D.C. arena rights: From ridiculous to sublime
D.C. arena rights: From ridiculous to sublimePublished October 16, 2017
|Capital One took over naming rights of the former Verizon Center in August for a reported $10 million annually over 10 years.
The Washington, D.C., arena, home to the NHL Capitals and NBA Wizards, opened in 1997 with what many considered the worst U.S. naming-rights deal ever: a $77 million construction loan to former Caps and Wizards owner Abe Pollin, which also granted title rights to MCI without any additional fees. Without it, the arena may never have been built, but as naming-rights fees accelerated over the next two decades, the deal became a bit of an embarrassment, given the size and wealth of the D.C. market.
Then there’s the other extreme:
In a national market with an abundance of stadium and arena naming rights, as well as an oversupply of venues looking to sell their names for a second time, Monumental Sports & Entertainment established a U.S. benchmark — bringing in a reported $10 million a year over 10 years from Capital One in a deal announced in August.
In 20 years, naming rights for the Chinatown arena progressed from the ridiculous to the sublime.
“We could only do better,” said a senior executive at Monumental Sports, which owns the Caps, Wizards and the arena in which they play, “because we weren’t getting anything before.”
While there are several reasons Capital One bought the deal, the principal rationale was the same that compelled FedEx to put its name on the Redskins’ home field 18 years earlier — the significance of the D.C. market.
“We’re a mile from Capitol Hill, and a mile from the key departments that run this country,” said Jim Van Stone, Monumental president of business operations and chief commercial officer. “There’s considerable affluence, so we’ve got a great [business-to-consumer] market here, but we also have the [business-to-government] side, which makes it unique.”
Another motivating force was waving the community flag, which is almost always a factor in naming rights. Capital One is building its corporate headquarters just west of downtown D.C., in Tysons, Va.
Topping off the deal is a shared belief in technology as a panacea.
“A lot of our owners, especially [Monumental majority owner] Ted Leonsis, came from tech,” Van Stone said. “So technology became a focus of the deal as something that could drive customer loyalty and fan experience.”
It was a bond shared by Monumental and Capital One from the start.
“You had two consumer-focused companies — each with a huge number of technologists,” said Adam Heintz, Monumental vice president, business intelligence. “The more we talked, the more we saw there were amazingly cool things we could do. At its simplest, it’s taking their database and ours and seeing how we can build a better fan experience, more accounts and more business.”
Around mid-2015, Van Stone and other Monumental marketers started planning to take the arena’s naming rights to market. The MCI/Verizon deal was set to expire at the end of 2018. Monumental hired two agencies to assist. MP & Silva was to offer sales packaging advice and prospect among foreign companies. The idea was to find a brand seeking political influence in the U.S., following the Barclays Center blueprint in Brooklyn.
Horizon Media’s Scout Sports & Entertainment assisted Monumental with analytics and developing an out-of-home ad strategy, along with packaging and evaluating media associated with the sponsorship. Employing two sales agencies was not a typical strategy, but “we were looking for a new approach and Scout helped us think about our value in new ways,” Van Stone said.
|Capital One Arena.
As competition in retail banking and credit cards intensified, so had Capital One’s sports media spend. According to a SportsBusiness Journal analysis of iSpot.tv data over the past three years, Capital One’s budget on sports media skyrocketed from 26 percent of its overall media budget to 54 percent of its overall $255.4 million annual measured media spend from Oct. 1, 2016 to Sept. 30, 2017.
Clearly this was a brand already sold on sports as a marketing platform. Still, “it wasn’t a one-horse race right from the beginning,” said a source familiar with the negotiations. Other brands involved in early discussions included Leidos, a Virginia-based defense contractor, and UPS, which would have presented an interesting foil to FedEx’s naming of the Redskins’ home field, which is 13 miles from the arena.
Another reason Capital One was an early target is the cozy relationship between Leonsis and Richard Fairbank, Capital One’s founder, chairman and CEO, who’s a partner in Monumental. Van Stone and others insisted that Fairbank was not involved in the deal.
Capital One refused to make anyone involved in negotiating the deal available for an interview.
While an early sales plan had Monumental selling everything in its portfolio: Wizards patch, naming rights and a sponsorship across every team for $12 million or more, that went by the wayside. (The Wizards’ uniform ad patch was still available at press time.) In March, when Van Stone met one-on-one with Amit Desai, Capital One director of brand sponsorships and experiential marketing, at the company’s current headquarters in McLean, Va., the pitch was solely naming rights.
Negotiations moved relatively smoothly, with Capital One adding payment-card exclusivity to its exclusive banking rights.
“I don’t recall any real [deal-breaker] demands,” Heintz said. “It was more about getting the right mix: satisfying the people responsible for mortgages at the same time we were providing enough for those selling credit cards.”
Capital One made an initial offer in April. Monumental officials weren’t confident that they had an agreement until an hourlong conference call June 22, when Van Stone, Patrick Duffy, Monumental’s senior vice president of global partnerships, and Heintz were in Las Vegas for the annual NHL Awards show. Heintz recalled that the call began at 6:30 a.m. Vegas time. “The conversation turned to more substantive things — what we could do to activate,” he said. “Once we were having those discussions, we felt really good.”
A deal in principle was reached in July, followed by a final month of back and forth on details, until the agreement was completed and announced in early August.
One of the most problematic parts of the naming rights was getting Verizon to agree to an early buyout. Those negotiations took more than a year. Verizon is remaining in the building as a sponsor of the Wizards — a deal that complements the telecom brand’s NBA league sponsorship.
For the industry, the larger issue is one of selling naming rights multiple times. Outside of Maple Leaf Sports & Entertainment’s stunning recent 20-year deal, valued at $639 million, with Scotiabank for naming rights at Air Canada Centre in Toronto, there is no comparison. And considering that industry experts do not consider Toronto’s deal analogous to any U.S. deal, the yield in D.C. is a new standard for an arena.
“Considering all the assets Monumental had to sell, I always thought it would be a good number and it was,” said Rob Yowell of Gemini Sports, which assisted Scout in early evaluation and strategy on the deal.
So, any advice for other properties facing the same issue of showing value in an older building?
“It gets back to the location — and your four walls,” said Van Stone, noting $40 million in planned improvements, which will include a new point-of-sale system through which Capital One cardholders will receive discounts on food, beverages and merchandise in the arena.
“There’s a shifting landscape in naming rights,” said Michael Neuman, Scout Sports & Entertainment executive vice president and managing partner. “When it’s a second or third [venue] entitlement, teams need to think more holistically about what they are selling. It becomes more about delivering a better fan experience.”
Even with the NHL season underway and the NBA season approaching, Van Stone said he and his sales team have yet to have an official congratulatory meal with Capital One executives.
Over the past year, Monumental Sports also has signed a regional broadcast deal with Comcast, rolled out its first over-the-top network, launched two Arena Football League teams and cemented deals for food and beverage, merchandise and ticketing — putting the overall value of its recent deals at $1.6 billion. Additionally, earlier this month Laurene Powell Jobs, the billionaire widow of Apple founder Steve Jobs, became the company’s second-largest owner, after Leonsis.
So if they ever get around to having that party, it should be a Monumental celebration.
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