Are Schools Selling Their “Souls” For Sponsors?

           Yesterday, Florida Atlantic University (FAU) agreed to a naming rights deal with the GEO Group to rename its football stadium the GEO Group Stadium. Why would a seemingly innocuous name change for a college in Florida receive coverage from the The New York Times? The GEO Group’s primary source of revenue comes from owning and operating federal and state prisons and illegal immigration detention centers. More importantly, the GEO Group “has been cited by state and federal regulators and lost a series of high-profile lawsuits” related to its owning and operating of these facilities.  

Of all the attempts to generate revenue in sports, stadium naming rights deals have often been the target of criticism for both the sponsor and the rights holder. From the sponsor’s perspective, the public often does not understand why or how having a stadium named after a company adds value to that firm. Former Massachusetts Congressman Barney Frank summed up popular sentiment about naming rights sponsorship when talking to banking leaders at the height of the recession in 2009 when he stated, “I don’t think anybody has ever opened a bank account or decided to buy a CD because a bank’s name is on the stadium.” B6A has written numerous blog posts refuting the basic premise of Frank’s assertion. Sports organizations often do deliver tremendous value to their sponsors; yet these organizations often have difficulty quantifying and communicating how a naming rights deal increases a sponsor’s revenue or meets its marketing goals.

            From a rights holder’s perspective, fans and media have often criticized sports organizations for naming their venues after companies. However, the proliferation of these deals over the past 15 years has made the impact on sports organizations’ brands relatively minor. For example, ESPN’s Eamonn Brennan criticized the “tasty name” of the University of Louisville’s KFC Yum! Center before stating, “It will take no time at all for people to forget that this name is funny -- corporate stadium nicknames have a way of ingratiating themselves into the lexicon and losing all meaning except ‘that big building’ as soon as everyone gets used to the idea.”

            But sometimes corporate sponsorships can do more serious damage to a sports organization’s brand. B6A has written about how sports organizations can address issues with sponsors after naming rights deals are secured during the Brooklyn Nets’ recent response to Barclays’ LIBOR scandal. Yet this issue with Barclays occurred after the naming rights deal had been signed – a problem more familiar for sports organizations. One of the most famous examples is how the Houston Astros had to deal with the Enron fallout after naming its stadium Enron Field.

            The GEO Group naming rights deal, however, seemingly presents a new ethical quandary that has not been fully examined by most professionals in the sports industry: should FAU knowingly accept a $6 million gift from the GEO Group to fund athletic costs when it knows the company has been dealing with serious ethical issues? It is public knowledge that The GEO Group both runs prisons and detention centers and has a history of questionable human rights issues. In addition, it is likely that FAU knows that the GEO Group is using its naming rights deal as a way to enhance its brand perception to combat the negative attention that has come from both lawsuits and a grassroots organization’s protest. At the same time, GEO’s chairman has “two degrees from Florida Atlantic and once served as chairman of the Board of Trustees.” In addition, the company hires many FAU graduates, including the last two FAU student body presidents.

Moreover, FAU has significant costs related to the new football stadium.  The school recently completed construction of a new $70 million venue and receives no state government subsidies for its athletic program. The $6 million gift from the GEO Group will help cover stadium costs and fund athletic scholarships.

When faced with a similar moral issue, the New York Giants and New York Jets took a different approach. In 2008, the New Meadowlands Stadium LLC (the company in charge of building the stadium for the two teams) entered into negotiations with Allianz for a naming rights sponsorship. There was only one problem: during Adolph Hitler’s reign as chancellor and dictator of Germany from 1934-1945, “the German company insured Adolf Hitler's engineers at the Auschwitz death camp, had a chief executive in his cabinet and allegedly refused to pay off life insurance policies to Jews during the Holocaust.” Even though it had publicly apologized for its role in helping Adolph Hitler and the Third Reich during this time, public outrage -- particularly within the relatively large New York Jewish community – caused the end of the negotiations.

It would be easy to say that FAU should have simply followed the New Meadowlands’ approach and terminated its negotiations with a company with publicly known and much more recent ethical issues. But the economic reality is that the Giants and Jets are in a much more financially stable position than FAU. These professional organizations could afford to turn down Allianz because they enjoy additional revenue streams to fund operations (most notably the NFL’s massive television rights deal). In addition, the New Meadowlands could much more easily find another partner for a naming rights deal. MetLife soon agreed to pay $400 million over 25 years (less money on annual basis than the proposed Allianz deal) for the Jets and Giants to host games in Metlife Stadium. Meanwhile, the $6 million gift from the GEO Group is the “the largest such donation in Florida Atlantic’s athletic history.” It is unlikely that FAU could find another partner that would be willing to pay that much money for such rights.

FAU, however, might still have found other sources of revenue that would accomplish the same goal as the new naming rights deal. The GEO Group’s $6 million per year deal will be paid out over 12 years creating an average annual stream of $500,000 for FAU.  As discussed in yesterday’s B6A post, FAU is now a prime candidate for “paycheck” games. These are games in which Bowl Championship Series automatic qualifying schools from the top conferences, such asthe Big Ten, SEC, and PAC-12, pay smaller schools to compete at their venues. For example, Northern Iowa received $1 million to play the University of Iowa and University of Wisconsin - $500,000 per game. With the Big Ten voting to eliminating paycheck games versus Football Championship Subdivision Colleges, that means there is a smaller number schools who could qualify for paycheck games. FAU, especially with its impending move to Conference USA, becomes a prime candidate for more of these games (the school played Alabama and Georgia in 2012).

Over the past decade, college athletic programs have increasingly sought to maximize all possible revenue. From individual media rights agreements and naming rights deals to conference re-alignments,, academic institutions have overwhelmingly favored whichever approach generates the most money. There are good reasons to both support and criticize this new reality in collegiate sports, and this debate has been covered in many other places.

The FAU case shows that making an ethically questionable decision does not have to be the only way to generate more revenue. By fully understanding and observing the competitive landscape, FAU could have avoided the negative publicity that came with the GEO Group’s naming rights deal and made a comparable amount of money through a different channel. The program then could have signed a naming rights deal for a lower amount of money with another corporate partner that had fewer ethical question marks. In fact, placing more emphasis on ethical considerations may have even led FAU to a different and more ethical approach in maximizing its revenue.

Note: “Paycheck” games may also be considered by many to be unethical. This criticism has some validity in that smaller schools are receiving money to play in football games against teams where they are likely to lose. However, both BCS and non-BCS schools need non-conference opponents to play during the season. In addition, playing a BCS school does not guarantee a loss. In fact, many people remember the Appalachian State and Michigan “paycheck” game in 2007 for this reason. Therefore, the uncertain outcome makes the guaranteed payments less ethically questionable than accepting money from company facing serious ethical issues such as the GEO Group.