We’ve covered here in the past the terrible, horrible, no good, very bad lease that Hamilton County signed with the owners of the Cincinnati Bengals when agreeing to build them a new stadium in 1997, which included such items as a promise to buy the team a “holographic replay system” if such a thing is ever invented. We have also covered, briefly, the team owners’ recent announced sale of naming rights and how they won’t tell the county how much it’s for, because then they might have to share some of the proceeds.
What we have not actually done is gone to look at the language in the Bengals’ lease governing sharing of naming rights, so let’s do that now:
10.5.1 County and Team hereby agree that the name of the Stadium Complex shall be “Paul Brown Stadium.” Notwithstanding the foregoing, County further cedes and grants to Team the exclusive right to grant the privilege to, and to sell to, (and to enter into a binding contract or contracts authorizing) any Private Person the right to rename the Stadium Complex, but such naming rights and any such contract(s) relating thereto shall not extend beyond the expiration of the Term (including any exercised extension options relating thereto).
10.5.3 In the event Team sells to a third party naming rights to the Stadium Complex, Team shall be entitled to retain the first $16.67 million of net revenues arising therefrom. Any net revenues in excess of $16.67 from such sale of naming rights shall be shared by County and Team, with County receiving thirty percent (30%) thereof and Team receiving the remaining seventy percent (70%) thereof. … Net revenues, for purposes of this Section, shall be determined as the present value of the stream of revenue from such sale of naming rights as of January 1, 2000, using a six percent (6%) discount rate.
To translate that out of legalese: Even though the county built, and owns, the stadium, it handed over the right to sell naming rights to the team, which gets to keep the first $16.67 million in proceeds, after which the county gets a 30% cut of any excess. (This may seem exceedingly generous to the team to you, but what part of “terrible, horrible, no good, very bad lease” didn’t you understand exactly?) That’s $16.67 million in year 2000 present value, which discounted at a 6% rate means the Bengals owners get to keep about the first $60 million, then cut the county in on the rest.
The Bengals owners aren’t telling how much they’re getting from payroll software company Paycor for the naming rights — they say they showed the contract to their own accountant, who told them they wouldn’t have to share any of it with the county, but won’t actually show the terms to the county because their accountant is “a respected accounting firm with its own professional and ethical obligations,” so how could anyone like that be wrong? Team execs did reveal that it’s a 16-year naming rights deal, so if they’re getting anything over roughly $6 million a year (again, at that 6% discount rate) — and one naming rights consultant estimated it’s more likely to be $8-12 million a year — Hamilton County should get a cut of the proceeds.
So that’s one problem. Another, which you’ve already noticed if you read item 10.5.3 closely, is that the lease actually says the county gets a share of “any net revenues in excess of $16.67” — not $16.67 million, just $16.67. This is obviously a typo, but also obviously a typo that the Bengals signed in a binding contract, so it seems like Hamilton County could at the very least ask a judge to enforce it and see what happens. Dumber typos have ended up costing millions of dollars, after all.
A bigger problem, though, is in section 10.5.1:
such naming rights and any such contract(s) relating thereto shall not extend beyond the expiration of the Term (including any exercised extension options relating thereto)
The Term of the contract is clearly defined as ending no later than “June 30, 2026.” This would seem to mean that the Bengals owners just sold naming rights for the years 2026-2036 that they don’t actually own at present. They might if the county agrees to a lease extension, but the county hasn’t done that yet, and is under no obligation to, especially when the team is being so high and mighty about even letting the county see how much the naming rights contract is worth.
It’s hard to believe that nobody would have noticed any of these things before now, but, again, dumber things have been written into legal documents without anybody spotting them at first. (The Cincinnati Enquirer did a bunch of open records requests for emails between the team and county that it reported on yesterday, but didn’t appear to check the lease language itself.) I’ve reached out to both the Bengals owners and Hamilton County to see what they have to say about all this; as soon as I hear back, you’ll be the first to know.
It says “net revenues…” What does “net” mean in the context of naming rights, as opposed to “gross”?
It’s in that section that I replaced by an ellipsis, because it was tangential to this discussion. From 10.5.3:
“For purposes of this Section, net revenues shall be all
naming rights revenues received less the costs of all “fulfillment” obligations to
the naming party, provided that the cost of such fulfillment obligations shall be
valued at the lowest rate charged by Team to other third parties for
comparable products or services. (County acknowledges that “fulfillment”
obligations may include, without limitation, the provision of items such as other
advertising, Private Suite(s), Club Seats, tickets and other products to the
naming party.)”
In short: If some of the naming rights money is determined to really be payment for a luxury suite, then the county doesn’t get a cut.
Got it. A luxury suite probably costs more that $17 anyway.
I assume that the cost of changing all the signage adds up to something too.
It’s actually unclear from the lease whether the county or the team is on the hook for replacing the signage.
I understood that most naming rights agreements mean a payment for the “right” to install your signage on the building (subject to conditions, natch).
Typically, then, that would make the company buying the rights is responsible for their own signage and installation costs, not the team or owner of the facility.
That makes sense. Thanks.
$16.67. Hey, a contract is a contract…
But why would any of us expect the people who signed such a ridiculous contract in the first place to enforce sections of it that work to the benefit of the public they are alleged to represent?
If the Bengals want that number changed, you know that Hamilton county et al will just agree to it… and probably offer even more public money as some form of apology for leaving that number in the contract so long. And a pony. And, naturally, holographic displays.
Surprised to see you haven’t posted anything about the Miami Heat “FTX Arena” fiasco yet, 1 of the biggest naming rights disasters of recent times
It’s not any worse than Enron Field was, or a bunch of others. The Heat get the naming rights back now to resell, so while it’s embarrassing, the monetary impact isn’t much.