The Staples Center is getting a new name for Christmas. Starting December 25th, the venue will unveil its new logo as the Crypto.com Arena when the Lakers host the Brooklyn Nets after an historic naming rights deal. [UPDATE: 12/22/21: The signage has now been updated to Crypto.com Arena both inside and outside the arena.] The arena, located in downtown Los Angeles, houses the Lakers, Clippers, Kings and Sparks.
Historic Naming Deal
Crypto.com paid more than $700 million for the 20-year naming rights, making this one of the biggest naming deals in sports history. Crypto.com’s chief officer, Kris Marszalek, hopes the name will solidify crypto as a mainstream item.
AEG Worldwide, the arena’s owner, signed a deal in 2009 with Staples for the naming rights in perpetuity. Despite that ever-lasting deal, AEG bought back the naming rights in 2019 for an undisclosed sum. Staples has seen a steady business decline since the late 90s, which may have led to its decision to sell back the naming rights 10 years later.
Perfect Opportunity to Strike a Naming Rights Deal
Individual naming rights deals are largely a product of the economic situation of the time the agreement was negotiated and the purchasing entity’s ability to pay. Staples’ income issues mixed with the rising star power of the arena presented the perfect opportunity to strike a deal. In recent years the Staples Center hosted high-profile events, such as the Grammy’s, in addition to housing the 2020 NBA National Champions.
Contracts Matter in Naming Rights Deals
Naming rights deals are being reached for previously unimaginable prices; therefore, clear, forward-thinking contract terms are crucial. Previous debacles have shaped these contracts and what they include. For example, in 1999 Enron signed a 30-year, $100 million deal to put its name on the new Houston Astros stadium. Despite Enron’s subsequent Chapter 11 bankruptcy filings and ongoing investigations into its business practices, the company was current on its payments as the Astros were set to open their 2002 season. Eventually the Astros agreed to pay Enron $2.1 million for the naming rights back and release Enron from the 30-year contract.
That’s why the contracts matter. Morality clauses are incorporated to protect the image of each party. Morality clauses define circumstances that would be embarrassing or harmful to the organization’s reputation and values. If either party commits such an action, the other party retains the right to terminate the contract.
Protections for Naming Rights Purchasers in Contracts
Force Majeure clauses in these contracts are now less vague and include specific language. Issues such as Covid-19 and natural disasters are accounted for to protect the naming-rights purchaser from losing on its investment due to the loss of events or a work stoppage. In Denver, for example, the Bronco’s Empower deal includes reduced payments from the company in the event fewer than 10 preseason or regular season NFL games are played in the venue in a season. And the contract includes the option to add another year at the backend of the 21-year agreement if an entire season isn’t played in the venue. You can find similar clauses throughout venue naming rights contracts.
Other Important Naming Rights Contract Considerations
The contract doesn’t solely focus on negative contingencies, though. Naming rights deals must also plan for issues that arise from the evolving and ever expanding nature of naming rights and their relationship with technology. Constant technological advances and the development of new forms of media such as Tik Tok and Twitter require careful wording in contract provisions regarding what rights are being granted to a corporate sponsor and how often the name must be mentioned in venue accounts.
In contemplating and negotiating naming rights and sponsorship deals, it is always prudent to proceed with a certain amount of caution and with the benefit of good advice from those with a keen eye on the historical nature of naming rights. With that said, naming rights and sponsorship arrangements are leading and meaningful revenue generators for teams. They continue to be great investments for companies and creativity in the deal structure will continue to evolve
With $700 million on the line and Crypto.com’s forward-looking business model, we have to think these details have effectively been examined.
KJK’s Esports attorneys represent entrepreneurs and individuals in the esports industry, facilitating contracts and negotiating deals to capitalize on the explosive growth in the esports ecosystem. If you would like to learn more about opportunities within this growing industry, contact Scott Norcross at san@kjk.com or 216.736.7264 or Paige Rabatin at pmr@kjk.com or 216.736.7270.