Broncos stadium name contract goes up for auction, no one bids even one dollar

Man, I hate when I get all excited about a news story and then it turns out to be a big ball of nothing. That appears to be the case with Friday’s news that the naming rights to the Denver Broncos stadium had gone up for sale, and nobody even bothered to bid:

The stadium in Denver is called Sports Authority Field at Mile High Stadium, named after the eponymous sporting goods retailer in 2011. However, Sports Authority filed for bankruptcy in March and put the naming rights up for sale as part of a court-supervised auction.

No bidders for the rights came forward at an auction of the retailer’s assets held this week, Matt Sugar, the director of stadium affairs at the Metropolitan Football Stadium District, which is the owner of the stadium, said on Friday. Discussions are underway about launching a new auction for the naming rights.

Wow, really, nobody? I’ve argued before that naming rights for existing stadiums aren’t worth much, in part because after a couple of name changes everybody just gives up and calls it whatever it was called in the first place — and with “Mile High” stuck there in the name, that gives fans a great option to ignore whatever new corporate moniker got slapped on ahead of it. But you’d think somebody — some publicity-desperate tech startup, Peeple, anybody — would throw a token $1 at the bankruptcy auction, no?

Except then there’s this:

The contract for the naming rights up for grabs extends until 2021, and comes with a $3.6 million payment obligation due Aug. 1.

And there’s the catch: Sports Authority isn’t really auctioning off the rights to the Broncos stadium name — it’s auctioning off its contract to put a name on the Broncos stadium. And since the stadium name is almost certainly worth less than the $6 million a year the company agreed to pay back in 2011, the rights to take on those payments probably have a negative value, which is why nobody bothered to bid.

The more likely scenario now is that no one bids for the rights, Sports Authority misses that August 1 payment, and the Denver Metropolitan Football Stadium District gets to re-sell the rights to the highest bidder, of which there will no doubt be some, even if they won’t be offering $6 million a year. The Broncos and the district split the proceeds from naming rights, so Sports Authority’s bankruptcy could end up costing both the team owners and the public some money — though not as much as the naming-rights deal cost Sports Authority, since the move may have helped push the company into bankruptcy. You think maybe everyone might have thought this through better in the first place?

23 comments on “Broncos stadium name contract goes up for auction, no one bids even one dollar

  1. I have wondered if the Delta Airlines bankruptcy a few years back did not have something to do with their sponsorship of the Salt Lake City Olympics. The Greek government did not fare so well after jumping in whole hog with the 2004 Olympics. Why don’t the business and government communities admit it is not their jobs to shore up the sports industry while many sports employees rake in the highest of salaries. Seems sort of obviously stupid to me for businesses and governments to fall for these schemes.

    • Interesting question, Mary.

      Given that the basic reason for companies to sponsor any kind of sporting event is advertising and corporate gain (free tickets, hang out with athletes, attachment to a popular pastime rather than the corporation’s own disgraceful business practices etc), one would assume that they spend the amount of money they think they can afford based on their current (or future) earnings from the association.

      As with the Bundesliga TV rights a few years ago, sometimes companies get this calculation very wrong and may (in part due to this decision) go bust. Happily enough, though, advertising is fully tax deductible, so I guess they feel like they are spending money they would (at least in significant part) have to pay as taxes if they didn’t spend it on advertising.

      As with any futures contract, long term advertising costs tend to be based on current earnings and (generally rosy) revenue projections. We see with Sports Authority what happens when those predictions turn out to be too optimistic.

      I guess there’s a lesson for us all here… we ought not to buy all the house we can afford today, but all the house we know we can afford years (or decades) down the road.

  2. @Neil:

    Who pays for the physical changes of a name change? e.g. Signage

    Is that taken off the top of naming rights fees and then the split happens?

    • Depends on the specific contract — I’m not actually sure what’s typical, or if there’s an industry standard.

    • I can’t speak for major sports stadiums, but typically the sponsorship fee paid by advertisers does not include the cost to construct or erect the physical advertising itself. What the sponsor is buying is advertising space, not the physical ad. Some events (golf and tennis tournaments mostly) will restrict the colours used – IE white logo on green background etc -to avoid “eye shock” for spectators and competitors, and may also require that a particular type of advertising material/construction be used. In those cases I’m told that “advertiser pays” may not always hold true.

      In a case where the holder of the contract has gone bankrupt, though, I wouldn’t count on Sports Authority paying to have their name removed… more likely the stadium operator will be hit with that. I’m sure they won’t complain about that though…. I seem to recall that one of the first things that the company that bought Enron’s building did was pull the logo off the top of the upper floors…

  3. …in part because after a couple of name changes everybody just gives up and calls it whatever it was called in the first place…

    Indeed, most fans still call the AZ Dbacks stadium BOB.

  4. So can Donald Trump get the naming rights for free up until August 1 when he won’t pay up?

  5. Lots of airlines have gone bankrupt at various times, except for Southwest.

    Salt Lake City and Utah have lower than average unemployment and poverty; so the Winter Olympics did not screw things up too much.

    Ironically enough, Dick’s Sporting Goods bought the rights to the Colorado Rapids’ Major League Soccer Stadium, but problem at what, 5% or so of the cost of the Broncos’ stadium naming rights?

  6. If this sort of “ego” advertising was not tax deductible, I think we would see stadium naming rights deals collapse to a value that is actually supportable based on the true advertising benefit derived from them.

    But that won’t happen, just like the premium corporate seating plague. If these things were not fully deductible business expenses for the companies that buy them, I think you’d see stadiums once again being built to cater to ordinary fans (though there were still be premium club seats for individuals wealthy enough to afford them, which is as it should be).

    So long as our tax codes permit corporate high rollers to pay for their entertainment with dollars that would otherwise be taxable income, don’t expect these kinds of things to change.

    • John Bladen, that is also how I see the problem. I keep connecting the tax code to subsidizing and incentivizing stupidity, poor priorities and the herd mentality when it comes to high schools, colleges, businesses and governments dealing with the sports industry.

    • I wonder if the naming rights “boom” was related to the changing of the rules for deductibilty of stadium suites. To my best recollection it was about the time the tax law was changed that stadium naming rights (and other naming rights like entry gates) took off.

      I wonder if instead of buying/renting a luxury suite whose deductibility is limited companies sign deals where they “overpay” for naming rights that are fully deductible and then get a luxury suite tossed into the deal as a bonus.

      • No, naming rights just took off because no one had invented them before that. And there are a whole lot of dumb companies out there that think the best way to increase or maintain their market share is “Let’s buy a really big, expensive ad!”

  7. Dr. Pepper could not come up with enough money to put out a “Orange Crush Stadium” bid?

  8. I’ve always wondered whether the naming rights deals can be justified by the exposure to the name given by broadcast and print media.

  9. The trolling potential here is epic.

    Too bad Mark Davis is dead-ass broke, otherwise we could see a “Oakland Raiders Field @ Mile High Stadium” for a few months.

    • 1) The Broncos and Denver get to reject offers they don’t like if they re-sell the name. They’ve already said they won’t accept any offers from marijuana companies.

      2) Sure, you could get around that by buying the naming rights out of bankruptcy court, but that’d put the buyer on the hook for $6m a year for the next several years, so that’s not happening.

      • I dunno. If FedEx went chapter 11 and the bankruptcy court had to sell the naming rights contract to the LOLskins’ stadium, I think Jerrah would give more than a thought or two to buying up that right – even if it would cost him that much dough.

  10. I similar scenario happened when PSINet went bankrupt back in 2001. I was working for the consulting firm handling that bankruptcy. When there were no bidders I asked if as a Browns fan if I could bid and rename it “Modell Sucks Stadium”, alas it was a similar situation where I would have to make the same payments PSINet was to make.