12571 Main Street Los Angeles, CA 91632 Phone 912-555-1212 To: Jerry B.

Bigwig From: Bart Bickel Date: 12-1-07 Subject: Proposal on the purchase of naming rights I have completed the report you asked for to determine the feasibility of purchasing naming rights to the new stadium. I have compared and contrasted the positives and negatives in the report and this should give you all the information you need to make your decision. After weighing all the facts it appears that it would be in the best interest of the company to proceed with a proposal.

Naming rights: the key to the future of marketing

By Bart Bickel

As a sports fan I watch many football games and each week you cant help but notice when they start the game they refer to the name of the stadium they are playing in. Many stadiums today have contracts with major corporations to have their naming rights on the stadium and I believe that we should be one of those companies. Every time a TV announcer or radio broadcaster says the stadium name I think that could be our company and that should be our company. Gentlemen, it is time we look to the future of this company and how we can make ourselves a viable leader in the 21st century marketplace.

Marketing our name

Marketing has always been a very important factor with any company or with any product. How do you best reach your target audience? To enhance company growth and increase name recognition it is important to expose our company name to as many people as possible. Spending money must be done to reach this goal so as a company we must determine how much to spend and determine our target audience. In years gone by it was always word of mouth and then along came the newspaper. After that came radio advertising followed by television. Each form of communication cost progressively more money but reached more people. Today we continue to see the same growth in terms of money spent and the number of people that can be reached. This brings us to one of the newer forms of advertising which is the use of naming rights on athletic stadiums. The idea of naming rights has been around since the 1980s. Back in 1988 there were only 3 contracts for naming rights with a total value of $25 million. In 2004 that number had grown to 66 deals with a total value of $3.6 billion.1 This growing trend has set off million dollar bidding wars between companies just to get their name on the side of the stadium.

With that in mind you must wonder if the publicity is worth it. The idea of spending $5 million, $20 million or how about $400 million2 just to have your logo on a building seems preposterous. In this report I will attempt to break down the amount of money being spent for such deals. I will also look at this type of marketing and see how it compares with others for the companies marketing dollar. In the end I will make a recommendation that it is worth the financial investment to get our company name on that building. Even though this idea has been around for over 20 years there are still many questions. As with most marketing it is not an exact science and you will see many different opinions. I will investigate at all the evidence and determine if this is in the best interest of our company based on our target audience and the direction we desire to take in the future.

What are we competing against?

Average Cost per Year $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $H oc ke y Fo ot ba ll Ba sk et ba ll / Ba se ba l l

As I mentioned before there are numerous naming deals out there right now for a variety of buildings. The easiest way to look at these would be to break them down by cost per year. In the graph above we can see the comparison of the average cost per year for each of the major sports. This is important to note because we will be bidding for a contract with the local football stadium. Please note that football is the highest cost of any sport. The price we would pay must be compared to other football stadiums to be accurate. The data is courtesy of ESPN.com. The first question is why the range differs so much from the lowest cost to the highest cost. The lowest cost is for a contract that is in the last year of a 10 year contract. It is likely that the new rate will be much higher. The stadium for the Detroit Lions is only $1 million per year for Ford motor company. The team is owned by the Ford family so they are getting a discounted rate. Other factors include length of contract and size of the city that the stadium is located in. Below you can see the yearly amount paid by each city. The smaller markets have a lower price as you would expect. Football
Millions $12 $10 $8 $6 $4 $2 $Ja ck so nv ille De In di tr oi Sa an a t p n Fr olis an cis St c o .L ou Pi tts is b Ta urg m h pa B Ba ay ltim or e De Ph n ila ve de r lp h Ca ia W rol a s in a hi ng to Ho n us to n

What options do we have?

Now lets take a look at other forms of marketing that we could compare this with. There is the possibility of newspaper or radio ads. These would be much cheaper but the audience is so much smaller. Certainly a radio spot or newspaper ad could be effective but we are a global company and a radio commercial is not what will help our company continue its growth. To continue to show our companys place on the national stage we need to think bigger. What about the cost of television ads? This would depend on which shows you choose to advertise in. Last year you would pay and average of $615,000 during American Idol for a thirty second commercial. Most of the higher rated primetime shows were about $200,0003. We could run commercials at off peak times and save money but we will probably be looking at $200,000 for every thirty seconds of ad time. The average cost of a stadium is $4 million and that would buy about 20 commercials a year. That is only 10 minutes of advertising per year for the same amount of money. If we place our name on the side of the stadium then everyone who drives by will see our name. When you add in the amount of times they mention the company name on TV, radio or in the newspaper we will get far more coverage for the advertising dollar with naming rights. So lets take a look at the comparisons. The downside is that the cost will be relatively high and a long term contract would be difficult to get out of if we did not like the results. The use of naming rights is relatively new so it is difficult to study the effectiveness of other companies in the past. It is a risk that the company has never taken

before. The final problem regarding naming rights is the possibility that rates may decrease and would be locked in at a higher price. The positives of having our company name on the side of the stadium would include a lot of national publicity on TV, radio and in the newspapers. It would be a one time fee without the production cost associated with filming a TV commercial. If we were to sign a long term contract the price would be locked in so even if the average cost was to rise we would already have a set price. Based on the past ten years the prices have risen dramatically and there is no indication that the trend will stop. The money we spend was already going to be spent on marketing but now we can try a different area and see how effective it is.

Recommendation
After careful study of the risks and the benefits I believe it is in the best interest of the company to bid on the stadium. The national exposure will enhance our company name and show our support in the local community. We have always been a company that tries to stay ahead of the curve and this is another opportunity we have to be a market leader. This company is moving forward rapidly and by investing in this stadium we will show our commitment to being a progressive company that is looking to the future.

The New York Times Friday, November 9, 2007 At (Your Name Here) Arena, Money Talks Advertising Age; 1/29/2007, Vol. 78 Issue 5, pS-4-S-4, 2/5p

MediaDailyNews Archives Report Reveals Real Prime-Time Ad Costs, Fox Has Priciest Shows by David Goetzl, Monday, Sep 10, 2007 7:45 AM ET