Stadium Sponsorship – an unexploited field of play

29.09.2020

Income through stadium naming rights deals is considered to be the third most lucrative source of revenue for clubs in the field of commercials, behind shirt sponsorships and kit supplier deals. Monetizing stadium names has been a rising trend globally in the past decades, as it promises to bring extra revenue to clubs. However, the market in European football is still underdeveloped, and the current coronavirus pandemic is adding more complexity to the evolution of the market. In this article, we provide more context around the trend: show the major players and markets, discuss the effects of Covid-19 and also discuss some key factors that make venue sponsorship a sensitive matter.

In April, FC Barcelona announced that the club seeks a naming rights sponsor for Camp Nou, Europe’s largest football stadium – a deal to last only for the current season and the revenue to go to charities fighting against Covid-19. However, there were no further news since that announcement. The move was interpreted by many as a first step to sell the naming rights of their planned new and even bigger stadium, to be completed on the same site in four years. The club’s current dire financial situation, its global appeal, and the optimal timing of giving a new name to a new venue – all seem to lead into the direction that Camp Nou will, sooner rather than later, get a naming sponsor, for the first time in the club’s history.

LaLiga rivals Real Madrid have been renovating Santiago Bernabéu since June 2019, set for competition in the summer of 2022. The club is predicted to sell the naming rights to the refurbished stadium, also to help finance the EUR 525 million renovation and make the project financially more viable.

Tottenham Hotspur’s new, GBP 1 billion stadium was opened in April last year, with the aim to sell naming rights soon to compensate costs, but a corporate sponsor is yet to be announced. The modern, multi-functional venue is the largest stadium in London, able and contracted to host NFL games and mega concerts too, and thus offers vast exposure in several fields and internationally too. Amazon was earlier reported as a potential investor. Interestingly, while the club has been hit financially by the pandemic, Amazon is one of the few companies that could escape it or even become stronger with rising demand for online shopping. The company is not new to the club and the EPL – it produced a documentary “All or Nothing,” about Spurs’ 2019-20 season, while its Amazon Prime service is to stream 20 EPL matches this season. Spurs’ chairman Daniel Levy is reportedly insisting on an asking price of annual GBP 25m, and for over ten years. Such a deal would make the stadium the most lucrative one in England. Nevertheless, the turmoil around the pandemic and the high asking price seem to delay a deal.

The virus had more dramatic impacts in the US. In June, Banc of California terminated its EUR 6.67 m/year naming sponsorship of the home to Major League Soccer (MLS) side Los Angeles FC, a deal which was to run until 2033, being the highest naming rights deal in MLS history. Similarly and also in the summer, New Era, the headwear and apparel company withdrew its naming rights of the home ground of NFL’s Buffalo Bills. 

The sale of naming rights is very common for sports venues in the USA, where the trend originated. The first deal was made in Boston more than 100 years ago – the opening of Fenway Park in 1912, the home of the Boston Red Sox baseball team, involved the Fenway Realty Company, the stadium owner's real estate firm, who capitalised on the promotional value of the naming at the time. Many venues in the US today are multi-purpose arenas, often used by more than one team, mostly involving National Football League (NFL) or college football teams, who play “American football”, and also clubs playing “soccer” from both the men’s Major League Soccer (MLS) and the National Women's Soccer League (NWSL). Thus, while almost 80% of MLS clubs play in venues that have a naming sponsor, such deals are driven primarily by the venues’ resident NFL franchises.

The market is far less developed in the European top football flights, with the exception of the German Bundesliga, 78% of whose stadia are sponsored. Regarding all the 98 clubs in European football’s top five leagues, only 30% of them have stadium naming rights partners. Only a fifth of the stadia are sponsored in the English Premier League, Italy’s Serie A and France’s Ligue 1 (all at 20%), followed by the Spanish La Liga (at 15%). Interestingly, Turkey’s Süper Lig and England’s second tier, the Championship have more venues with a naming sponsor than those bigger leagues.

Our chart shows the leading European leagues by number of venue sponsorship deals.

Considering all of the major deals and players it is interesting to note that while UAE’s Etihad Airways has the largest individual deal, Allianz spends even more on various stadia naming rights. The German insurance giant has built a global portfolio of supported clubs, the “Allianz family of stadiums”, sponsoring eight venues on four continents, including six football clubs, paying a total of around EUR 30 million annually for those rights. The chart which follows shows the most lucrative venue sponsorship deals in Europe.

However, with the threat of sport stuck in crisis mode for some time without spectators in the stadia due to the Covid-19 pandemic, naming rights sponsors may try to renegotiate ongoing deals, or arrange makegood agreements with the rights holder, in the spirit of cooperation to compensate for a downturn in exposure. 

Surveying the key sponsors by industry, the financial sector is the biggest spender in terms of sports venue naming rights. In Germany, Europe’s most developed market in that regard, more than a quarter (28%) of the deals are with financial firms, followed by car manufacturers (21%), while the rest are from various other industries. Interestingly, this mix is quite similar to that of US stadiums' naming rights market, where financial services and automotive firms lead the pack.

Here again, firms from industries most heavily hit by the crisis – the airline sector surely being one of them – may want to rethink their current deals, while those who were planning  to sponsor a venue, would likely delay any move.

Despite the potential financial gain, several top football clubs in Europe have been hesitant to sell the naming rights of their home ground so far. The market reveals that revenue is the prime consideration among several others when a club ventures into the prospect of inviting a sponsor to rename their home ground.

EPL giants Manchester City earn an annual EUR 17.1m from UAE airline Etihad for their stadium naming rights. Neighbours Manchester United, or Spanish giants Real Madrid and Barcelona, could likely make even more a year, if they decided to change the name of their stadia to include a sponsor. Nevertheless, they have been reluctant to sell rights and thus rename their iconic venue. Old Trafford, Camp Nou, Bernabéu, San Siro,  Anfield – they are such well-established brands on their own, entrenched in the psyche of fans and the general public, that placing a sponsor name would have been difficult because of the historic attachment to the original name of the facility.

Partnering with sponsor brands, in general, can be a sensitive issue for football clubs for several reasons – the major concern is usually the reaction from the fans, mainly around how a sponsorship may fit with a club’s culture, heritage and identity. A kit supplier is rarely an issue in these regards, while a main shirt sponsor can provoke more passionate sentiments. The name of a club’s home ground is definitely even more part of club identity. In 2011, Newcastle United have renamed St James' Park the Sports Direct Arena after owner Mike Ashley's company. The move was meant to be a temporary measure to "showcase the sponsorship opportunity to interested parties". But in less than a year, the historical name was restored, as supporters were outraged and even the media refused to call the stadium SDA. When Arsenal left 38k-capacity Highbury and moved to over 60k-seat Emirates in 2006, which also boosted the club’s matchday revenues, manager Arsene Wenger commented thus: "We built a new stadium but we …left our soul at Highbury.” His words demonstrate the significance of the emotional component around a club’s home ground, which also implies that selling naming rights is not only a financial consideration.

The right moment to involve a naming rights sponsor could be during the refurbishment of old stadia or for the development of a new, well-equipped venue that provides a top-notch user experience and can be used for multiple purposes, making any name change more acceptable, even for the most loyal fans. When Atletico Madrid left the historic Vicente Calderón Stadium and moved into their new, redeveloped home ground, naming rights were sold to Chinese real estate company Wanda Group, who also owned 20% of the club. In 2003, Manchester City left their Maine Road stadium, which had a reputation for being one of English football's most atmospheric grounds, and once at their new home, in 2011, the club struck a combined shirt and stadium deal with airline Etihad, signed for 10 years and worth GBP 400m.

Both Arsenal’s and Manchester City’s examples demonstrate another common catalyst for selling/changing naming rights: new owners taking over at a club often want to capitalize on their investment via gaining such exposure. In addition, they may also combine shirt and stadia sponsorships. Arsenal’s original GBP 150m deal with Fly Emirates included shirt sponsorship until 2019 and stadium naming rights until 2028, with the jersey deal having been extended in 2018 until 2023-2024. Similarly, Manchester City’s aforementioned 2011 deal with Etihad covers both shirt and stadium sponsorship.

These examples also show that venue naming right deals are often part of larger contracts, in contrast to stand-alone deals. Leveraging the synergies of the partnership can take other formats, too. When a financial sector corporate becomes the naming rights holder at a club, typically the firm would also provide several related financial services to the club. Allianz, for example, won the 2019 Stadium Business Awards for product innovation by introducing NFC ticketing at Bayern Munich’s home ground – it allows visitors to enter the stadium simply by holding their Apple devices (phone or watch) up to an NFC reader for contactless entry. Similarly, a retail brand sponsor may try to capitalize on the opportunity to get consumers to engage with their product, also involving the squad and players to help sell the brand, particularly if they have significant popularity with followers on social media channels.

A sponsor must also be a reliable and stable partner. Some corporate failures, especially in the US, show the PR and reputation risks clubs may take on when embarking on selling their home ground’s name. In 2000, CMGI, the American tech and venture capital firm agreed a 15-year naming rights contract on the home stadium of the NFL’s New England Patriots (paying USD 7.6 million annually) – but the deal did not last much longer than after the first kick-off of the first game: when the dot-com bubble burst, the company’s stock price fell by 99%. Or recall “Enron Field”, home to the Houston Astros baseball team – the 1999 deal (worth USD 3.3 million annually) lasted only for 2 years, as the energy giant went bankrupt in 2001 after its disreputable corporate fraud scandal. These are just two examples among many similar failures in the US, while clubs in Europe, where venue sponsorship is a relatively late development compared to the US, could avoid such fiascos so far, partly due to having learned the lessons from those failures.

The pre-Covid evolution of the market proved that selling the naming rights to a sports venue must be based on lucrative and strategic deals and good timing, with a reliable sponsor partner who fits with the club’s image and business endeavours, including revenue that would persuade most supporters and stakeholders too, and with an appropriate contract duration, as changing names too often would not be acceptable for a club’s own brand.

The overall impact of the current pandemic on venue sponsorships is yet to be seen. It may push clubs, even those reluctant so far, to exploit this revenue stream, to help compensate their financial losses and/or finance costly developments. However, the uncertainty around the pandemic makes it hard to estimate the fair value of new stadia sponsorships, putting all the excitement at the negotiation table regarding deal value.

“At least for some time, sponsors are not going to pay pre-Covid prices, as they are also suffering from the economic downturn and are well aware that in the current market they have strong negotiation power. Also, this is true not only for naming rights, but for all sort of commercial deals” Andrea Sartori, KPMG’s Global Head of Sports commented.