Naming rights

For those of us who can remember which city Lancaster Park is in or that Rugby Park, the Bull Ring and Yarrows Stadium are one and the same, the sale of naming rights seems to have quickly become an integral feature of our sporting landscape.

Aside from the input of local government, it has been the contributions made by corporate sponsors and the significant investment made by charities such as the Edgar Charitable Trust, which has made sporting complexes available in most communities.

What we're seeing in New Zealand reflects developments overseas where the business culture of the sports industry and competition for investment in the upgrading of facilities has resulted in the sale of naming rights to stadiums being an integral part of the business plan for most of the largest spectator sports.

As in the large overseas markets, a naming rights deal holds the possibility of a range of benefits for the sponsor, including the promise of repeated use of the sponsor's name in media coverage of the sport. This should be more cost-effective than traditional forms of advertising an association between the sport and the sponsor.

Again, local developments have tended to mirror the trends overseas where a move to a new stadium, such as the move from Wellington's Athletic Park to Westpac Stadium (aka the Caketin) or a redevelopment programme, such as the recently re-named AMI Stadium, has been the catalyst for the sale of naming rights. In some cases, particularly the redevelopment of existing grounds, the sale of naming rights may require some juggling between sponsors, such as where there may be a ground naming rights sponsorship arrangement and then, within the ground, separate sponsorship arrangements – such as those for individual stands or facilities. Similarly, some naming rights agreements include extensive arrangements requiring exclusive use of the sponsor's goods or services within the stadium. These may be as simple as exclusive pourage rights for the sponsor's brands at outlets within the stadium, or in the case of banks, exclusive rights to locate ATM machines within the stadium. In the case of London's O2 Arena, previously known as the Millennium Dome, the naming rights sponsor's branding opportunities include the stadium itself, individual attractions within the stadium such as a music venue and exhibition centre, and associated branding on the stadium's website.

Other issues that may need to be considered include whether the stadium owner or operator can require, as a term of any arrangements with broadcasters, that the broadcaster use the sponsor's name when referring to the stadium.

Also relevant, even in the absence of a declaration of a "major event" in the Major Events Act, is whether the holder of a particular tournament at the stadium may be able to insist on a "clean stadium" policy in order to ensure that the tournament naming rights sponsor does not risk competing advertisers intruding into the advertising benefits it might otherwise enjoy as a result of its sponsorship because of (say) the rights they enjoy in conjunction with their stadium sponsorship.

Another topical issue in the present economic climate is the issue of the implications of having granted naming rights to a failing brand. For example, what happens if stadium naming rights have been granted to a finance company which has fallen on hard times but has met its obligations in terms of payment of relevant sponsorship payments? In many cases, the sponsor will have ensured that it has the ability to terminate its sponsorship obligations as a result of actions on the part of the stadium owner which could have a material adverse impact on the image of the sponsor but those rights may not be reciprocal. Similarly, the stadium owner may be able to terminate the sponsorship deal in the event of non-payment and the final stages of insolvency of the sponsor, but possibly not during early stage events such as a moratorium on payments to depositors.

Some may see this as akin to the ethical behaviour dilemma referred to in this issue's article on behavioural issues and the impact on sponsorship.

Enquiries and information

Bell Gully manages issues such as sponsorships, player contracts, financing, merchandising, disciplinary hearings and constitutional issues. Our clients include the country's leading sporting teams, players and organisations.

For more information on any of articles in Sports Law Update or advice please contact our sports law team.