Defunct sporting-goods retailer Sports Authority is trying to auction naming rights to the home stadium of the NFL's Denver Broncos -- an unusual move that's raising eyebrows in the world of sports marketing.
The company wants to capture some of the appreciation in the value of naming-rights deals since striking its agreement for Sports Authority Field at Mile High back in 2011, a time when the market for such arrangements had just begun to heat up again after collapsing during the Great Recession.
Lawyers for the chain, which began liquidating last month after failing to find a suitor, are attempting to monetize the stadium sponsorship agreement in a similar fashion as bankrupt retailers who flip long-term lease agreements with below-market rents to other users. The buyers typically pay a fee and take over the payments.
But the team and stadium authority are crying foul and have gone to court to block the auction, for which bids are due June 27. They say naming rights cannot be assigned to another sponsor without the team's consent, citing both the sponsorship agreement and bankruptcy law.
The filing does note the team might reconsider its objection depending on which replacement sponsor Sports Authority brings to the table. The bankrupt chain also plans to sell several brands it owns, along with its website and customer data.
Sports Authority put its name on what most fans still call Mile High Stadium after assuming a deal previously held by fund-manager Invesco. It pays about $6 million per year for putting its name on the facility, team officials have said. More recent NFL stadium deals have stretched upward toward $10 million per year.
Sports Authority probably realizes it won't be able to resell its naming rights without the Broncos' cooperation, but it may be taking an aggressive stance in hopes of yielding some value for the bankruptcy estate, noted Todd Fischer, senior vice president of global sports and entertainment consulting for Milwaukee-based GMR Marketing.
"The idea that they could take it and turn it into an asset would change the landscape of the industry," Fischer said. "It would be like people buying futures of sponsorship inventory and assets and being sellers in their own rights. That wouldn't necessarily fly."
Typically, stadiums and other rights holders have very little incentive to let a sponsor off the hook in such deals, Fischer said. One example: Sprint (S) attempted to find a replacement as title sponsor of the NASCAR series, but had to continue to pay up when it failed to find a suitor.
Sports Authority is a different story because it's in bankruptcy liquidation.
"The Broncos and the city of Denver won't necessarily want a defunct company to be the naming sponsor on their stadium," said Fischer, who has represented clients on naming-rights deals and previously worked on major ad campaigns and partnerships for State Farm. "They're likely to be more aggressive."
Fischer figures the Mile High naming rights are worth somewhere in the ballpark of high seven figures or low eight figures, based in part on recent deals in Atlanta and New Orleans. It's not a new stadium (opened in 2001) and won't be hosting a Super Bowl, but Denver is a strong corporate market, and the Broncos are coming off a Super Bowl championship.
Fischer said other teams and sports marketers will be watching the action in Denver closely and may move to tighten up their own contractual language around future deals.
A successful sale of the naming rights without input from the Broncos would set "a very bad precedent" for the industry, said Ken Ungar, principal of Indianapolis-based U/S Sports Advisors.
Under such a scenario, the team could wind up with inconsistent pricing levels or a category conflict -- a name sponsor that duplicates an industry where it already has an exclusive sponsor.
"It also creates operational and marketing issues for the stadium if they don't get a say," Ungar said.
Changes to stadium names aren't all that common, and those that do change often are orchestrated in a less adversarial manner.
In 2011, the naming-rights sponsor of the Indiana Pacers, CNO Financial (CNO), decided to switch the stadium name from its former corporate moniker Conseco to Bankers Life Fieldhouse to reflect one of its brands. The company negotiated with the team to make the change, and the new name remained in the same "sponsor family" of insurance.
Ungar suspects the Broncos could land a naming deal starting in the range of $7 million per year, based on comparable deals in other National Football League markets.
The Carolina Panthers in 2013 did a deal with Bank of America (BAC) for $7 million per year. The Washington Redskins 1998 deal with FedEx (FDX) generates $7.6 million per year. And the Minnesota Vikings in 2015 inked an agreement for US Bancorp (USB) to put its name on the team's new stadium for $8.8 million per year.
The next high-water mark likely will be set when a new stadium opens in Los Angeles for the Rams franchise -- which is relocating from St. Louis.
All but a handful of professional sports stadiums in the U.S. carry a corporate name, a gold rush that kicked off in 1973 when Rich Products agreed to a 25-year deal to put its name on the home of the Buffalo Bills.
That deal was worth a mere $1.5 million per year over 25 years.
The most recent major sports deal involves the proposed new home for the National Basketball Association's 2015 champion Golden State Warriors. The team's privately financed $1 billion stadium, set to open in 2019, will be called Chase Center.
For that privilege, JPMorgan Chase (JPM) reportedly will pay about $10 million per year for 20 years.
The NFL's Houston Texans also get $10 million a year for stadium naming rights, from Houston-based Reliant Energy, a unit of NRG (NRG).
Naming deals in the NFL have gotten richer over time, but they haven't appreciated as rapidly as team values, which skyrocketed as broadcasters bid up TV rights to show games.
Typically, the outlay for naming rights is only the beginning of the investment corporate sponsors make on such deals.
As a rule, they spend twice or three times the naming-rights investment to "activate" the deal with other types of advertising and community outreach, said David Morton, a veteran sports marketer who now works at classic-car-focused Mecum Auctions.
"Having your name on the side of the building is wonderful," Morton said. "But what are you going to do with it?"
Morton said he wouldn't be surprised to see the Broncos land a new naming sponsor paying a premium over the 2011 Sports Authority deal.
"Mile High is a gem," he said.