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I recently visited my Mom on the south side of Chicago, and as always, I took a tour around the city to see what's changed. I drove south on the Dan Ryan Expressway, past what used to be called the New Comiskey Park. The old Comiskey Park ball field was demolished in 1991 to make room for a new and improved stadium just across the street. In January of 2003 the New Comiskey Park was renamed U.S. Cellular Field.
That drive down memory lane got me to thinking about all the fate of those not-so-modest companies that plastered their names on various stadiums around the country, and led me to what is known as the Stadium Sponsor Curse and its companion, Stadium Sponsor Stock Index or SSSI.
The Stadium Sponsor Curse is the bane of companies with enough chutzpah to put their name on a major North American Sports venue. To do so is to hurt your company and leave your stockholders holding the bag. Laugh if you must, but then talk to shareholders of Conseco, WorldCom, United Airlines, Adelphia Communications and US Airways, all of whom felt the pain of the curse in 2002. In 2001 it was Enron, PSINet, Trans World Airlines and National Car Rental's parent ANC that succumbed to the curse.
What's the common theme, other than arrogance? Many companies in difficult and competitive industries feel that they need to step up and sign sponsorship deals with teams and stadiums to build or enhance brand identity. But there is a growing sense among investors that the corporate egos that lead to such deals spell trouble for future performance. During an interview on our show last fall, Sydney Finkelstein -- author of Why Smart Executives Fail -- even cited stadiums as an example of CEO distraction:
"The CEO is more interested in seeing himself on television, who is interested in having stadiums named after him or her," Finkelstein said on our Oct. 9, 2003 broadcast. "That's someone who is distracted."
There's no empirical formula for calculating the return on investment from stadium naming. The corporate brand name is literally all over the place, but translating that to the bottom line is difficult. The theory is that these deals offer branding benefits, instant fan recognition and hopefully long term consumer relationships, but there is scant evidence of a solid relationship between a particular sport and a company's target consumer market.
Long contracts haven't held up well either. Many corporations go for the longest deal possible, amortizing the cost over that period. But what happens if during that time, the company has a shift in business strategy that no longer benefits from these long term associations? You've effectively tied up a sizeable investment that has no relevance to your business model.
You might think that the success of the sports team might translate into success for the stadium sponsor. Think again.
The Baltimore Ravens' stadium was called PSINet the year the Ravens won the Super Bowl XXXV in 2001 against the New York Giants. That win didn't support the share price of PSINet, which dropped so low that it was delisted just two months after the Ravens' victory.
Or consider CMGI, the internet conglomerate which, for a hot second, had a 15-year, $114 million-dollar naming deal with the New England Patriots signed in 2000. The Pats have won two Super Bowls since then (2002 and 2004) while CMGI's stock price has dropped to $2 from $40 while the company name has dropped off the venue, now called Gillette Stadium.
Granted, those examples were from the now-imploded dot-com era, and to be fair, the index of stadium namers in 2003 rose an auspicious 27 percent as the entire market rebounded. And if the economy continues to grow, the curse may die this year.
Take the airlines, well represented on the stadium name front. The sector has soared, and its best performer in the index, America West, saw its stock grow seven-fold in 2003. AMR, parent of American Airlines, has dodged the bankruptcy bullet. Continental Airlines share price has more than doubled (and the team playing in the Continental Arena, the New Jersey Nets, clinched their division). Even UAL saw its delisted shares post gains, although it still has yet to emerge from bankruptcy.
On the other hand, the jury's still out on Invesco Field at Mile High. Denver fans still call it Mile High and it may revert to that if state and federal charges of improper trading stick to the investment management company. Toyota is trying its luck with the Houston Rockets, now playing at Toyota Center, while Bank of America puts its John Hancock on the Carolina Panthers' stadium, to be revealed to all when the Super Bowl bridesmaid Panthers kick off their 2004 season against Green Bay on Sept. 13 in the first Monday Night Football game of the season.
Hmm, Monday Night Football and the 13th -- more curses.
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