Editor’s Note: Welcome to a daily column breaking down the day’s biggest stories in sports finance. It comes to us via our friends at JohnWallStreet, publisher of a free e-mail newsletter (you can sign up here). It’s sports business with a financial spin. Howie Long-Short and Fan Marino will be providing their expert opinions on each story. They have slightly different areas of expertise. Fan Marino is a firm believer that the SEC is the premier football conference. Howie Long-Short knows it as the Securities & Exchange Commission. Fan Marino lives and dies with the college selection of 5 star , blue chip recruits. Howie Long-Short spends his days analyzing blue chip stocks. Howie Long-Short knows that Black Monday occurred on October 19th, 1987. Fan Marino swears it happens every January after Week 17. You get the point.
College Football to Experience Dramatic Rise in Naming Rights Deals
The value of college football stadium naming rights deals has skyrocketed over the last 3 years, with the average annual fee now exceeding $1 million. Several deals have re-set the market. Back in ’15, American Airlines started the trend, agreeing to a 10-year $41 million pact with the University of Washington (Husky Stadium). United Airlines followed, agreeing to a 16-year deal worth $69 million, to put its name on the Los Angeles Coliseum; home of USC Trojans. The shifting landscape has programs across the country considering the adoption of corporate names for their athletic buildings. Colorado Chief Revenue Officer Matt Biggers explained his school had explored naming rights sponsorships “over the past few years”, but said now for the first time there seems a universal understanding (from administrators and alumni) “from a cost and revenue standpoint” that “we have to generate revenue to compete.”
Howie Long-Short: College football is in an arms race and naming rights are just one of many revenue streams that allow athletic departments to stockpile artillery. Back in May ’17, Kentucky became the first SEC school to add a naming rights sponsor (on a football stadium), agreeing to a 12-year $22 million deal with Kroger. I would expect the remainder of the conference to follow in short order. Programs in the football crazed SEC can’t be perceived as falling behind asset-wise.
The first stadium naming rights deal in college athletics was signed nearly 40 years ago when the Carrier Corporation gifted a one-time $2.75 million donation to Syracuse athletics in exchange for the naming rights in perpetuity to the Carrier Dome; home to both Syracuse football and men’s basketball. Considering the teams still play there today, one could certainly argue that deal ranks among the best in sports history (see: St. Louis ABA, Bobby Bonilla). Carrier Corporation is a subsidiary of United Technologies Corporation, which trades under the symbol UTX.
Fan Marino: Back in ’07, “Papa John” Schnatter agreed to pay the University of Louisville $6 million over 10 years to brand the school’s football stadium Papa John’s Cardinal Stadium. While Schnatter holds those rights until ’40, the school was quick to strip the brand name off the stadium after it was revealed the company founder had made racially insensitive remarks on a corporate conference call. Expect a settlement, the value of those rights is too lucrative for the building to sit without a sponsor for too long.
Speaking of Papa John’s (PZZA), more than a half dozen MLB teams have quietly restored their partnerships with the company just a month after cutting ties. The Yankees said their decision was made in support of the +/- 120 tri-state area franchise owners suffering from declining sales, but that had nothing to do with the racist comments. Papa John’s has said it will lower franchise fees to help offset the revenue lost due to the controversy. Major League Baseball has not yet reinstated the Papa Slam promotion, but is reportedly considering it.