Buying the naming rights for its hometown NFL team’s stadium put Sports Authority’s name in front of millions of football fans, but it also may have ultimately doomed the company.
A marketing expert in Denver says that the retailer’s demise should serve as a warning to other companies that are thinking about signing a sponsorship deal.
The name of the defunct company is still on the stadium where the Broncos play and other events are held, and maybe Sports Authority would still be around if the company’s leaders had listened to marketing experts when it took over the remainder of the 20-year contract from Invesco six years ago.
Professor Darrin Duber-Smith of the Metropolitan State University of Denver explained to Westword that at the time, Sports Authority didn’t have enough money in its marketing budget to cover both the sponsorship payments and the money a company needs to spend to support its sponsorship.
Wait — isn’t slapping your name on the side of a building enough? No, Duber-Smith says.
“You’re supposed to spend at least one time the amount of money you spent on the sponsorship on leveraging,” he told Westword. “So if the sponsorship deal’s for $5 million, you need to have another $5 million per year.”
What’s “leveraging”? That means spending more money to market the company’s relationship with the Broncos and the stadium. That might include advertising, promotions, and using the team’s logo whenever the company can.
Sports Authority didn’t have the money to spare and make the most of its sponsorship, since the company was never a very healthy one. Denver-based Gart Brothers and Florida-based Sports Authority merged, but were never a cohesive and healthy single company. The professor compared the merger that formed Sports Authority to “two garbage trucks colliding.”
This is all a warning to the next company that will take over the Mile High Stadium naming rights, since the team is determined to find a sponsor that’s still in business before the beginning of the next football season.
The problem is that the sponsor needs enough cash flow to make the sponsorship worthwhile, and there aren’t many companies based in Denver that are big enough. Coors already has its name on a local major league stadium. The most likely candidates are national or international brands, not local ones.