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Thursday, February 26, 2009
Frank on naming rightsI've defended the Citi-Mets naming rights deal against the political attacks because those political attacks have tended to be misinformed and hypocritical. The Mets deal is a big fat obvious target, but the criticisms ignore the fact that there's an underlying contract in place that can't magically be undone. More generally, these attacks stink of political opportunism. After all, there are multiple other bank expenses -- including marketing expenses -- that the taxpayers shouldn't be underwriting and no one is attacking them with such vigor.
But That doesn't mean that naming rights deals are good things to begin with, and yesterday congressman Barney Frank pretty much nailed the concept to the wall:
“Marketing expenses should be for real marketing, not ego boosts, which is what I think naming rights are . . . Important men, in particular, like to hang out and ingratiate themselves with sports figures, and after the fact try to figure out how to make sense of the sponsorships as marketing or economic development . . . I don’t think anybody has ever opened a bank account or decided to buy a CD because a bank’s name is on the stadium."
Sounds about right. And he's also right about the Citi-Mets deal in particular:
Frank is not demanding that the bank break a valid contract that the Mets have said has no escape clause. “If there’s some cancellation fee, fine, but if it’s binding, it’s binding,” he said . . . “We can’t force them to break an existing contract” with the Mets, Frank said. “But we can put in some pretty strict conditions on them going forward.”
I'm sure there's a lot about his day-to-day politics that I don't agree with -- I disagree with everyone in every party about something at some point -- but when Frank starts talking informally about something, he usually makes a lot of sense.
Posted by Craig Calcaterra at 8:30am
Jason Rosenberg said...
Of course, this is really opening up the can of worms labeled “Marketing Strategies.” Of course, Frank is right that no one has probably ever said, “I like CITI Field, so I’ll use that bank.” I’m going to guess that marketing people are aware of this, too! But, what I have NO idea about is the subtle effect - what does seeing CITI, over and over, do to our brand awareness? To our confidence? To our comfort with the business? Until we can, at least partially, answer that, can we really judge the worth of naming rights?
Posted 02/26 at 10:02 AM
Jason beat me to what I was going to say. coporate branding has indisputible value. frank is equating stadium rights with a tv ad for coke or pepsi. they are totally different.
frank’s statements also begs the question, did he think the USPS sponsorship of a tour de france racing team was money well spent?
so basically frank makes some sense but to me he’s once again proving the politicians dont no diddly and should just shut up.
Posted 02/26 at 10:26 AM
I think with the trouble banks have been seeing these days, being able to see ‘legitimacy’ of a bank by having their name on the Mets stadium may be helpful. Though, not if you can’t afford it.
The real problem is actually quantifying the value of those rights on the stadium. Given very little marketing results in direct ‘buying’ of things, it’s hard to really say. Could be seen as a game theory problem:
Well, the other banks are doing it. We want to go into this new ‘banking era’ seen as legitimate. If we’re the only legitimate competitior without naming rights, people may not trust us.
It’s virtually impossible to know if that results in getting any more business. In the end, the firms decide they have to compete in this area as well…as stupid as it may sound.
Posted 02/26 at 10:28 AM
I’m not sure about the brand awareness thing in terms of stadium rights—so many stadium names have changed so frequently that it actually highlights the instability of corporate culture in this era, and I think that profoundly undermines any brand-building effect. I think in-stadium advertising probably does a lot more than the name of the stadium itself.
The MCI Center becomes the Verizon Center; The Core States Center (or whatever) becomes First Union Center becomes Wachovia; Enron Field becomes whatever the hell it is now. Sure, there might be a kind of subliminal effect that people don’t even really notice just from hearing a company’s name over and over, but I’d bet that’s outweighed by more conscious cynicism due to the fact that your stadium’s name changes every three to five years.
Posted 02/26 at 10:40 AM
I dunno, Millsy, i think the value in stadium rights is a lot more quantifiable than you’d think. any time a bank is spending $400m they are going to have to justify it with heaps of back up and numbers. i’m sure there are plenty of studies done on corporate sponsorships and the value they provide.
Posted 02/26 at 10:42 AM
I’m not convinced Frank knows all that much about banks, or more appropriately, lenders. I recall his statement from not long ago that Fannie and Freddie were not in a crisis…whaaaaa??? This from a committee chair. I am glad he realizes that the existing contract should be honored, though.
Posted 02/26 at 10:48 AM
Chris H. said...
kendynamo: have studies been done? I’m sure they have. But we don’t really know the underlying assumptions, etc., of those studies.
As a generic statement, “corporate branding has indisputable value” is certainly correct. But I think it absolutely *can* be disputed that naming rights have any significant value.
You’re going to have to do better than, “Well, banks are involved and they’re spending a lot, so they must know what they’re doing” to convince me otherwise.
Posted 02/26 at 11:38 AM
fair enough chris, i realize this all comes across as mostly out of my butt talking since i’m neither an advertising and marketing professional nor student (yet anyway), but i’d wager a healthy amount of monye that there are peer reviewed papers and studies being done in a rigourous academic environment with regards to copororate sponsorships and their value that includes pro stadium naming rights. whether there are defintie conclusions reached and whether a bank follows them faithfully is completely unknown to me.
it could be that citibank overpaid by double the amount for the benefit one would expect from a deal of this nature and thier bean counters and salesmen screwed up. it could also be that they cut this particular deal i part because they also underwrought the $600m in city sponsored tax free bonds the mets were offering. i dont know. the point is i’m 99% percent sure citibank, despite thier current pathetic state, knew more about whether it was a sound business plan to persue a stadium rights deal than barney frank.
i’m sure stadium rights have ‘some’ significnt value. you’re obviously free to remain unconvinced, though.
Posted 02/26 at 12:06 PM
“But we can put in some pretty strict conditions on them going forward.”
This is the part that scares me.
It’s hard to defend the people who have been running these banks, but if there’s any group in whom I have less confidence, it’s Congress (or just the government in general).
Posted 02/26 at 12:18 PM
Pete Toms said...
kend made my point that this deal was more than a straight sponsorship, it was also about financing the stadium.
Most interesting to me was the news that BofA backed out of their Yankee Stadium sponsorship. Where the hell have I been? When was this announced? I thought it was a done deal and that BofA was laying low about due to obvious reasons. Things aren’t going according to plan for the Yanks, their luxury suite sales stalled, they lost a huge deal with BofA….hmmm..
The naming rights era might be over. If the likes of Jerry Jones, The Yankees and Giants/Jets can’t scare up naming rights dollars then nobody can.
BTW, since when does on the field news make Sandomir’s column?
Posted 02/26 at 12:23 PM
The Mets might make a lot more money by letting Citi out of the contract for a small fee.
Citi is supposed to pay the Mets $20 million a year for 20 years.
It seems somewhat likely at this point that in 20 years Citi will no longer exist….heck in 6 months they might not exist and they wont owe the Mets a dime.
The Mets get good publicity for ‘doing the right thing’ and they make some money. Finding a replacement willing to fork over insane money will be difficult for the Mets but it certainly wont be any easier to wait for Citi to fold or be nationalized and start looking for a replacement then.
Posted 02/26 at 01:18 PM
My point wasn’t that we have no way of knowing the return on them. It’s a difficult task and, as stated above there are a significant number of assumptions that have to be made in order to assess it. My point was there is a way to look at it beyond the direct impact on ‘bank signups’ because you see CitiField driving to work every day.
Posted 02/26 at 01:49 PM
Teal and Black said...
Of COURSE the government can make them break the contract. Breaking contracts is NOT illegal. In many instances it’s the economically efficient thing to do.
Posted 02/27 at 12:01 PM