Business, Investments, Small business

The Economy’s Impact on Naming Rights Deals

Notice a rise in the use of corporate names associated with a building or an event?

Naming rights have enjoyed a rapid increase in number and expense over the past few decades. A boom in construction and the expansion of major sports leagues are among the factors. However, a drag in the growth spurt has occurred due to turbulence within the economy.

The use of a company name on major buildings, such as stadiums and museums, or local venues is done for financial gains. For instance, a university grants a brand name to be placed on a department in exchange for a large monetary contribution.

A brand also benefits from a boost in awareness and recognition. The placement can alter its public image, show its community involvement, support trade relations or goodwill, deter competition and increase market share. The business may use a venue, such as a museum or an event, such as a golf tournament, to launch or showcase a product.

Naming rights deals are usually longer than a year. Therefore, it’s important to understand the value of the name to avoid any negative issues.

Recently, naming rights deals were portrayed in a bad light. In 2009, banks, that secured multi-million deals with sports stadiums and events, received funds from the Troubled Asset Relief Program. This led lawmakers to question the appropriateness of the deals.

Many naming rights deals have terminated during the recession and economic recovery. Companies either went out of business, sold or bought.

On the other hand, cities and municipalities, attempting to lessen their budget gaps, are giving sponsors the opportunity to purchase naming rights on schools, parks, government buildings and other facilities.

Some colleges have even gone as far as asking for corporate sponsorship for their classes.

Naming rights are known to be expensive, and it appears as though local areas are benefiting the most in this economy. Do you agree?

Photo Credit: Cecelia

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