Companies Must Consider the Highs and Lows of Naming Rights

For many companies, the issue of what’s in a name takes a back seat to the matter of where its name is posted for all to see. Many larger firms prefer their monikers to be displayed in high-visibility locations, as part of their own branding and public-imaging efforts, often on prominent buildings they don’t own.

That can take the form, for instance, of lease arrangements that give a business the right to display its name on a high-rise office building where it leases space, essentially branding the building itself in the process.

It also is seen in naming rights purchased by corporations, to have their name displayed prominently under long-term agreements on public buildings like sports arenas — with the most prominent local examples including pro football’s Qualcomm Stadium and baseball’s Petco Park.

In exchange, the building owner gets crucial revenue that helps make operations viable. To ensure that such arrangements are truly mutually beneficial, however, both the owner and the company seeking placement must weigh a host of issues.

They range from costs to aesthetics, to image compatibility between the brand name and the venue, and potential fallout if either party suffers a hit to its reputation.

Raising Revenue

During the past two decades, cities increasingly have seen corporate naming rights arrangements as effective, albeit partial, responses to tightening municipal budgets and public resistance to plowing tax dollars into projects like sports stadiums.

In 1997, the home of the NFL’s San Diego Chargers was renamed Qualcomm Stadium, after the city reached an agreement with locally based Qualcomm Inc., under which the company paid $18 million for naming rights spanning 20 years.

In 2003, locally based Petco Animal Supplies Inc. purchased the naming rights to what became Petco Park, the downtown home of Major League Baseball’s San Diego Padres, for $60 million over 22 years.

Now, with a tough economy suppressing charitable giving by individual donors, some nonprofit organizations are turning to naming rights options to fund vital programs.

“We had raised around $5.9 million before the recession hit, then it became very difficult,” said Jo Dee Jacob, chief executive officer of Girl Scouts San Diego-Imperial Council.

Buying More Than Cookies

One response is that the local Girl Scouts council is seeking a corporate donor to place its name on the organization’s recently completed Leadership Center, located at its Balboa Park headquarters, and supporting programs serving the group’s 40,000 local members countywide.

The organization built the center at a cost of $2 million. The Girl Scouts chapter is now offering permanent naming rights for $1 million — payable over five years if the namer wishes — after recently reducing the price from $1.5 million.

Jacob said the organization is hoping that several of its facilities will be named by local companies with missions that complement scouting priorities. For instance, at the scouts’ Camp Winacka and Camp Whispering Oaks in Julian — where naming rights for various facilities range from $10,000 to $250,000 — it is looking to attract firms involved in sectors such as environmental science and clean technologies.

Corporate names could eventually be appearing on objects beyond local buildings, to help shore up government budgets. The City of San Diego is considering a program to allow company sponsorships on lifeguard towers, signs and other elements at city-owned beaches. The city is expected to hold public meetings on the issue during the next several months.

Since the start of the recession, many companies have trimmed promotional spending, impacting areas including public venue marketing.

“One issue is that it’s difficult to measure the return on the investment,” said Ed Augustine, managing partner of consulting firm The Pathfinder Group, who has advised the City of San Diego on corporate marketing since 1999. “It’s not like when you print coupons, and you see how many people redeemed them.”

In addition to community visibility, Augustine said the company that puts its name on a high-profile venue like a stadium gets free exposure that it otherwise would have had to pay for through various channels. For instance, Petco’s name shows up in Padres media coverage, on game ticket stubs and elsewhere beyond the baseball park.

Augustine said there are few facilities that have the citywide visibility of a stadium, and can thus command high prices for name placement. Also, during tough times, both facility owners and corporate sponsors need to carefully weigh whether a naming arrangement really works for brand and identity enhancement.

Consider the Consequences

“You have to decide, do you want to have your facility associated, for instance, with a cigarette company or a liquor company?” Augustine said.

In the office sector, several prominent banks and financial services firms have their nameplates atop multitenant buildings they lease in places like downtown San Diego and the city’s University Towne Center district adjacent to La Jolla.

In many cases, those signs identify the buildings to the public in a way that overshadows the actual owner, or the true name given to the complex by the developer.

Matt Carlson, a director in the San Diego office of brokerage firm Cushman & Wakefield, noted that costs to place signs on office buildings can vary widely from property to property. Factors such as sign size and the building’s location and desirability often decide the price that is negotiated between landlord and tenant for top sign rights.

The sign of a major business player on top of a building can often be a draw to other tenants, though the direct competitors of the marquee tenant might decide to avoid the same location.

Carlson said there are several businesses, such as locally based Bridgepoint Education Inc., and some law firms that usually prefer to have the main signage when leasing in multitenant buildings around San Diego County.

“Sometimes the availability of that building sign can be the big differentiator when a tenant decides to pick one location over another,” Carlson said.

That was the case with prominent local law firm Procopio, Cory, Hargreaves & Savitch LLP, a San Diego mainstay since 1946. In May, the firm set up shop in new downtown quarters, spanning the top four floors of the building at 525 B St., after outgrowing its former offices across the street.

Managing Partner Tom Turner said the firm’s biggest priority when choosing its new home was not signage, but rather having a place where it could sensibly keep all of its 110 attorneys and support staff in close working proximity.

While he declined to disclose the transaction figure, Turner said sign availability ultimately proved to be a clincher in picking the location over others it had been considering. The law firm’s name now graces the outside of the 22-story building where it leases 102,000 square feet.

Turner said the locally based firm’s name on a high-rise is a rarity for downtown San Diego, where most of the large buildings carry the moniker of companies based elsewhere, such as Bank of America, Wells Fargo and NBC.

Experts say banks and other financial service firms that have survived recent economic travails are especially eager to illustrate their staying power through avenues like branded buildings.

“If it conveys credibility and strength and solvency, it could make a big difference if it prevents 2 percent of your clientele from leaving and taking their business somewhere else,” said Jenny Lemmons Magic, principal in the San Diego marketing firm Better Way To Say It.

“But usually the types of companies that do this have huge marketing budgets, and the sign on the building is just one of several elements of their marketing,” said Magic, who has advised clients in the Dallas and San Diego areas.