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March 2007 |
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The New P.E. & Sports Dimension
The column that opens your day by opening your mind
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"Sport Facilities and the Cost of the Game”
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By
Amanda Kuntz, Dr. Peter Titlebaum and Dr. Corinne M. Daprano
University of Dayton, USA
Amanda Kuntz is a Graduate Assistant, Department of Health and Sport Science at the University of Dayton |
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The articles of our authors are indexed in |
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To start with the discussion and how to: Click here |
In today's sport world, the ultimate goal of winning is overshadowed by the need to generate revenue. Professional sport teams have moved from commemorating sport and civic leaders in favor of commercialization. Venue names formally served as the identity and the public memory of many teams. The Miami Dolphins' Joe Robbie Stadium, the name of the original owner, was changed after the team signed a 10-year $20 million deal to re-name the stadium ProPlayer Stadium. Invesco Field at Mile High is another example of a stadium name that was changed because of a naming rights deal. While ‘Mile High' was left on the venue at the request of the Denver media and fans, the new name does not satisfy most fans (Boyd, 2000). In 1999, the Houston Astros sold the naming rights to their ballpark to Enron in a 30-year $100 million deal. In 2001, Enron filed the largest Chapter 11 bankruptcy in American history (Korolefski, 2000). |
| 1. Corporate Naming Rights |
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Corporate naming rights are not a new phenomenon as the first deals date back to 1926, when Wrigley Field in Chicago acquired its name from chewing gum magnate William Wrigley, Jr. Busch Stadium in St. Louis in opened when Anheuser-Busch purchased the naming rights in 1953. In 1973, Rich Products Corporation bought the rights to the Buffalo Bills' stadium for $1.5 million. These days, a stadium without a corporate name is a rarity. The NFL, for example, is comprised of 32 teams, and 19 of those teams' venues are corporately named. Lucrative deals in the NFL include such teams as the Houston Texans, who sold the rights to Reliant Stadium for $10 million a year until 2032. The Philadelphia Eagles play in Lincoln Financial Field to the tune of $140 million over a 20-year period (ESPN.com, 2004; Romeo, 2002).
Corporate naming rights are primarily used by sponsors to distinguish themselves from their competitors. Sport stadiums and arenas are effective promotional opportunities for sponsors because of the popularity of sport on television and the Internet. Naming rights are also a useful tool for gaining brand recognition. Companies are able to gain exposure on television, radio, stadium signage, field displays, the Internet, and print media. |
| 2. Defraying Construction Costs |
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Since the1990s, over 90 professional sport venues have been built in the United States (B. Dorsey, personal communication, January 7, 2007). Currently, there are plans for seven new or renovated stadiums in the NFL. Average construction costs for a National Football League (NFL) venue are $300 million. The new San Diego Chargers' and Indianapolis Colts' projects cost $400 and $500 million, respectively. Lucas Oil is helping to defray construction costs for the Colts' stadium by purchasing the naming rights for $121.5 million over 20 years (Naming Rights, 2007). In part as a result of this naming-rights deal, the entire project will be financed without raising property, sales, or income taxes.
New or renovated facilities offer innovative amenities specifically for fans . The New England Patriots opened Gillette Stadium in 2002 and included an audio system with 2,000 speakers that distribute sound to all parts of the stadium. The new facility has wider seats and concourses and more rest rooms, parking spaces, and concession stands. In addition, the stadium houses a 12-story lighthouse and is located near a renovated riverfront (Gillette Stadium, 2007). |
Association of Luxury Suite Directors Executive Bill Dorsey (personal communication, January 7, 2007) asserts that when a team considers building a new venue, the first concern is the construction of luxury suites. Revenue from premium seating, such as luxury suites and club seats, are a form of contractually obligated income (COI). Many luxury suites are sold to Fortune 500 companies in advance of the venue's opening. This is another way of defraying construction costs. Revenue from luxury suites can make a substantial contribution to a team's profits.
The National Basketball Association (NBA) Detroit Pistons' Palace of Auburn Hills was the first venue to sell luxury suites. Overall construction costs were over $70 million in 1988 when the venue was built. The completed facility included 180 suites and 1,000 club seats. Annually, an average of $20 million in premium seat revenue is generated (Arenas, 2007). Stadium clubs in Major League Baseball (MLB) facilities such as the Diamond Club at the Cincinnati Reds' Great American Ballpark and club seating have been built as part of this trend as well.
Luxury suites are not the only aspects of the premium seat market. Many facilities also have club seats offered at higher prices than traditional seats. These club seats offer better views, service, and an overall entertainment value. Further, a number of venues have stadium clubs that are utilized by corporate clients for hospitality. Corporations use the clubs to entertain clients and negotiate business deals. Some can even be utilized when no events are scheduled in the facility. Finally, personal seat licenses (PSLs) offer patrons the opportunity to purchase season tickets for certain seats in a venue.
The premium-seat market is growing rapidly in collegiate sports as well. Many colleges rely on donors to help fund facility projects. The University of Dayton , a private Midwest university, revamped its basketball arena in 2002. Additions to the UD Arena included suites, loge seats, and the Time Warner Cable Flight Deck, all overlooking the basketball court. The arena's lounge was renovated to include upgraded concessions for fans. |
| 4. Additional Revenue Generation. |
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Another revenue stream for sport facilities is generated from advertisements displayed in these venues. The Chicago Cubs and Under Armour recently announced a sponsorship deal that allows Under Armour to place signage on the ivy covered outfield walls at Wrigley Field. The 7-by-12 foot paintings of Under Armour's logo will not disrupt the ivy and gives the Cubs an opportunity to create an additional revenue stream for the team. Further, Under Armour purchased advertising rights to the Green Monster in MLB's oldest stadium – Fenway Park .
Counter to the corporate naming rights trend discussed earlier, team such as the Cleveland Browns (Cleveland Stadium), Dallas Cowboys (Texas Stadium), Chicago Bears (Soldier's Field), Green Bay Packers (Lambeau Field), and Cincinnati Bengals (Paul Brown Stadium) have retained the names of their stadiums in order to honor the history and tradition of the team and city or state in which each is located. Instead of selling naming rights to the entire facility, many of these teams have sold advertising rights to other sections of the facility. The Cleveland Browns sold naming rights to the gates of its stadium. The Dallas Cowboys contracted with Verizon and Ford to hang banners in their stadium for $1.5 to $2 million each (Wethe, 2002). The Cowboys have even offered to sell naming rights and advertising space to the end zones or sidelines behind the team benches. The spaces would extend into concession areas, gates, parking lots, and even particular seating sections of the stadium. |
Teams need additional sources of revenue to pay the rising costs of player salaries. One way to generate this additional revenue is to build innovative venues that incorporate several seating options and add-on services for corporate customers. In addition, many teams are willing to create a new set of sponsorship and facility advertising categories to meet increased facility construction costs and rising demand. Corporate naming rights, luxury suites, club seats, and PSLs are now essential aspects of any new stadium or arena construction plans. |
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Arenas (2007). The Palace of Auburn Hills. Retrieved January 14, 2007, from http://basketball.ballparks.com
Boyd, J. (2000, November). Selling Home: Corporate Stadium Names and the Destruction of Commemoration. Journal of Applied Communication Research . 28 (4), 330-346.
Gillette Stadium (2007). GilletteStadium.com Retrieved February 2, 2007, from http://www.gillettestadium.com/stadium_information/index.cfm?ac=quick_facts
Korolefski, J. (2002). The Sport of Naming. Retrieved November 5, 2006, from http://www.brandchannel.com/features_effect.asp?pf_id=95#more
Naming Rights (2007). Lucas Oil Secures Naming Rights for new Colts Stadium. Retrieved January 11, 2007, from http://www.stadia.tv/archive/user/news_article.tpl?id=20060306094616
Romeo, T. (2002, June 3). Lincoln Financial Field New Eagles' Nest. KYW NewsRadio, Philadelphia . Retrieved on November 13, 2006, from http://www.freerepublic.com/focus.f-news/694141/posts
Stadium Naming Rights (2004) ESPN.com. Retrieved February 1, 2007, from http://sports.espn.go.com/espn/sportsbusiness/news/story?page=stadiumnames
Wethe, D. (2002, November 1). Cowboys to benefit four ways from stadium deal. Dallas Business Journal . Retrieved November 1, 2006, from http://dallas.bizjournal.com/dallas/stories/2002/11/04/story3.html?page=3 |
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