GOING MOBILE: Grubhub is in demand during the pandemic. (Getty Images)
COVID-19 pandemic lifts some sectors, depresses others; consultants see value for sponsors when events return
The naming-rights space could emerge from the COVID-19 pandemic with tech-driven mobile delivery services putting themselves in a greater position to place their names on arenas and stadiums, consultants said.
Restaurants across the nation have restricted operations to takeout and delivery because of the coronavirus. As a result, DoorDash, Grubhub, Postmates and Uber Eats have flourished during states’ stay-at-home directives, delivering meals to thousands of customers.
Those brands and other delivery services could potentially replace some companies in traditional naming-rights categories that have struggled financially during the crisis, said Dan Griffis, Oak View Group’s president of global partnerships. (OVG owns VenuesNow.)
Collectively, the four delivery services have their issues, according to stories documenting their business over the past year. They’re named in a recent class action lawsuit alleging excessive fees charged to restaurants, which ultimately pass those costs on to consumers.
DoorDash, which Wall Street investors value at $13 billion, has filed for an initial public offering despite losing $450 million in 2019, The New York Times reported. Grubhub, one publicly traded delivery service, has seen volatility in its stock price simply because of the competition, leading to speculation of potential consolidation among those four companies.
Still, mobile delivery service as a whole stands out for meeting consumer demand during the pandemic, while other industries serving the public have suffered because of the global spread of a contagious and deadly disease.
“You’ll see a shift of some industries falling off and some starting up again,” Griffis said. “It’s the same thing we saw with the financial bailout in 2008 and 2009. We saw automotive and banks fall off the radar a bit in terms of their spending in sports because they were getting federal money and were put in a weird position to invest.”
He said, “They’ve all come back strong and continued to spend. It takes time for things to correct themselves again and gives opportunity for new major industries to pop in, technology-related firms that saw the benefit of what was happening. DoorDash, Grubhub and Postmates could get an influx of capital and may want to make a bigger splash. Where one person lags, another person fills the spot.”
Health care, which has been front and center during the COVID-19 crisis, brings another interesting dynamic to the space. Hospitals have naming rights for several big league practice facilities tied to on-site medical clinics open to the public. Whether it translates to their branding more arenas and stadiums remains unclear. Atrium Health signed a 10-year naming-rights agreement for the new ballpark of the Kannapolis (N.C.) Cannon Ballers, a Class A affiliate of the Chicago White Sox. The deal for Atrium Health Ballpark was announced in early February.
As it stands now, though, hospitals are experiencing financial losses tied to insurance coverage for COVID-19 and lost revenue from postponing elective surgeries to focus on the coronavirus, according to CNN. The hospital industry is receiving $200 billion in federal aid as compensation, in part to help fund testing for the virus.
“It still has to pencil financially and strategically,” Griffis said. “Typically, health care companies have smaller limits on financial resources vs. more traditional categories. Post-virus, they will be the only authentic brands that can celebrate the health care workers — the front-line workers and early responders. Before COVID-19, game operations celebrations and recognition was mostly about military, police, fire and teachers. This is the health care workers’ time in the sun and for good reason. I look forward to seeing how creative brands can get with this.”
Overall, sports marketers say the naming-rights business remains a solid investment, despite the prospect of teams playing in empty or reduced-capacity arenas and stadiums for the remainder of 2020 and into next year, shrinking exposure for sponsors. It’s a great time for those partners to take a leadership position and show strength in unity, said Rob Yowell, president and founder of Gemini Sports Group.
“You don’t get into those deals and think about how to get out once something like this hits,” Yowell said. “Nothing is business as usual right now. But you’re the ultimate brand in the life of a team and maybe the community. The last thing you need to be is the first to turn tail and run.”
Some categories embedded in naming rights, though, have taken a hit, such as the airline business, which has some experts wondering how some of those deals will hold up when the pandemic subsides.
Allegiant Air, for example, bought naming rights last summer for the new Las Vegas Raiders stadium, a 20-year agreement valued at $20 million to $25 million annually. The airline industry has bottomed out because of COVID-19, which has cut air travel by 90 percent from spring 2019. Allegiant, a budget carrier, has received $172 million in aid as part of the federal government’s payroll support fund. Like other carriers, it put workers on leave and cut pay. In addition, Allegiant suspended construction of a $470 million Florida resort and put a $50 million expansion on hold at Concord-Padgett (N.C.) Regional Airport near Charlotte.
In Las Vegas, where Allegiant Air is based, company officials told the Review-Journal that they’re committed to paying for naming rights to help the Raiders fund their portion of the $2 billion stadium, which is scheduled to open this summer.
“I would be very concerned right now about an industry that gets hit square between the eyes,” Yowell said.
In Miami, American Airlines, which is also part of the bailout, did not renew naming rights after its 20-year deal for the NBA arena there expired at the end of 2019. Under terms of the agreement adjusted in 2018, Miami-Dade County is responsible for finding a new partner in addition to paying the Miami Heat, the primary tenant, $2 million a year to make up for the loss of that revenue.
“Now is a tough time to be selling it,” Yowell said.
In the event leagues cancel seasons because of the pandemic, major sponsors will most likely have their deals extended another year without having to make another payment or on a prorated basis, said Chris Allphin, senior vice president at Van Wagner Sports & Entertainment.
“What you’ll see is teams bending over backwards to be fair,” Allphin said. “Nobody wins with potential lawsuits. Teams need to operate and keep their product on the field and customers need to get what they pay for.”
All told, companies with naming-rights deals will be part of the big celebration when venues open their doors again. The smart brands see those strong, emotional connections ahead of time, sports marketers said.
“It represents a turning point in some of these cities’ health to know there’s an anchor that stepped up to create this hub of community activity for the next 10 to 20 years,” Griffis said. “That type of investment is going to be looked upon very favorably in these communities.”