Colts and Marketing and Sports Business

Colts plan to let sponsors decorate portions of stadium

September 4, 2006

In an initiative rolled out last month, the Indianapolis Colts are giving sponsors a chance to help design the interior of Lucas Oil Stadium. But the opportunity to play decorator won't come cheap.

All told, the newly announced sponsorship packages, which parcel out naming and design rights for 12 parts of the stadium, are expected to generate up to $10 million a year for the franchise.

That's more than the approximately $6 million a year the NFL team will get from Lucas Oil Co., which is paying $122 million over 20 years to get its name on the facility, which opens in 2008.

"No other NFL team has tried this sort of naming-rights deal," said Tom Zupancic, Colts senior vice president of sales and marketing. "This will account for a huge part of the team's revenue."

While Cleveland and Houston sold naming rights to gates--and the Indiana Pacers locally have sold naming rights to parts of Conseco Fieldhouse--sports marketers said no other professional team has had a deal as comprehensive as the Colts'. And no teams have solicited this kind of sponsor input while the stadium was being built, sports marketers added.

The Colts in August began marketing naming-rights opportunities for four main gate entries to the facility, four main-level corners of the building's interior, and two spaces on the suite level and club level.

"We wanted to sell these sponsorships early, so our sponsors could be involved in the design and set-up of the space," said Jay Souers, Colts vice president of sponsorship sales.

"They won't be altering locations of pillars and walls, but we want them involved in things like color schemes and lighting," Souers added. "We want to integrate our sponsors into the building in a whole new way."

Though annual prices are somewhat negotiable, they will range from $400,000 to $600,000 for suite- and club-level sponsors to $1.4 million for gate sponsorships, Colts officials said. But sports marketers said the gate sponsors could be pushed even higher if demand exceeds expectations.

"These types of sponsorship deals--though relatively new--have proven very popular, and there's no league that is doing better in team sports right now than the NFL, so I would expect there to be strong demand," said David Carter, principal of Los Angeles-based Sports Business Group. "With the right building and the right market, the demand could extend from local and regional firms to Fortune 500 companies."

Unlike ticket revenue, which is shared among NFL teams, naming rights and in-stadium sponsorships and other ancillary revenue is kept by the home team.

Since the Colts and other NFL teams are not required to reveal revenue, it's difficult to gauge how much the team will net from its new stadium. But most marketers think it will be six to eight times greater than the amount raised through the RCA Dome.

Colts' revenue isn't the only thing that will escalate at the new, larger venue. Local officials said it will cost $10 million more annually to operate than the RCA Dome.

That's an unfunded city expense, but city officials said using sponsorship revenue to plug the gap would undercut the purpose of the new stadium, which was to give the Colts the means to raise enough cash to flourish here without direct city subsidies.

"The challenge is, we had to negotiate a deal to keep the Colts in one of the smallest markets in the NFL," said Fred Glass, head of the Capital Improvement Board, which will operate the new stadium. "We had to negotiate a deal to get them off the sweetheart deal they negotiated with the city in 1998."

That deal called for the city to subsidize the franchise any time its financial performance sagged below the league median.

"We wanted to give the Colts the tools to succeed, but no more guarantees," Glass said.

Colts officials said money from the sponsorship deals is needed by the franchise to attract and retain key players to keep the team competitive.

Glass said despite the team's early success in raising sponsorship revenue, he has no misgivings about the deal brokered.

"I think the Colts are doing well, and that's the marketplace in action," he said.

Glass said tax and user-fee revenue over and above what is needed to service the construction debt on Conseco Fieldhouse and Victory Field is used for maintenance and operating expenses for those facilities. That's how he thinks state and city officials should agree to cover operating expenses at Lucas Oil Stadium.

Carter, the L.A. sports marketer, said the Colts are doing what any team would do.

"They're raising enough money to sign another star player or two, and that could make a big difference. This is smart business, because if the Colts don't field a competitive team, there would be a big outcry about that," he said.

Eye for design

Because the Colts are allowing sponsors to design elements of the stadium that aren't easily changeable, the agreements will be six to eight years in duration. Suite-level deals with locally based Sport Graphics and ProLiance Energy are close to being finalized, and Colts officials plan to have all 12 packages sold by year's end.

"The Colts realize the dynamics are changing, and getting sponsors involved early is more and more important," said David Wagner, whose Charlotte, N.C.-based architectural firm was hired by the Colts to help sponsors design their spaces. "It's sports and entertainment, and this is about getting a sponsor's message out and engaging those who visit that facility."

The deal to host the NCAA Final Four at the retractable-roof stadium on a regular basis should help sell the sponsors, sports marketers said. Local tourism officials said as many as 250 events annually could be hosted at the facility.

"This is going to be a brand new facility with a whole lot of foot traffic," said Frank Hancock, president and CEO of Sport Graphics, a diversified printing and signage company. "But more than that, we think it's going to put us in front of a whole new audience in an entirely different way. It's really going to be an opportunity for this company to tell its story in a meaningful way."

Founding sponsorship areas will include signage, customized interactive displays, product demonstrations, music, shows and more.

Sponsors will be given a periodic rebate or "allowance" to invest in keeping the area "fresh." Street-level sponsors will be given an additional allowance to encourage sponsors to continually change their presentation and weave it into Colts' game-day themes.

Sponsors will also get a corporate suite and advertising time on 65 flat-screen televisions placed around the stadium. Their messages will also appear on the NFL's longest electronic video board--1,574 feet--encircling the area above the playing field and on the stadium's 36-foot-by-96-foot Jumbotron.

Having a bank of TVs throughout a stadium dedicated to a group of sponsors' messages is an NFL first, Colts officials said. The names of sponsors will also be listed on tickets for seats in the sponsors' designated areas.

Suite deal

The Colts are accelerating sales efforts on multiple fronts. Earlier this summer, the team's sales staff--which has swelled from four to 45 in the last eight years--started suite sales. They hope to conclude those this fall. Though many contracts are still pending, Colts officials think they have deals for all but about 25 Lucas Oil Stadium suites.

Lucas Oil Stadium will have 140 suites; the RCA Dome has 104. And even though the average annual suite price is jumping about $25,000 from RCA Dome prices, Colts officials don't anticipate difficulty in selling out the inventory. The minimum deal is for six years, but Greg Hylton, Colts vice president of premium seating and ticket sales, said some suiteholders are asking for a longer term. It's a far cry from 1998, when it took the Colts 18 months to sell out the RCA Dome suite inventory.

"We hope to have contracts for all our suite inventory signed by October," Hylton said. "With the team doing so well, and the excitement from the new stadium, we're seeing demand from our customers at an all-time high."

Prices range from $40,000 annually for a mini-suite seating eight to $230,000 for super suites seating 32. On average, the suites are 150 square feet bigger with better amenities than RCA Dome suites.

The Colts are also selling seats in the 160-seat quarterback's suite, which comes complete with a buffet and other entertainment outlets such as a pool table and bank of TV screens to watch other NFL games. Companies or other groups can buy up to eight seats there.

Next up will be club seats. Although the new stadium has 7,100 club seats compared to 4,228 in the RCA Dome, Hylton predicted they would be sold out by February.

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