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Why Naming Rights Deals in College Athletics are Complicated Business

By Terry Eddy (University of Windsor)

Throughout the last decade, the issue of selling college sport facility names began warming up after Jim Bentubo put out his Sport Business Daily article in 2007. In 2015, when the University of Washington and Alaska Airlines struck a deal for $4.1 million per year deal, the naming-rights market in college athletics was officially hot.

 

In that article, there were a number of people in the industry who believed that once a major program sold naming-rights to a notable/historic venue, others would follow. Recently, there have been a number of deals in this regard. The Kentucky deal with Kroger is worth $1.85 million per year, USC and United Airlines agreed to $4.7 million per year, New Mexico and Dreamstyle Remodeling reached a $1 million per year deal, and now Fox Sports has acquired Impression, which is an agency that specializes in college naming agreements.

 

The Kentucky agreement is notable, as the SEC was the last of the Power Five conferences to have a football venue with a corporate naming partnership. Given the infrequency of these partnerships over the past decade, this may be a tipping point for the naming rights market in college athletics.

 

Historically, the market for naming college sport facilities has been relatively soft with regard to financial commitments from sponsors. The Washington and USC agreements can be considered an anomaly or possibly the beginning of something bigger. Until these two deals were announced, the price paid for the right to be a naming rights sponsor remained fairly consistent with numbers falling in between $800,000 and $1 million per year, with a few outliers reaching as high as $1.5-2 million.

 

In a 2016 study of college facility naming-rights valuation, it was concluded that until 2014, football stadiums brought in lower prices than arenas. This was due, in part, because sponsors were willing to pay more per year for facilities with multiple tenants.

 

As such, it is possible that the amount sponsors were willing to pay was not significant enough for most schools to sell when balanced against the potential angst it may cause amongst its constituency. Even the USC deal can be a misinterpretation of the market, as the short-term tenancy of the Los Angeles Rams possibly played a significant factor in the final terms of the deal.

 

Although some of the numbers pale in comparison to the eight-figure annual deals seen in professional sports, and there are many political implications in securing them, these partnerships can be significant sources of revenue for many athletic departments around the country. According to the figures in the USA Today database, the agreements at Washington and the University of Houston appear to represent approximately 4-5% of their total athletic revenue.

 

Comparing deals between colleges and professional sports is also tricky, as the attitudes and opinions of fans differ within each respective setting. Those who follow professional sports are generally accustomed to the commercial element being integrated with the end product; so there tend to be fewer fans speaking out against commercialism. Also, given the current 20-30 year life span of professional stadiums, emotional attachment isn’t as strong for those who follow sports at that level.

 

A 2005 academic study pointed out that there is a sub-group of college fans that are concerned about, and resistant to, commercial influences in sport. Although the size of this group is unclear, it is certainly more vocal than similar sized groups of pro sport fans. In the hours and days following the Kentucky announcement, the deal was met with resistance on social media from fans of the school’s football program. The Washington agreement also generated at least one letter expressing disappointment to the editor of the Seattle Times and one angry editorial on ESPN Seattle Radio.

 

Other research only partially supports this assumption about fan resistance. There has only been a handful of college naming-rights studies published in prominent peer-reviewed sport management journals over the past five years. A 2012 study found that, when presented with a hypothetical basketball arena naming-rights deal, students at the institution responded with anger. They felt like part of what makes them, as fans, and their team special was being threatened. Given the traditions that make college athletics and each respective institution unique, this could be a serious concern.

 

Follow up studies using hypothetical football stadium naming scenarios attempted to answer the question of ‘whether fans would vote with their feet.’ In those studies, fans in general had negative intentions toward the hypothetical new naming sponsor, and those who indicated stronger attachment to their school’s athletic tradition and stadium had even greater negative intentions toward the sponsor.

 

On the other hand, when it comes to team-related intentions (attending future games, buying merchandise, etc.),  fans generally indicate that their behaviors would likely not change, particularly among those fans who considered themselves highly identified (i.e. emotionally attached) with the team. In fact, fans who were very concerned about commercialism in college sports indicated they might be less likely (than other fans) to attend games if their favorite team sold the stadium name to a corporation, but their team-related intentions were still generally neutral to positive. In all, these studies suggest that any disapproval that fans may have of a naming-rights agreement may not be manifested in drops in attendance or less support of the team.

 

When it came to sponsor-related intentions, studies show two significant findings: 1) males have more positive intentions toward the hypothetical naming sponsor than females, and 2) major donors (defined as those who contribute at least $1000 per year) have more positive intentions than those who donated less than $1000, or were not donors at all. Although sponsors should generally take this as a positive, it must be noted that the overall intentions were still slightly on the negative side of neutral – just less neutral than the other donor/non-donor groups.

 

As mentioned above, the majority of the academic research on fan attitudes in this area use hypothetical sponsorship scenarios. To date, there is no research on existing, actual naming-rights deals.

 

So, does all this mean that you should (re-)consider selling naming-rights to your stadium? The honest answer is that it depends. This isn’t just a lack of commitment to the results – the data actually support this somewhat non-committal answer. Research shows that there are clear differences between the attitudes and intentions of fans of different institutions. The differences in fans’ responses toward the sponsor were bigger (and statistically significant) compared to responses toward the team, but there are still some noticeable trends that fans would be more/less ‘ok’ with the idea of a corporate name on the stadium. In general, fans of teams that were currently struggling within their conferences (both financially and on the field) were more open to the idea of a corporate naming partner, compared to those fans whose teams were in better shape.

 

Personally, I recommend that administrators not ignore this possible revenue driver; Interested schools should test the market quietly to see what’s out there in terms of corporate interest. If the numbers are enticing, do some research to find out how your fans feel. Obviously no one wants to alienate fans or turn them off, but the data presented here suggest that fans may not respond quite as negatively as we might think, at least at most institutions.

 

If the history of naming deals in professional sports tells us anything, the Washington, Kentucky, and USC deals are probably just the tip of the iceberg. With every benchmark deal in pro sports, there is discussion that the market will dip because the dollars spent aren’t sustainable but, sure enough, a new, bigger deal usually comes along a few years later (i.e. Reliant, now NRG Stadium followed by CitiField). It will be interesting to see not whether a bigger deal comes along to set the new market in college sports, but rather which institution will be the next trendsetter.

 

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