Are Long-Term Deals With Marketers in Sports a Bad Risk?

Even Nascar Not Immune to Brands' Changing Fortunes

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NEW YORK -- Call it "When Naming Rights Go Bad."

As the subprime mortgage industry struggles with an unprecedented number of foreclosures, one of the industry's leaders, Ameriquest, has backed out of $100 million in naming rights and sponsorships in the last two weeks.
Ameriquest's decision to pull out of nearly $100 million in naming rights and sponsorships shows the 'fickle nature' of these deals, one exec says.

Ending deal with Nascar

First, the Orange, Calif., company reached a mutual agreement with baseball's Texas Rangers to remove its name, Ameriquest Field, from the team's stadium, as well as all sponsorship and signage -- saving it $67 million on the 30-year, $75 million deal it signed three years ago. Then it told Roush Fenway Racing to sell off the final two years of a three-year contract it inked in November 2006 to sponsor driver Greg Biffle's Nascar Nextel Cup car. Primary sponsorships of Nextel Cup cars run $15 million to $20 million a year, so the move should save it at least another $30 million.

Ameriquest did not return calls for comment, and a spokesman for Roush Fenway Racing said with virtually all of the 2007 selling season left, there should be no problem finding a primary sponsor for Mr. Biffle's car for 2008 and beyond.

But there's more at work here. Marc Ganis, president of Chicago consultancy SportsCorp, said, "This just shows the fickle nature of naming-rights deals." And there's potential damage for sports teams faced with frequently shifting nameplates on their stadiums.

The Texas Rangers will rename the field Rangers Ballpark in Arlington, and the club intends to make up half of the $2.5 million it loses annually by selling Ameriquest's signage space in and around the field. "For the amount of money that was left on the [Ameriquest] agreement, it was worth more to me over the next 26 years to have our brand back," Texas Rangers team owner Tom Hicks told ESPN Radio in Dallas. All references to the lender will be gone by the time the team opens its season April 6.

'The money is out there'

That's not to say naming-rights deals aren't alive and well. "The money is out there," said Walter McGivney, executive director of the Tampa, Fla., Naming Rights Association. Baseball's New York Mets and basketball's New Jersey Nets recently signed 20-year, $400 million pacts with Citigroup and Barclay's, respectively, for facilities to open in 2009. And rights for the combined New York Giants/New York Jets stadium, as well as the stadium being built by the Dallas Cowboys, are likely to fetch even more than what the Mets and Nets received.

Marketers are also taking advantage of Major League Soccer being the only major team-sports league in North America that allows branding on franchise uniforms. The Los Angeles Galaxy, which will welcome superstar David Beckham later this summer, just announced a five-year, $25 million deal to have diet-supplement company Herbalife across its jersey.

But though lucrative, the deals are still fraught with peril. In Major League Baseball alone, 11 of its 30 franchises are on their second or third names for their respective ballparks. "Today's hot company can be next year's dud," said Mr. McGivney.

Look no further than Enron Field, hurriedly dumped by the Houston Astros after the oil company became embroiled in a disastrous accounting scandal. It's now Minute Maid Park.

Not so brand-friendly?

Even in Nascar, the most sponsor-friendly sports league in the world, there are problems.

Telecommunications giant AT&T filed a motion Monday, asking that its logo be added to Jeff Burton's car immediately. Mr. Burton is sponsored by cellphone-service provider Cingular. AT&T recently took full ownership of Cingular as part of its recent merger with BellSouth and intends to eliminate the brand name.

AT&T sued Nascar on March 16 after racing-series officials refused to allow AT&T to put its logo on Mr. Burton's car because of Nascar's $70 million-a-year deal with Nextel, which sponsors the league's top series, the Nextel Cup.

Nascar's Nextel deal forbids teams that race in the series to sign sponsorship agreements with competing telecom companies. The deal does contain a provision that allows teams with existing telecom sponsorships, such as Mr. Burton's, to keep their sponsors. But Nascar has drawn the distinction between Cingular and AT&T.
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