With debate swirling over whether Orlando needs a new arena and exactly who should pay to build it, little is certain except for this: Orlando Magic officials hope to bag big bucks by auctioning off the name of their hoped-for new home to the highest bidder.
A survey of stadiums and arenas around the country, however, hints they may have fewer buyers than they'd like.
Corporate executives see a huge promotional value in having their logos draped across stadiums -- or so conventional wisdom holds. But several corporations that signed naming-rights agreements with cities and sports teams in recent years later have seen their stock price tumble or the firm go out of business entirely.
The trend suggests there may not be a great many companies clamoring -- or even able -- to purchase naming-rights to the Magic's proposed $250 million replacement to the 12-year-old TD Waterhouse Centre.
Since the Magic signed a four-year, $8 million naming-rights deal with TD Waterhouse last year, the online brokerage itself has experienced financial trouble. Its stock price has fallen more than 50 percent, and the company cut 15 percent of its workforce in February. On May 16, TD Waterhouse reported that its second-quarter income plunged over 90 percent since the year-ago quarter.
Despite that lackluster performance, TD Waterhouse said its decision to buy the rights and rechristen the former Orlando Arena was an effective, sound investment.; ;
Spokesman Lazaro Benitez declined to say exactly how TD Waterhouse gauges the impact of the buy. "Methods in determining its success are proprietary information which we don't divulge," Benitez wrote in an E-mail response to Orlando Weekly.; ;
Yet TD Waterhouse is one of several tech companies with stadium naming-rights that are experiencing financial hell right now. Big names on that list include MCI, 3Com, Ericcson and Qualcomm. In some cases, such as that of PSINet, tech companies have performed so poorly that they're on the brink of bankruptcy.
Two years ago, PSINet, an Internet hosting company, reportedly paid $106 million for a 20-year contract with the Baltimore Ravens football team. The Ravens won a Super Bowl, but PSINet's stock tanked -- from more than $20 a share when the deal was struck to less than 20 cents a share this month. In April the company was thrown off the NASDAQ.
The trend afflicts more than just tech companies, though.
Pro Player, an underwear manufacturer, entered into a reported 10-year contract with the Miami Dolphins in 1996 to rename the former Joe Robbie Stadium. But when Pro Player went out of business this year, it left the Dolphins scrambling for a new partner. According to Dolphins VP Jim Ross, the team will be more careful to ensure that its new partner sticks around for the life of the contract.
"We are certainly aware of the companies that have done naming-rights deals that are no longer in existence," Ross said. "[W]e're particularly sensitive to that in light of our situation where we have already been up and down the road once and did a deal with a company that went belly-up."
Still, Ross said the sky-high rates teams charge are justified.
"The value is there and the price-value relationship is there, so the fact that some of the companies have been weeded out is not cause for us or for other companies interested in selling naming-rights to lower the price," he said.
For the young tech companies, Ross said the risk of failing after entering into an expensive naming-rights deal was secondary. The largest priority, he said, is publicity.; ;
"The thing about naming-rights is the immediate marketing it provides for a company," Ross said. "And the companies that did those deals, frankly, were the companies that were in most need of that marketing."; ;
Magic officials would not discuss the team's plans for luring a company into a naming-rights deal for their hoped-for new arena. But Magic VP Jack Swolpe said the team will, of course, make sure the company they partner with is capable of following through on its contract.; ;
As for TD Waterhouse, Swolpe said the brokerage will not become another Pro Player.; ;
"We have had a very good relationship with TD Waterhouse, and we're not aware of any concerns from that [financial] prospective," he said. "They've been an absolutely terrific partner to work with, so we feel very comfortable."
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