Sporting Kansas City’s New Sponsorship Could Be A Cancer

Posted In Features - By Bryan Ashlock On Wednesday, March 9th, 2011 With 3 Comments

Yesterday, Sporting Kansas City announced the name for their new $200 million stadium (which opens this June). Unfortunately SKC’s stadium will not be like the city’s other pro stadiums and remain sponsor free. The new stadium will be called LiveStrong Sporting Park. Yes, LiveStrong, as in Lance Armstrong and those yellow bracelets that millions of Americans wear to “raise awareness for cancer”.

Corporate sponsorship is, whether you agree with it or not, a necessity in the modern era of sport. I don’t think anyone was so naive as to think that this new park would not have a corporate sponsor, but I don’t think anyone thought that the team wouldn’t earn any money from their sponsorship deal. Yes, that’s right; Sporting Kansas City are, essentially, donating the name of the stadium to the LiveStrong Foundation.

That can’t be right, can it? Unfortunately it is.  Sporting KC will be surrendering an estimated $2 million per year in a traditional naming-rights deal in return for only the standard tax break that goes with all charitable contributions. Not only that, but SKC will also be giving up a portion of all stadium revenues, including tickets and concessions, in order to fund a nonprofit effort to fight cancer. The goal is to raise a minimum of $7.5 million over the course of the six year agreement for the nonprofit.

This move by a professional sports franchise to donate sponsorship to a charity is not unprecedented. Barcelona pay UNICEF 1.5 million Euros to put the UNICEF name and logo on the front of their shirts. However, the donation of stadium naming rights in addition to a portion of all the stadium revenues seems ludicrous.

What exactly are Sporting Kansas City getting out of this deal? Livestrong’s “payment” comes with Lance Armstrong’s access to big-name performers who could help fill the stadium for high-dollar concerts. Armstrong is close with Justin Timberlake, for instance. He shares a house in France with Bono. Jimmy Buffett rode in the pace car during one of Armstrong’s Tour de France races. So that’s what you’re getting Kansas City. Performers who probably would have come to town anyway will now definitely be making a stop at LiveStrong Sporting Park.

Articles are already starting to come in about how noble a gesture SKC and their owners, Sporting Club, are making by doing this. I couldn’t disagree more. This is by far one of the stupidest decisions I have ever seen. Before I go any further, I don’t want to hear people say I’m “for cancer”, no one is ever for cancer. However, aren’t we all sufficiently aware of cancer? Do we really need a full month of NFL players wearing pink, or LiveStrong bracelets, or stadium names to “raise cancer awareness”? As a matter of fact, I challenge you to find me one person (over the age of 5) who is not aware of cancer.

From a strictly business standpoint this decision is utterly ridiculous. Two of the biggest ways in which professional sports franchises earn money are sponsorship and stadium revenues. Sporting Kansas City just gave both of those up. For the next six years SKC will not be receiving an estimated $2 million per year for naming rights. There’s a loss of $12 million dollars. Over those six years at least another $7.5 million will be donated to fund the fight against cancer. That’s nearly $20 million in lost revenue.

Teams depend on ticket sales, parking, merchandise sales, and concessions to help them turn a profit. Especially in a league like the MLS where television revenues are relatively low. I worked for nearly a year in ticket sales for a small market NHL team and the pressure on the sales staff to put butts in the seats so that the club could turn a profit was immense. More people mean more concessions, more parking, more everything, but not for SKC. Instead SKC will have to find other ways to earn money, ways with much lower profit margins than those stadium related revenues.

$20 million would be a lot of money to Kansas City’s two other professional teams, the Royals and the Chiefs, but to Sporting Kansas City, a team playing a sport that is still searching for a foothold with American sports fans, this could be catastrophic. Clearly Sporting Club feel that with a new stadium the team will be able to, somehow, maintain profitability despite the loss.

This time last year the MLS players were prepared to go on strike because the owners were doing everything they could during the collective bargaining agreement talks to keep costs down. That’s why there’s still no free agency in the MLS, because the owners felt like bidding wars would hurt the profitability of the clubs. Yes, they raised the minimum salary and provided more guaranteed contracts, but we’re only a year in and we haven’t seen what the financial impact of this has been on the league. And now, a year after these talks SKC forgoes more than $3 million a year in income for a little good will? Something doesn’t seem right about that.

Unfortunately, unlike many foreign teams, the MLS teams are privately owned and their earnings are not released to the public, so we may never know. In fact, this sponsorship may be why we’ve seen SKC dump salary in recent months. Shedding more than $1 million in salary would certainly be one way to make up for lost revenue from this deal, though certainly not one that would be popular with supporters of the club. Surely, SKC’s COO Robb Heineman has a plan to make this profitable. I’m just not sure what it could possibly be.

In addition, Sporting Club are counting on the fact that the team will gain so much in goodwill and positive publicity. Sure, people may like that the team is supporting the fight against cancer, but are investors going to like it when the team fails to turn a profit? Will fans like it when that failure to turn a profit results in a downturn in the product on the field? Doubtful on both counts. In fact, some like me, might be turned away by the pretentiousness of the whole thing.

This is obviously a great deal for the LiveStrong Foundation. If I were Lance, or whoever runs the foundation, I’d make this deal 100 times out of 100. LiveStrong are getting paid to be a sponsor and they’re raising additional money for their cause. Plus this is a great way to broaden their exposure and diversify their revenue just in case something goes bad with Lance. What’s not to like about that deal?

But what happens if the hammer ever comes down on Lance Armstrong for cheating? The brand would instantly lose value and the sponsorship would become a white elephant. Sports Illustrated released a pretty damning article on Lance back in January and the cyclist is still subject of an on-going grand jury investigation into his alleged performance-enhancing drug use. Sporting Kansas City can hardly afford to have Lance and his foundation go down in flames.

Sporting Club and Heineman spent this off-season rebranding the team. The team will begin play in the new state of the art LiveStrong Sporting Park this summer which will be the final step in the rebranding process. The Wizards was always a weird name (no more weird than the original Wiz), so one can hardly argue with the effort to rebrand the team. They’ve aligned themselves with a brand that is recognizable and supports a good cause, but they have made a poor business decision. One that could result in bankruptcy.

So, Congratulations Sporting Kansas City. Now not only do you have a team name that makes no sense and jerseys that are disappointing, but soon you’re going to be broke.

About Bryan Ashlock - Soccer aficionado living in Atlanta. Contributor to Cartilage Free Captain, a Tottenham Hotspur blog on SBNation. Follow me on twitter @BryanAshlock

Displaying 3 Comments
Have Your Say

  1. Bet says:

    You’re dumb.

  2. Andy Edwards says:

    I won’t comment on the part about the idea being stupid, because that’s your opinion. And, while your opinion on this matter sucks, there is one thing you were factually wrong about. They’re not dumping salary for this reason. They dumped Conrad, Wolff, Jewsbury, etc., because they are older players on huge salaries and none of them performed to the level their salaries last year suggested they should. A little bit of quick research and you’d find that the team is already hovering around the $2M mark on the salary cap, with a handful more guys they’re close to signing or trying to sign.

    I can certainly at least see your thinking about how it’s not a smart business decision, but really, nothing they’ve done this offseason has been “by the book.” The ownership group has a vision, (we’re not all completely in on everything that that entails, yet) and as successful businessmen they have been, (they have good money) I’m willing to give them the benefit of the doubt that they know what they’re doing. We’re certainly going to find out.

  3. Clayton says:

    I think this is the first critical article I’ve read on this site. Good job.

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