Bailout Ballpark. Taxpayer Field. Subsidized Park.
All the names are catchy, and perhaps appropriate. Nevertheless, the new ballpark under construction for the New York Mets will continue to be called Citi Field. But that name may be subject to change, based on the shifting tide of the financial landscape and the equally uncertain future of Citigroup.
At a time when Citigroup could still pretend that all was right with its balance sheet, the financial giant entered into the largest sports facility naming rights deal in history, a 20-year, $400 million contract with the Mets.
Now that the toxicity of Citigroup’s assets has been confirmed, and the government has agreed to a $345 billion bailout - $45 billion in direct investments and another $300 billion in guarantees – critics of the naming rights deal are having a field day, no pun intended. But their criticism is misplaced. Neither the naming rights deal nor its amount should be the issue.
When times are tough, marketing budgets should be among the last areas businesses seek to cut. Companies need to market their products, and to do that they need name recognition and exposure. The question that should be asked is whether a company receives value for its investment in marketing.
The visibility of the naming rights deal with the Mets makes it an easy target for those who are rightfully upset with the callous and reckless way Citigroup operated, which resulted in the need for a government handout. But that visibility merely suggests that the naming rights deal may in fact be an appropriate and effective use of marketing dollars.
If critics of Citigroup’s government subsidy want to get worked up over the company’s actions, a more appropriate target would be the compensation package afforded the bank’s executives. Those responsible for leading the financial giant down the road to ruin earned as much as $30 million per year. When he was finally asked to leave last year, Citigroup’s chief executive, Charles O. Prince III, was “rewarded” with an additional cash bonus of $12.5 million and stock valued at $68 million according to The New York Times.
Citigroup isn’t the only recipient of taxpayer funds to have naming rights sponsorships with sports entities. The list is long and includes a number of other financial institutions. Among the largest: PNC Bank ($7.7 billion) holds naming rights to the Pittsburgh Pirates’ ballpark, “PNC Park;” J.P. Morgan Chase ($25 billion) calls the Arizona Diamondbacks stadium “Chase Field;” Comerica ($2.3 billion) has its name on the Detroit Tigers’ stadium, “Comerica Park;” and Capital One ($2.3 billion) is the title sponsor of the “Capital One Bowl”.
AIG, the insurance giant that is being propped up by a $150 billion subsidy from Uncle Sam, has a $125 million sponsorship agreement with Manchester United, the British soccer club. At least with the Citi Field sponsorship, the argument can be made that bailout funds are being spent on American soil.
Not every company seeking a handout from the American taxpayers is continuing or expanding its sports sponsorships. General Motors, which along with the other Detroit automakers is on life support and seeking $25 billion in aid from Congress, has announced cutbacks on advertising in NASCAR and will eliminate all Super Bowl ads next year. The company has also cancelled a sponsorship agreement with Tiger Woods to endorse its Buick line. The original 10-year deal would have expired next year, but the parties mutually agreed to an early termination, saving the beleaguered company $7 million.
The sponsorship deal between GM and Woods was a one-way street - beneficial to Woods, but unproductive to the company and its shareholders. GM hoped to reduce the age of Buick buyers by aligning the brand with the youthful golfer. But the average age of Buick purchasers in 2008 was 68, the same as in 1997, according to a study by the auto research division of Strategic Vision, Inc. Sales of Buicks plunged 58% from 1999 to 2007, and fell an additional 24% this year.
Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is an Assistant Professor of Sport Management at Eastern New Mexico University, teaches the Business of Sports at the University of Wyoming, and is a contributing author to the Business of Sports Network. Jordan can be reached at firstname.lastname@example.org.