It would seem that defining "naming rights" would be a relatively simple concept. After all, at its most basic level, the term seems to imply that a sponsor is simply paying for the right to place its selected name on a building.

While this may have been true in the early days of corporate naming rights agreements, this is no longer the case as these arrangements have become multi-level marketing partnerships that involve a myriad of issues and revenue-generation items.

However, the problem is that the term "naming rights" has taken on a life of its own in the industry and the media. Supporters and opponents alike have turned the phrase into a buzzword or a catch phrase. In the attempt to simplify things, this catch-phrase has obscured the reality of what elements comprise these agreements and many mistakenly believe that corporate sponsors are paying hundreds of millions of dollars simply for the right to "name the stadium". Thus, before one begins to explore the naming rights concepts and methodologies discussed herein, one needs to determine what is implied by the term "naming rights" and the assorted items that comprise this concept.

Origins

When considering naming rights, one has to begin with the basic premise that the owner of a particular piece of property has the right to name that piece of property unless they have transferred that right to someone else.

For example, one could theoretically transfer the naming rights to one's car if someone were willing to acquire those rights. While it is unlikely to occur because another party would seemingly derive little commercial benefit from naming an automobile, it does illustrate the concept that naming rights can be developed and transferred for any piece of owned property.

History

The concept of naming facilities obviously dates back to the early days of sports facility construction as these buildings needed to have a name for any number of reasons.

Publicly constructed stadiums and arenas were often given names to reflect the municipality that owned the building. In some instances, the facility owner named the building after a community hero, distinguished citizen or even the name of the team's owner.

For private facilities, the concept was very similar with the team or team owner usually being the honored designee. An example of this concept that continues to exist to this day is Chicago's Wrigley Field. The facility was named for the family patriarch who owned the team at the time the facility was named. The fact that Wrigley also owned a company that was named for him was certainly an added bonus. However, no evidence has ever been offered to show that the company paid for those rights. As such, contrary to assertions made by many in the media, these deals are not "naming rights" agreements in the commonly referred to usage in today's industry and media.

In 1972, Rich County, New York sold the right to name its new NFL football stadium that housed the Buffalo Bills to Rich Products Corporation in a 25-year, $1.5 million arrangement. Rich was allowed to put some some illustrative signage and was allowed to dub the new stadium as Rich Stadium. This exchange of compensation for commercial value makes the Buffalo deal the first-ever naming rights agreement under the common usage of the term.

The Evolution

In an effort to generate larger amounts of revenue from the sale of naming rights, teams and facilities began incorporating more pieces of inventory such as luxury suite usage, event tickets, more signage into their deals to entice sponsors and advertisers to pay larger dollar amounts.

The trend accelerated in the 1990s as the dollar amounts grew larger and the list of sponsor benefits grew at an equally stunning rate. Tickets, suites and signage were no longer sufficient for sponsors to justify paying the increasing dollar amounts charged for naming rights.

In an effort to keep the dollars flowing, teams and facilities included business opportunities for the sponsor into the arrangements. Product sampling, couponing, direct hotlines, branch offices, retail space, customer information access and providing business services for the facility and/or teams became necessary to generate the dollar amounts that members of the media and industry executives can discuss at a moment's notice.

Today's Definition

As the 21st century begins, it is important to note that the term naming rights as used in the industry and media needs to account for the fact that "naming rights" are in essence a package deal comprised of a variety of benefits and opportunities both for the sponsor and the team. These deals are, in reality, naming partnerships that are complex business agreements between the parties that require each to include a tremendous amount of revenue sources and other opportunities to each other to make the deals work.

Simply put, sponsors will not pay millions of dollars simply for the right to place their name on a building. They need to have all of the elements that comprise a traditional, modern naming rights agreement. Thus, when people argue that teams or facility owners should simply sell the naming rights to close a financial gap or increase revenues, it is important to note that such an approach involves more than merely changing the name.

Naming Rights Versus Sponsorship Versus Advertising

The earliest battles involving the sale of naming rights to a corporate sponsor were in trying to distinguish naming rights from advertising and/or sponsorships. Teams naturally argued that naming rights were advertising or sponsorship opportunities and that they should control them. Facility owners argued with equal force that they have always had the right to name stadiums and arenas and the sudden commercial value of that right should not be transferred to the tenant. Both arguments clearly have validity and, in some quarters, the debate continues to this day.

However, the reality is that facility owners appear to have won the battle, but lost the war. Court rulings and common industry practice now acknowledge that the right to name a facility is a separate, distinct revenue stream that facility owners have the right to control. However, as noted in the previous sections, the mere right to name a building without the accompanying signage, business opportunities, tickets and other unique elements common to sponsorship and advertising is worth a mere fraction of what a traditional "naming rights" package now commands.

Thus, in an effort to increase revenues for all parties, facility owners often transfer the right to name the facility to a team in the building in exchange for hoped-for concessions elsewhere in the lease agreement and financial relationship between the parties. This uneasy truce has existed for several years now and shows no signs of changing in the near future.