Via the Marginal Revolution blog I came across a piece analyzing the economics of stadium naming. The basic conclusion was that if you see a corporation buying naming rights for a stadium, you should sell your stock because most of the time the company ends up under performing.
What got me to read through it was the promise that by the end I would know:
How to decide whether a company you run or advise should buy the naming rights to a sports venue (e.g. high school stadium, college stadium, major league stadium, etc).
I was hoping there would be some differentiation between the benefits of sponsoring a high school or college stadium vs. major league stadium which might point to a possible benefit to a company for sponsoring performing arts venues and interior spaces. Unfortunately, the article only deals with major league stadiums and doesn’t cover college or high school at all. There is a promise of a more detailed analysis if you subscribe to the author’s newsletters.
Overall the analysis is interesting to read due to the context of why different company’s stocks under performed. Banks and financial institutions were bailed out by the US government. Energy companies profiled were involved with all sorts of scandals or were part of a sector that just broadly under performed.
There were two examples of companies that beat the overall trend and did better: Qualcomm which stepped in when San Diego was desperate for funding to complete a stadium expansion. As a result, Qualcomm paid much, much less than they might otherwise have.
Target was the other example. Their deal apparently included additional enhancements that sponsorships generally don’t. Among them were appearances of NBA players at stores and potentially merchandise deals.
I have never really paid much attention to stadium naming news, but the insight the article provided about some of the arrangements and how beneficial it has been to the company stock† sheds light in an easily digestible format into an area which isn’t widely reported on.
†Since I frequently mention that not all measure of value are relevant, I feel I should point out that just because the stock for many of these companies didn’t do well doesn’t mean the naming arrangements weren’t valuable to the companies in other ways.