Cash-Strapped Cities Turn to Marketers for Help
NEW YORK (AdAge.com) -- There's the TECO Line Streetcar System in Tampa, sponsored by Tampa Electric. The HealthLine bus line in Cleveland, sponsored by the Cleveland Clinic and University Hospitals. And if all goes as planned, there will be a Barclays Center subway stop in Brooklyn by 2012.
Municipalities facing shrinking budgets are turning increasingly to the private sector to fund public services, offering up naming rights in exchange for cash. Last week New York's Metropolitan Transit Authority approved a 20-year deal worth $4 million with real-estate developer Forest City Ratner to rename a Brooklyn subway station. The developer is opening a sports arena named the Barclays Center near the heavily trafficked subway stop, which will share the Barclays name.
What's next? Will iconic American locales such as Route 66 or treasured public institutions such as the Smithsonian be up for grabs?
"Given the state of the economic environment, you're absolutely going to see more municipalities getting creative in the assets they own and control and engage the corporate community in unique ways to get revenue," said Jim Biegalski, senior VP-consulting with Omnicom Group's Marketing Arm, a marketing and promotions agency. "At this point, I wouldn't put anything completely off-limits."
Jeremy Soffin, press secretary for the MTA, said the Barclays Center subway station is the MTA's first naming-rights deal, but is part of a growing relationship with corporate advertisers. Since the mid-1990s, the MTA has increased its advertising revenue to $120 million in 2008 from $30 million, growth Mr. Soffin attributed to inviting "creative ways of advertising," such as "station domination" and projecting ads on walls and floors. As for the soon-to-be Barclays Center station, "this is the first one that we've had strong interest in and made sense," he said.
Mr. Soffin said when the MTA was researching the possibility of selling naming rights, it turned to other cities that were pursuing corporate sponsorship, including Tampa, Cleveland and Las Vegas. Las Vegas is forecasting a $31 million shortfall for fiscal year 2010 and a $260 million six-year shortfall through fiscal year 2015, so it has taken aggressive steps to secure nontraditional funding.
"It's just so hard right now because the economy is tanked and nobody is giving money at all," said Esther Boyter, a management analyst with the Office of Cultural Affairs for the city of Las Vegas. "But we're just not giving up right now."
In 2007, the city tapped Active Marketing Group to draw in corporate sponsorships. So far, Las Vegas has secured only one, with an online-mapping company, for about $4 million over five years. Ms. Boyter said she believes Las Vegas would have had more contracts, but the market tumbled just as the city was attracting serious interest.
Mr. Biegalski said municipalities seeking corporate sponsorship have met with varying levels of success. He said he believes some of that has to do with what the municipalities have to offer: Some assets don't necessarily evoke the kind of broad-based emotion that, say, a home team's sports stadium does.
According to a 2008 IEG Sponsorship Report, from 2003 to 2008, 96 deals worth almost $477 million were made for naming rights to pro-sports stadiums in the National Basketball Association, Major League Baseball, National Football League and National Hockey League. The deals typically ranged from 10 to 20 years. The average deal in the NBA was $2.5 million; the MLB, $2.8 million; the NFL, $4.2 million; and the NHL, $2.5 million.
Mr. Biegalski, who estimated that corporate sponsorship is a "multi-multibillion-dollar" industry, is keeping an eye on what is going on in the public sector, but he has not had any clients come to his agency expressing interest.
"Corporate America will definitely look at it," he said. "But will it become a silo within sponsorship like music, sports, television, entertainment, cause? It may at some point, but that's a number of years away before this government or municipality sponsorship gains any traction."
The MTA deal has gotten other New York agencies thinking. Selling naming rights is "not something that we've aggressively pursued in the past," said a spokesman for the New York Office of Parks, Recreation and Historic Preservation. "But given the economic realities, it's something we're taking a closer look at."
And lest anyone think the situation is limited to city services, the City College of San Francisco put individual course names up for grabs at $6,000 apiece, much to the dismay of the school's board of trustees. Without private funding, City College plans to cancel 800 classes -- roughly 8% of its academic offerings -- to chip away at a $25 million budget deficit.