For the first time in league history, the NHL has sold the naming rights to its four divisions to corporate sponsors. The league announced early January that its teams will play in the Scotia NHL North Division, Honda NHL West Division, Discover NHL Central Division and the MassMutual NHL East Division during the 2020-21 season. The NHL did not say whether corporate sponsorships for divisions would be a permanent fixture in the league or a one year campaign. Allegedly, an NHL source informed ESPN that selling the naming rights to its divisions is viewed internally as a one-year-only campaign. This is the second major sponsorship announcement coming out of the NHL this season, following the announcement that the league would allow advertisements on player helmets.
Briefly, a naming rights agreement is a financial agreement where a corporation or individual purchases the right to name a stadium, or team in this case, for a set period of time in exchange for a financial payment. These rights are frequently part of a sponsor’s marketing strategy for brand recognition and an organization’s ability to increase team revenue. Naming rights has grown exponentially, with over two thirds of top-level hockey, basketball, baseball and football teams playing in branded stadiums. Without sponsorships, many elite events and broadcasts would not happen. When dealing with naming rights, there are several legal considerations; exclusivity and prominence/dominance provisions and remedies. In essence, considerations for protection for the sponsor against the presence of advertising in the arena by the sponsor’s competitors, and provisions that ensure a sponsor’s signage, will be placed in frequent and visible locations (such as a player’s helmet).
The NHL has faced massive revenue shortfalls in the past year because of COVID-19. Forbes stated the average value of NHL franchise has declined for the first time since 2001 as COVID strips the league of critical revenue. New sponsorship deals will bring in much-needed revenue to the league, although some fans are concerned about the over-commercialization of the league. Naming rights deals are a crucial revenue stream for both sports organizations and their corporate sponsors. This move has opened the doors for a new era of commercialization within the league, allowing for the growth of new revenue streams. Bob Dorfman, a sports marketing expert at Baker Street Advertising in San Francisco stated that:
“I’m sure this won’t be a one-timer for the NHL. Whether it’s naming rights, logos on uniforms, or almost any other new sponsorship deal bringing in much-needed revenue, fans will get used to it and leagues will keep pursuing it.”
Selling once off-limits sponsor inventory is not an unexpected move given the financial hardship inflicted by the pandemic. Sports organizations need to find new revenue sources to replace the ticket revenues that have historically provided the bulk of income for competitive teams. Some worry that this is a slippery slope towards teams becoming “mobile billboards”, but this is rather a reflection of an economic reality. Once the revenue flows, we may see other sports leagues following suit.
Written by Jordan Kazan Baigrie. Jordan is a 2L student at Osgoode Hall Law School and ESLA’s Co-Director of Sports. She has an avid interest in sports and entertainment law, and litigation. Jordan has spent the last decade working in sports as an athlete, coach and operations manager.