Naming Rights: Is the pay-off worth the investment?
- May 2, 2023
- Adam Mitchell
What are naming rights?
Naming rights are a common form of sponsorship that occur when a brand sponsors a venue, team, or event to build an association to that property and to capitalize on that association with consumers. These rights can take shape in several different ways, be it by:
Sponsoring the name of a sport, music, or entertainment venue i.e. Heinz Field, Crypto.com Arena
Sponsoring the name of an event i.e. Carabao Cup, TD Jazz Festival, RBC Heritage
Sponsoring the name of a team i.e. Red Bull Racing, New York Red Bulls
These sponsorship rights can often vary in the way they’re executed with the brand sponsor taking priority (i.e. [brand name] venue), or by supporting through added verbiage (event presented by [brand name].
Why do brands and properties want naming rights?
Naming rights are one of the most sought-after assets, and they command a significant premium. Brands are attracted by the idea of being overtly associated to a venue or event that enables them to connect with their target. On the flip side, properties are attracted to the commercial opportunity and revenue that these deals represent.
Why are they so expensive?
There are several factors that play into the value of a naming rights deal, and often the media will call attention to the price tag while falling shy of the specifics that make up the value. There are different approaches to valuing the assets that come with naming rights; however, some of the reasons that these deals command a significant premium include:
Inclusion of the brand name across all marketing materials and channels
Inclusion of the brand name on the building that provides significant impressions
Flow through revenues by becoming the exclusive supplier of the category i.e. soft drinks, food, ATMs
Access to hospitality and unique experiences
The value of these deals can be significantly influenced by the relatively limited supply, and significant demand for them, which can attract competing offers and spur bidding wars between competitors.
How much do these naming rights go for?
We’ve valued and evaluated the effectiveness of naming rights deals across the globe, and the value can range significantly from <$1M USD to well over $50M USD / year. The location of the venue, its foot traffic, the fandom of the property, and all the assets offered all play an important role in determining its value.
There are also several naming rights deals that have been reported or estimated publicly, such as:
Scotiabank Arena (formerly Air Canada Centre) in Toronto where the Toronto Raptors and Toronto Maples Leafs play was reported to be worth $800M/20 years
Crypto.com Arena (formerly Staples Centre) in Los Angeles where the Los Angeles Lakers and Los Angeles Clippers, Los Angeles Kings and LA Sparks play was reported to be worth $700M/20 years
Do naming rights drive consumer behavior?
Naming rights have been seen to drive sponsor awareness, and in many cases convert that awareness to impact. In a global study we completed in 2022, consumers were asked which assets are most likely to positively impact them and title sponsorship and naming rights are among the top five assets.
Case Study: NBA Team Venue Naming Rights
In 2022, we analyzed five unique naming rights deals between NBA teams and their naming rights partners. The results indicate that this expensive asset is one that can certainly drive awareness and impact for brands across different categories.
Read the case study here.
