The team and Amway Global have reached a 10-year $40 million naming-rights deal to call the new facility Amway Center.
The agreement comes as the recession has made it more difficult for sports franchises to secure advertising and sponsorship deals. But in Orlando’s case, the team had a trump card: Magic Owner Rich DeVos also is the co-founder of Amway, which already held the naming rights on the Magic’s current home, Amway Arena.
The latest agreement is tied for the sixth-largest total price for an NBA naming-rights agreement, according to Sports Business Journal, which first reported the deal on Monday.
“I think that it’s a good deal [for the Magic],” said Smith College professor Andrew Zimbalist, who has written extensively about sports economics. “The thing about naming-rights deals is that the market is very thin. It’s sort of like selling a luxury house. If the right person comes along at the right time, you can get a good price.”
Magic officials and Amway officials declined comment on Monday. The agreement’s formal announcement is scheduled for Wednesday morning during a press event adjacent to the new arena’s construction site.
The Magic had the exclusive authority to negotiate the naming-rights deal for the city’s new $480 million facility, which will open in the fall of 2010.
Over 30 years, including an option for the final five years, the team will pay the city $1 million in rent annually, plus a $1.75 million annual fee that will increase by 3 percent each year. In exchange for that guaranteed sum, the Magic received the ability to make decisions about naming rights and keep the resulting revenue from any naming-rights deal and from signage.
“The City of Orlando made a long-term decision to secure a guaranteed amount from the Orlando Magic for the naming rights and advertising revenues,” said Heather Allebaugh, a spokeswoman for the city. “There are a number of factors that could impact the ability of the Magic to secure a naming partner and advertising sponsors, including the current economy and the Magic’s on-court performance. Under the agreement, regardless of these factors, the City of Orlando will ensure consistent revenues from this source.”
The naming-rights agreement currently in place for Amway Arena was finalized in Decenber 2006 and called for the Michigan-based consumer-products company to pay the city $375,000 a year over four years, city officials said.
That deal also gave Amway the initial exclusive option to negotiate for the right to name the new arena.
In the current economic downturn, some franchises are having trouble finding the right price for naming-rights to new facilities. The Dallas Cowboys, for example, are expected to open their new stadium this year without a title sponsor for the venue.
“There is no doubt that the global challenge we face economically has impacted not only naming rights, but all sponsorship, all advertising in general,” said E.J. Narcise, a naming-rights consultant and a co-founder and partner at Rockville, Md.-based Team Services LLC.
“I think companies are being extremely cautious as to how they spend their dollars. The types of investments that are made are scrutinized now more carefully than they ever have been.”
Narcise added that naming-rights deals have seen their biggest adjustments not in the amount of money that changes hands per year but in the lengths of the agreements. In a strong economy, he said, a deal between Amway and the Magic might have been made for 15 to 20 years.
Raymond D. Sauer, an economics professor at Clemson University, said the 10-year, $40 million deal might not look so good for the Magic once the economy improves.
“They got a deal done, which is good news, but the price seems to me to be a pretty low valuation relative to the stadium deals that followed up until the recession hit,” Sauer said.
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magicblog. Josh Robbins can be reached at jrobbins@
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