of the future Red Bull Park in Harrison, New Jersey. contemporary New York-Metropolitan area’s Naming Rights agreement, which IMAGE COURTESY: will shape the global financial sector and world of sport. ROSSETTI ARCHITECTURE WHAT’S SPRING 2007 P ANS TADIA 36 FEATURE — NAMING RIGHTS ince the late 20th century, naming rights contracts have been an intrinsic compo- nent of sport facility finance, providing windfalls of private equity to balance public contributions toward their build. SAs irrational exuberance in disenfranchised business halted with the ‘bursting’ of the US stock market ‘bubble’ in 1998, these once lavish agreements were re-evaluated and renegotiated, more often at the expense of existing and future facilities. “The lesson learned in the 1980s and 1990s is that naming rights, as a platform alone, [pose] a risk,” said Bruce Wilson, Partner and leading member of Covington & Burlington LLP sport practice, in an exclusive PanStadia interview. He continued: “Naming rights agreements need to build on brand equity, and involve the corporation in the full sport facility and surrounding community to establish meaningful returns.” Naming rights contracts of today are a marriage between a facility and private business. The founda- tions of the relationships are reasonable, scaled to meet the business expectations of the naming corpora- tion and the scope of the facility and community. They are by no means a financial disappointment. Last year alone, there were thirteen major US nam- ing rights agreements for the ‘Big Five’ sports — MLB, NFL, NBA, NHL and MLS — negotiated. The total sum of these contracts exceeded US$4.5billion. And, already in 2007, two more deals with a value of more than US$505million have been announced. ➲ Must a name mean something?” Alice asked doubtfully. “Of course it “must,” Humpty Dumpty said with a short laugh: “My name means the shape I am—and a good handsome shape it is, too. With a name like yours, you might be any shape, almost... — Lewis Carroll, Through the Looking Glass, Ch. VI. ” IN A NAME SPRING 2007 P ANS TADIA 37 FEATURE — NAMING RIGHTS The lesson learned in the 1980s and 1990s is that naming rights, “as a platform alone, [pose] a risk. Naming rights agreements need to build on brand equity, and involve the corporation in the full sport facility and surrounding community to establish meaningful returns... — Bruce Wilson, Partner, Covington & Burlington” LLP. WHAT’S IN A NAME Exponential Growth in Naming kees (MLB), New York Mets (MLB), New Jersey Nets Rights Deals (NBA), New Jersey Devils (NHL), and New York Red With fifteen new facility naming rights deals in four- Bulls (MLS), and a joint stadium for New York Giants teen months exceeding US$5billion and future forward (NFL) and New York Jets (NFL). A new, soon-to-be US economic stability, it’s fair for industry professionals announced Madison Square Garden project is also in and academics alike to examine if history is indeed the design and negotiation phases. repeating itself. If naming rights agreements and com- To play as a naming rights sponsor on this stage, petition for their privilege are once again on the rise, as corporations must pay big bucks. And already the they were in the 1980s and 1990s, if new marketplace returns are exceeding estimates, consequently skewing trends are identifiable. national valuation figures. One may begin with an examination of public and In March 2006, the New Jersey MetroStars were private equity, the foundation of which is the strength sold to Red Bull. The reported US$100million sale price of the US and Global markets, and those corporations for the franchise included US$45million for a stake in that have profited most from it; those with a vision of the stadium’s ownership, US$25million for the team the future of sport and its integrated international itself, and US$30million for stadium naming rights of ambitions — global financial institutions. the future Red Bull Park in Harrison, New Jersey. These corporations, rich from a decade of growth In November of the same year, the New York Mets and consolidation, are relentlessly aggressive in their and Citigroup announced a twenty-year naming rights pursuit of competitive advantage and expansion. They agreement, which will be worth at least US$20million are increasingly adapting their individual ‘shapes’ to annually, and include an option to extend the agree- those of changing local and global demands. Failure to ment to thirty-five-years. Over the life of the agree- adapt is unacceptable, while for the most part their ment, the Mets stand to generate between US$400 services are — strengths and weaknesses considered — and US$650million from the sponsorship agreement. indistinguishable. Local activism and community pres- ence creates a distinguishing competitive advantage Sharp Rise toward sector supremacy in an increasingly global Already in 2007, both the New Jersey Devils and the world. New Jersey Nets (soon to be the Brooklyn Nets) have announced their own agreements with Prudential Global Stage Financial and Barclays Bank respectively. Prudential Global financial institutions require a global stage, and Financial will pay the New Jersey Devils US$105.3mil- none is larger than that of New York City, the ‘financial lion over twenty-years to call its future facility ‘Pruden- capital’ of the world. Fortunately for team owners, fans tial Center’ — designed by HOK Sport Architecture — and corporate sponsors alike, State and local politicians in Newark, New Jersey. Barclays Bank will pay an aston- in the New York-Metropolitan area have ‘lifted the cur- ishing US$400million over an identical twenty-year tain’. An unprecedented seven new major sport and time period to name ‘Barclays Center’ — designed by entertainment facilities are scheduled to open in the Frank Gehry of Gehry Partners LLP — as the new home New York-Metropolitan area between 2008 and 2010. of Brooklyn Nets in Brooklyn, New York, above the These include individual facilities for the New York Yan- Atlantic Rail Yards. ➲ SPRING 2007 P ANS TADIA 38 FEATURE — NAMING RIGHTS Prudential Financial will pay the New Jersey Devils US$105.3million over twenty-years to call its WHAT’S IN A NAME future facility ‘Prudential Center’ — designed by HOK — Just how ‘Big’ are these Deals? announced a US$400million, twenty-year naming in Newark, New Think about this: the most expensive arena naming rights agreement for a future multi-purpose sport and Jersey. rights deal before Barclays Center was the twenty-year, entertainment facility in Brooklyn. Construction for the IMAGE COURTESY: US$182million, Philips Arena deal in Atlanta, Georgia. new facility, or Barclays Center, is set to commence WWW.NEWJERSEYDEVILS.COM And that deal was only brokered back in 1999. Consid- upon final approval, and is expected to be complete er then that the New York market had barely entered prior to the beginning of the 2009-2010 NBA season the naming rights arena, except for the twelve-year, in fall/autumn 2009. US$29million deal to rename Brendan Byrne Arena to “Barclays is thrilled to partner with the Nets in this Continental Airlines Arena in 1996. And yet now, a exciting endeavour. We are delighted to put our name combined US$800million in naming rights fees is going to a development that will be a visual and economic to the Nets and the Mets. In less than two months, landmark in the renaissance of Brooklyn,” said Robert three separate stadium/arena naming rights agree- E. Diamond, Jr., President, Barclays PLC. “This opportu- ments in the Greater New York area have generated nity brings together economic prosperity for Brooklyn close to US$1billion in sponsorship fees. Such is the and the chance to participate, in a unique way, in the financial power of the New York marketplace in 2007; cultural and sporting life of New York.” the financial power of location. Barclays Bank is a full global financial services Atlantic Yards provider, operating in Asia, Africa, Europe and North The proposed arena is the final component of a and South America. Its history traces back to the 17th US$4billion residential and business project, which is to century. With total assets of more than US$1.5trillion, be built partly on a platform over the Metropolitan it is the largest bank in the world. Its stock trades on Transportation Authority (MTA) owned Atlantic Yards. the London, New York and Tokyo Stock Exchanges. The facility is the consummation of the original inten- Still, before January 18, 2007, most New York residents tion of project developer and Nets Chairman, Bruce were neither familiar with its name nor operations. Ratner, who purchased the New Jersey Nets in 2004, Barclay’s Bank does not have a bank branch in New with the sole purpose of relocating the NBA franchise York. In fact, it does not have one in the United States, from a Meadowlands area that lacks a public trans- period. However, on January 18, 2007, Barclays Bank portation system to one of the most mass transit- and the NBA New Jersey (soon to be Brooklyn) Nets accessible locations in all of Manhattan. It marks the ➲ Barclays Bank and the NBA’s New Jersey (soon to be Brooklyn) Nets recently announced a US$400million, twenty- year naming rights agreement for a future multi-purpose sport and entertainment facility in Brooklyn — namely Barclays Center, designed by Frank Gehry.