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What’s in a [Corporate Stadium] Name?

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5 Responses

  1. eric says:

    Another timely example: AIG, whose logo has for some time appeared on Manchester United jerseys, will not be renewing its $78.0 million sponsorship deal with the team (roughly the NY Yankees of English football, for the non-soccer fans in the audience). Which is a shame, because it would have been amusing to have the jerseys emblazoned with the logo of the U.S. Treasury Department.

  2. Lawrence Cunningham says:

    Eric,

    Thanks for the add. Two notes on it:

    (a) AIG reportedly says it does not plan to renew its contract with Manchester United, which expires by its own terms at year end 2010 without obligation, but is not seeking early termination before then; and

    (b) my understanding is that the Federal Reserve, not the Treasury, funded the US capital investment in AIG.

    –LC

  3. A.W. says:

    I strongly suspect the real purpose of naming something the Staples center, or whatever, is more for the satisfaction of financiers and investors, assuming it serves any rational role at all (a big assumption). Its their way of saying, “we are the big dogs. invest in us.”

    For the rest of the public, it increases awareness, but that is about it. i will never catch myself going, “oh, where should i go for office supplies. oh, right, the people who named a stadium after themselves.”

  4. Lawrence Cunningham says:

    A.W.,

    Personal satisfaction may be part of it but assessing rational role requires data, not assumptions.

    True, calculating the relation of the costs of a contract right to its benefits is not always easy, particularly in marketing and merchandising.

    Even so, in these deals, especially Citi-Mets, the payoff from awareness is only part of the gain, and that is especially hard to measure. The merchandising results are more susceptible to empirical calculation.

    Subject to those admitted difficulties, it does not seem unreasonable to accept an estimate, by a Bank of America officer, “that every dollar spent on the company’s sports-related deals generates $10 in revenue and $3 in income.”*

    But ultimately the question is who is best equipped to make the required judgments. Candidates are the corporation’s board or its shareholders, and corporation law always resolves that choice in favor of the board.

    Should the rules change if government is a shareholder? At present, government has made loans and provided guarantees to Citi, but has not acquired its common stock.

    In the current talk, one hears of the government “nationalizing” Citi, which presumably means it becomes its sole shareholder. In that case, government would have the power to elect Citi’s board and, in effect, direct business decisions like this one.

    It is not clear which governmental authorities would choose the directors of a nationalized bank, but candidates include Congress, the executive (President and/or Treasury) or the Federal Reserve or some combination.

    However directors are chosen, it seems plausible to believe that they could reach the same business judgment that the net benefits of the contract are favorable compared to breaching it.

    * See Madlen Read, Stadium naming rights: Frivolous? Or good marketing? (Associated press Feb. 8, 2009).

  5. bobby b says:

    How should informed people think about the Citi-Mets arrangement, and others, and assess the competing political, business and economic issues implicated?

    Informed people should be thinking about the quickest, most efficient means to reverse our current slide into public “ownership” of private business, recognizing that the blurring of roles must logically lead to governmental regulation imposed only to sustain a mediocre status quo and ending evolutionary growth and improvement.

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