Last April 9, for example, the Pittsburgh Pirates opened their season in the newly built PNC Park. For years, the Pirates had been rumored to be considering leaving Pittsburgh, and to assure that they didn’t, the city of Pittsburgh anted up some $262 million to build a new stadium, which was completed in 1999.
Wasted BucksFree enterprise? Not in the stadium business, at least.
According to the Federal Reserve Bank of St. Louis, some 140 sports facilities have been constructed since World War II and all but 14 used taxpayer dollars.
That might violate free-market philosophy, but even worse, it’s a money-losing business for taxpayers, the Fed study indicates.
"Cities are often driven by the idea that playing host to professional sports teams builds civic pride and boosts local tax receipts from the team-related sales and salaries," writes Adam Zaretsky, a Fed economist. "The pertinent question is: are these revenues above and beyond what would have occurred in the region anyway?"
The report says that while new jobs and additional tax revenues are generated by a new sports facility, income and revenue could be overstated. The jobs themselves may not be new, they may just lure people away from other jobs. Most of the "big money," says the report, goes to the owners and players. The athletes and owners often live in cities other than where the stadium lies, and they spend their money elsewhere as a result. And athletes’ professional careers can be short-lived, leading them to invest money rather than spend it.
The report acknowledges that public funds can generate new revenues. If outsiders are drawn to the venue, they will spend money. Area residents may also spend more locally, or the funds will keep turning over locally, creating new spending. But on a net-net basis, municipalities generally lose money on their investments in stadiums, the report implies.
Pittsburgh-based PNC Financial Services Group joined the effort, recognizing that it had the opportunity to show its support for the Pirates — and get some positive publicity for itself."We knew the Pirates might leave and that its revenues were hurting," said Jeep Bryant, a PNC spokesman. "But we also knew we could play an important role in keeping this a major league city."
So PNC signed a deal giving the Pirates $45 million over the next 30 years for the naming rights to the stadium. The Pirates get $1.5 million per year, and PNC gets national attention and exclusive rights as the only financial institution to advertise during the games and to sponsor the broadcasts. Over the course of 30 years, PNC estimates that approximately 1.5 billion people will be exposed to the PNC name through television, radio and print.
Sports is now big business. So traditional advertising sales alone no longer generate enough revenue to support a professional franchise.
Large corporations purchasing stadium naming rights first became popular in the mid-1990’s. And as more and more professional athletes continue to command astronomical, multi-million dollar salaries, team owners are tapping new resources to help finance their growing operating costs. Raising ticket prices disturbs the average fan. And building a new stadium or arena increases attendance but can also cost between $200 million and $300 million.
So renting out the name of a stadium is quickly becoming a practical compromise, giving both sports and corporate America a little of what they both need—money and exposure.
PNC certainly is not the only bank pasting its name on a stadium. Chicago-based Bank One Corp. and Detroit-based Comerica also have purchased naming rights from Major League Baseball teams.
Bank One has a 30-year, $30
million arrangement with the Diamondbacks for naming rights to the "Bank One Ballpark" in Phoenix, which opened in 1998. Bank One also has a deal with the Diamondbacks for promotional rights. For an additional $30 million over 30 years, Bank One has exclusive promotional rights for financial institutions, and four advertisements per local Diamondback’s broadcast.
"It pays off when you see star players on TV, like Matt Williams, say they can’t wait to head back to ‘Bank One’," says Mary Jane Rodgers of Bank One’s marketing department.
Rodgers said Bank One pursued the deal in 1995 with the Arizona Diamondbacks after purchasing Phoenix-based Valley National Bank in 1992. "We were trying to expand our presence, and we felt this would be a good way to do that."
And in Detroit, Comerica will pay the Tigers $66 million over 30 years for naming rights to "Comerica Park," which opened in April. The deal also includes exclusive promotional rights during Tigers’ broadcasts.
Some banks have gone beyond baseball and purchased naming rights to multi-purpose arenas. Charlotte-based First Union Corp. purchased the naming rights of Philadelphia’s CoreStates Complex in 1998 from Philadelphia-based Comcast Spectacor, L.P.
Comcast Spectacor, owner of the National Basketball Association’s Philadelphia 76ers and the National Hockey League’s Philadelphia Flyers, sold the naming rights to First Union after First Union acquired Philadelphia-based CoreStates Financial Corp. The First Union Complex includes First Union Center, home of the 76ers and Flyers, and First Union Spectrum, which hosts over 200 concerts each year.
Other banks linked to NBA and NHL teams include Cleveland-based Key Bancorp, HSBC Holdings and FleetBoston Financial Corp. Key purchased the naming rights to Seattle’s Key Arena, opened in October 1999, for $15 million over 15 years. The Key Arena is home to the NBA’s Seattle Supersonics.
HSBC, after acquiring Marine Midland in 1996, inherited the naming rights to Buffalo’s Marine Midland Arena, home of the NHL’s Buffalo Sabres. The deal was renegotiated in 1999, and the named was changed to the HSBC Arena in 2000. HSBC reportedly pays the arena’s owner, Niagara Frontier, $15 million over 20 years for naming rights.
When the world-famous Boston Garden was demolished in 1995, the Fleet Center opened next door to take its place. Fleet has a deal for the naming rights to the home of the Boston Celtics and the Boston Bruins, but would not disclose details.
In Cincinnati, a power-play is taking place outside of the hockey rink at the Firstar Center. Firstar Financial Corp. purchased the naming rights from Cincinnati Entertainment Associates Holdings (CEAH), owners of the building, in 1998. The Cincinnati Cyclones, a minor league hockey team, plays home games at the Firstar Center. The contract runs through 2008, and the terms were not disclosed.
But CEAH recently filed for bankruptcy and the Firstar Center is up for sale. Unfortunately, the most recent offer, for a reported $31 million, would not be enough to cover CEAH’s debts. Meanwhile, CEAH’s biggest creditor is Cincinnati-based Provident Bank, an affiliate of which made the $31 million bid. Provident is owed $29.1 million.
Naturally, Firststar, whose name is being changed to U.S. Bancorp following a merger, is a fierce competitor of Provident and it’s a bit ironic that Firstar will keep its name on the stadium while Provident is bleeding from it.
A Firstar spokesperson says the bank is confident Firstar will retain the naming rights.