Lessons Learned From Banc Of California Ending Naming Rights Deal With LAFC

BY ADAM GROSSMAN

It may seem counterintuitive that a stock price would increase on as a result of a company announcing a multimillion-dollar payment. Yet, that is exactly what happened when the Banc of California (BOC) recently announced it was paying $20.1 million “to end its stadium-naming deal with professional soccer team Los Angeles Football Club (LAFC) 12 years early.”

Why would the bank’s stock price increase by more than five percent after the announcement? Shareholders appeared to believe that paying $20.1 million this year would deliver a better return on investment that keeping the remaining 12 years of BOC’s 15-year, $100 million deal that began in 2018.

LAFC President Tom Penn is likely correct in that the team should be successful in finding a new naming rights partner and that the task could be easier as compared with the original deal. He stated that the team now has a “fully operational stadium, which has sold out every MLS game and which will hold events during the 2028 Summer Olympics.”

The announcement also comes soon after a recent change in leadership at the company. New CEO Jared Wolff said that “reducing expenses is a priority.” BOC is also not unique in looking to reduce costs in the current environment.

Yet, it is difficult to believe that Wolff would have made this decision at that price point if he did not perceive this course of action to be a better long-term value for the company. More specifically, BOC (and its shareholders) understood the benefits Penn described and still decided to end the deal early.

Both Penn and Wolff could be right in that LAFC’s naming rights are valuable but do not necessarily drive ROI for BOC. As we have stated in past posts, naming rights deals are good for enhancing brand awareness and sentiment particularly for partners looking to increase customer engagement in a specific market.

One challenge with naming rights is that enhanced awareness and sentiment have limited utility if a team’s fans do not overlap significantly with a company’s customers. We used our Audience Inference Platform (AIP) to better understand why this may be the case in this deal (neither the BOC nor LAFC is a Block Six Analytics client).

AIP determines the demographic profiles of targeted Twitter accounts by looking at followers’ organic posts and comparing them to a dataset with known demographic attributes. The analysis (by percent of followers per attribute) shows that LAFC can disproportionately target attractive demographics for many companies. However, BOC and LAFC account followers do not have a strong overlap on education, income, ethnicity, and age attributes.

What types of companies should LAFC attempt to target for a new naming rights deal? AIP also examines followers’ organic posts to determine what words are being more frequently used in a specific account as compared to a general population. We found that technology, food, and fitness companies could be good fits for this deal given that LAFC followers frequently use these keywords in organic conversations.

A new partner also potentially has an opportunity to secure naming rights at a lower price point than BOC in part because LAFC secured the $20+ million payment mentioned previously. This example demonstrates that companies can and should be looking to explore partnership opportunities given “deals” like these will exist in the marketplace in the current environment.

LAFC and BOC could both be in a better position given the company’s decision to end the naming rights deal. Yet, BOC paying millions of dollars to end its deal early should also serve as a case study to those operating in the sports industry. It is critical for both sports properties and companies to understand and communicate partnership ROI using company-specific