The economics of stadium names

I have always wondered about the economics of these massive marketing campaigns. Take crypto.com for example:<p>&gt; Crypto.com buying the naming rights to the L.A. Lakers’ home arena for $700 million<p>I guess they hope people see the stadium name and go use their site, right? crypto.com makes their money from trading fees. Let&#x27;s take their most expensive fee of 0.4%[1]. $700M ÷ 0.4% = $175B. They would need to do $175 billion in trading volume just to make their money back. That&#x27;s not happening any time soon. Do these companies even care about ROI?<p>[1]: <a href="https:&#x2F;&#x2F;crypto.com&#x2F;exchange&#x2F;document&#x2F;fees-limits" rel="nofollow">https:&#x2F;&#x2F;crypto.com&#x2F;exchange&#x2F;document&#x2F;fees-limits</a>

How can companies quantify the ROI of extremely non-targeted advertising like stadium naming rights? For targeted campaigns, they can survey whether that specific campaign influenced customers&#x27; perception of the product. But for non-targeted campaigns, I don&#x27;t see how a company can reliably survey whether the implicit brand awareness stemming from e.g. stadium naming rights has any influence on consumer behavior.<p>I think buying naming rights is mostly done as a signaling factor to company stakeholders. If the company reports that brand awareness declines, it can cover its ass to board members and shareholders by claiming &quot;well, we did all we could in the advertising department—we even bought naming rights to a stadium! Clearly the decline is due to market conditions and not our own advertising failures.&quot; If, on the other hand, the company reports that brand awareness increases (likely due to factors other than the naming rights), it can trumpet that buying the naming rights was a genius strategic move.<p>As an aside, I think this is a large part of why companies hire management consulting firms, knowing full well they will yield zero effective results. It gives them another CYA excuse if things go south: &quot;we tried all we could to restructure; we even hired McKinsey and Bain, the best of the best! Our declining revenue must be due to factors beyond our control.&quot;

In Stockholm, Sweden, two of the largest arenas are named by companies who paid to have the arena named something not associated with their company.<p>Friends Arena is named after the Swedish anti bullying foundation Friends as part of the Swedbank sponsorship of the foundation.<p>Avicii Arena is named after the artist by the companies Trygg-Hansa and Bauhaus.

This article is interesting but I picked up on several errors.<p>For example: In case you were wondering how Q2 Holdings ($3B market cap) could possibly pay $260M to name a Texas soccer stadium... they can&#x27;t and didn&#x27;t. That number is the amount it cost to build the entire stadium. Q2 said the deal cost less than 1% of its annual revenue... Their annual revenues are &lt;$500M. <a href="https:&#x2F;&#x2F;twitter.com&#x2F;SportsPro&#x2F;status&#x2F;1354033011302477826?s=20&amp;t=4f-LNNCq3C34sYoZiNiiIA" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;SportsPro&#x2F;status&#x2F;1354033011302477826?s=2...</a><p>An interesting naming right to consider is Overstock.com... in 2011, they bought the rights to the Oakland–Alameda County Coliseum, where both the Raiders and Athletics played... for a 6 year total of $7.2M. It was always a head-scratcher for me how that went so cheaply. (<a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Oakland_Coliseum" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Oakland_Coliseum</a>)

The Staples center has been mentioned a couple times in this thread. If one is going to pay to name a stadium, make sure its a new stadium. As buying the rights to a stadium that expired after many years means you are paying a lot of money to put your name on something that people just call by the old name anyway.

I know little about finance, but this seems pretty clever. Actions like this can definitely give some insight into how their leadership operates (at least the leadership at the time of the action —- can’t pin that on the team who comes in 15 years into a 20 year agreement)

Yet a further example of the absurd economics of sport franchises. Quite nice work.<p>A minor quibble: not every investment a company makes can have the same GAAP ROI. A small example that comes up frequently on HN is the free drinks for staff, which is a small expense that has a large benefit. At the opposite end can s like these, companies often have complex relationships with their local communities (expanding facilities, traffic, pollution, etc). Stepping in, like Qualcomm did, or just “local boosterism” like Target or AA can be valuable but only appear as a hard-to-quantify avoided expense. Whether a stadium is better than some “keep the highway clean” campaigns and some school programs is hard to determine, though the article manages to touch on it (the rigidity of being locked in).<p>Of course when the campaign is unambiguously a national or international one (as with crypto.com’s) an analysis like ntoskrnl’s is right on.

Funny. As a (sometime) SF Giants fan, their park is now on its fourth name, and it&#x27;s only ~20 years old [1].<p>&gt; The Giants&#x27; waterfront arena on 3rd and King Streets is on its fourth name change in 19 years. It was first named Pac Bell Park when it opened in 2000. In 2002, it was renamed to SBC Park before changing again to AT&amp;T Park in 2006.<p>Life goal when I&#x27;m a billionaire: erect a stadium for some sport, call it &quot;&lt;Your name here&gt; Park.&quot; Enjoy listening to all the announcers say that.<p>[1] <a href="https:&#x2F;&#x2F;www.cbsnews.com&#x2F;sanfrancisco&#x2F;news&#x2F;oracle-park-is-the-new-name-of-the-sf-giants-stadium&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.cbsnews.com&#x2F;sanfrancisco&#x2F;news&#x2F;oracle-park-is-the...</a>

I remember when PacBell bought rights to the new Giants stadium for ~$2mm per year. Usually these are testaments to executive ego, similar to large HQ purchases. Sometimes it works out (Salesforce and Apple) but many times it doesn’t (Bear Stearns and Enron)

They mention the Crypto.com arena at the start, but it is interesting that they seem to have skipped over the history of the arena before that - The Staples Center and how that may have impacted their business

I was wondering...<p>Do this name changes change that people refer to landmarks in their day to day speech?<p>At least nearby, there are some places and companies that people still use their original name, even years after renaming.<p>For example as a foreigner I still occasionally refer to Mexico&#x27;s capital as DF, instead of CDMX&#x2F;Ciudad de México. And I&#x27;ve heard Costa Ricans still refer to their local airline as Lacsa instead of Avianca.

When Gov. Whitman and her crew first implemented &quot;leasing&quot; of stadium names, I think it was actually Plan B. What they _really_ wanted to do was privatize those publicly funded stadiums themselves. But that wasn&#x27;t something that would fly at the time because ordinary voters still hadn&#x27;t fully embraced full on privatization of everything.

After reading this article I&#x27;m more certain than ever that stadium naming rights are just very expensive NFTs.

Same as skyscrapers, isn&#x27;t it? While things look like they&#x27;re exponential, you can pay for anything. A stadium tells everyone your business has arrived in the big leagues.<p>One thing that I didn&#x27;t see is whether you can sell on the naming rights to a bigger fool.

Not a bad rule of thumb, especially if the company is spending money on long-term brand marketing that&#x27;s investor capital (or otherwise borrowed) and not from operating cash flows.

Wonder if this applies to cities that subsidize stadiums too? Are they worse off financially?