Sports Authority Field at Mile High Stadium, Denver. (Photo Credit: Denver Broncos Team Photography)
No one knows what the name of the stadium the Denver Broncos will play in this year will be. Sporting goods chain Sports Authority currently holds the naming rights, but the company filed for bankruptcy earlier this year, leaving the name of Mile High Stadium where the Denver Broncos currently play in limbo.
So far two deadlines for bids on naming rights have come and gone with no formal bidders. In what may be a sign of the times, the only company to publicly come forward with an offer is Native Roots, a legal marijuana dispensary chain with 14 stores in Colorado.
Part of the problem with finding a suitable bidder may lie in a legal dispute between Sports Authority and Metropolitan Football Stadium District (Stadium District), owner of Mile High Stadium and PDB Sports Ltd., which does business as the Broncos.
“The marketing and sponsorship guys are the ones driving that train,” said Jay Roberts, GM of Sports Authority Stadium. “The District’s portion of the process is still hung up in court, the District’s lawyers are dealing with it.”
Eric Smallwood, managing partner of sports marketing consultancy Apex Marketing Group, said, “Sports Authority is currently being shopped by Hilco Streambank, and they’re trying to auction off the naming rights and other intellectual property, but the contract has a clause that prohibits them from moving forward without approval from the Broncos and Stadium District.”
How much of a say the Broncos and the Stadium District get in picking the new company is up for debate and has turned into a legal issue. The contract also says that the entities cannot hold back approval if the new buyer meets the criteria in the contract. The contract also has provisions prohibiting tobacco, illegal products and foreign entities. There is no language covering marijuana, which is legal and regulated in Colorado.
If Native Roots did win the bid, it would certainly give new meaning to Mile High Stadium. Even so, industry observers believe the Native Roots public offer is a PR stunt. “It’s going to take $1 million to refurbish the signage alone,” said Smallwood. “A small company cannot absorb that for what could be only a five-year deal.”
Sports Authority bankruptcy lawyers say that the naming rights are part of the company’s intellectual property and have placed the rights up for bid in liquidation of the company. Hilco Streambank, a Massachusetts company, is running the auction. And yet, even though the bidding has been pushed back several times, no one has made a formal bid. “I think the uncertainty of the legal process is what’s holding up a good company from stepping forward,” said Smallwood.
PDB Sports Ltd. said in a court filing, “Sports Authority can’t sell or transfer its Mile High Stadium naming rights or its team sponsorship without written consent. Pursuant to paragraph 15 of the sponsorship agreement, no party may assign the sponsorship agreement or any of its rights or obligations under the sponsorship agreement without prior consent of the other parties.”
To further complicate matters, Sports Authority absorbed the naming deal from Invesco in 2011. The contract states that Invesco will pay $60 million over a 20-year period. Figures obtained through Stadium District show that Sports Authority paid $31,141,630; in 2013 they paid $34,343,690; the 2014 fee was up to $37,673,840. In 2015 the fee dropped down to $3,202,060. Smallwood evaluates the offer for the naming rights as: Low – $4,217,719, Medium – $5,527,792 and High – $8,147,938. He believes the overall annual value to be $15,720,877.
The Sports Authority’s contract was for 20 years. There are only five years remaining on their contract, and any potential buyer would be on the hook for the remaining $19 million owed. Most naming rights deals are for 10 years or more.
Matt Sugar, director of stadium affairs for the district, said, “I represent the owners of the stadium, which is the taxpayers. We would like the court to take action or free us of our contractual obligation. We expected this to settled before now.”
The next payment is $3,330,150 and due Aug. 1. Sugar said he does not anticipate that it will be paid. “The court has taken our naming rights contract and put it out to bid. That contract has been put out several times; they’ve had to move the bid several times and it just got moved again today (Tuesday, July 26). They are trying to find a buyer but have not been successful.”
The contract terms are split between naming rights only, which the Stadium District owns, and the rest of the intellectual property, which the Broncos own. “The contract with the Stadium District has not been breached yet because it is paid ahead of time,” said Sugar. “All they can sell is the contract with the remaining five years. They are bidding on the naming rights only, which the District holds; the rest of the inventory, like the suites and use of the logo, the Broncos own. Months ago Sports Authority failed to pay the Broncos so their contract was breached.”
As for Native Roots’ desire to buy in, Sugar said, “We may have to take them. Whoever buys it has to abide by the terms of the contract. We’ve already reserved ‘the right to object’ in court. The marijuana dispensary might be frowned upon by the NFL and maybe even federal law.” While marijuana is legal in the state of Colorado, according to federal law marijuana is illegal. Sugar believes marijuana might be prohibited under the tobacco rule, but he’s unsure, since it’s new territory for everyone.
Sugar also thinks the five-year nature of the contract makes any sale, to anyone, “challenging.” He said that when Sports Authority held the rights it all made sense; they had the rights to the logo, the suites and other Bronco property. “It only works when it’s one happy family,” said Sugar, “Dividing the pie up is problematic, when you start picking these things apart you lose the value. A lot of companies may not want to spend all that money for limited returns.”
Metropolitan Football Stadium District believes that if, and when, Sports Authority defaults on the next payment due on Aug. 1, they will inherit the right to sell the name. The District has already made plans to hire a marketing firm to help search for a new company that will pay to put its name on Mile High Stadium. The hiring of the firm, and the search, are on hold until after the Aug.1 payment deadline. “Once we have some definition from the court the next action we will take is to send out a Request For Proposals and start the process,” said Sugar.
That leaves 35 days for Hilco Streambank to come up with a buyer. If Sports Authority does show up with a check by Aug. 1, a 30-day grace period kicks in, after which the naming rights return to the Metropolitan Football Stadium District and Denver Broncos.
Executive Vice President of Hilco Streambank Jack Hazan said in an email, “Several interested parties have approached the firm. Potential buyers would receive better financial terms from the liquidator than if they deal directly with the District.” Hilco Streambank has priced the deal at $3 million a year for the remaining five seasons left on Sports Authority’s contract.
The Denver Broncos start their season Sept.8. Sugar said that he doesn’t expect any resolution to the naming rights situation anytime soon. “It would be nice but probably won’t happen. If there’s no resolution we’ll discuss it with the Broncos and we’ll most likely just be called Mile High Stadium until we get a deal with a new company.”
Non marijuana companies that have been bandied about in the media and encouraged to apply include Quiznos, Dish TV, Frontier Airlines, Chipotle, Level 3 Communications and Name.com.
Interviewed for this story: Eric Smallwood, (810) 300-4834; Matt Sugar, (702) 258-3772; Jay Roberts, (702) 258-3035