SBC Messenger: Scotiabank Arena Deal

scotiabank-mlse-air-canada-centre

Scotiabank bets big for naming rights to busiest arena in Canada

On Tuesday, MLSE and Scotiabank announced a landmark 20-year, $800-million CDN arena naming rights deal that will see Air Canada Centre renamed Scotiabank Arena next July. The new deal represents a 10x increase from the $4 million CDN per year that Air Canada was previously paying MLSE for the sponsorship. On the heels of the announcement, our own Adam Puddicombe and Jeff Lush connected on Facebook Messenger to discuss the deal. Here’s what they had to say:


Adam Puddicombe

Jeff, big news today as the ACC becomes Scotiabank Arena. Your initial reaction?


Jeff LushJeff Lush

I had this circled as valuable real estate that was coming available. My reaction is that it’s a fair price and really a good play for Scotiabank.

What did you think?


Adam Puddicombe

My first reaction was “wow $800 million!” The Air Canada deal was worth $4 million per year so I think this really speaks to the job MLSE have done a) making the ACC one of the premiere and busiest buildings in North America, and b) creating huge value around their properties.

My second reaction was “another Scotiabank building!” Scotiabank Arena. Scotiabank Centre. Scotiabank Saddledome. Same goes for Rogers. Rogers Arena. Rogers Place. Rogers Centre. Where does it end?


Jeff LushJeff Lush

Yeah, I thought the price was fair. I thought Air Canada and Staples had the sweetest deals in sponsorships and there’d be a huge increase in price for those buildings. The activations and just exposure you get with this kind of deal is incredible. I did think that though. Like if you’re Rogers or Scotiabank what’s one more building going to do? And say in 5 years you’re less interested in hockey or say Calgary gets the new arena or Toronto gets the much needed second one, then where are you? However, I can’t think of a Canadian arena deal that truly failed.


Adam Puddicombe

You’re right about Air Canada and Staples. I think this is a win for Scotiabank. If you’re going to have a Canadian building, the ACC is it. It’s the Boardwalk. But the valuation must have limited the list of suitors. Rick Westhead reported that there were 8 companies in the mix. I do find it somewhat comical when I see conversation on Twitter where people are complaining about the naming rights switch. Last time I checked Air Canada wasn’t running away with any consumer’s choice awards. It’s still a Canadian brand. One that’s heavy in hockey. I think it works.


Jeff LushJeff Lush

Yeah, people complaining about name changes should just be happy it’s a blue chip brand and not Smoothie King Centre or something foolish sounding. Additionally, as far as suitors, you have to assume it’s the big dogs for brands. Your banks, airlines, telecoms, maybe a Loblaws, but the price is the limiting factor. I also find it funny about the name because the building has minimal history, and the building it replaced had awful history on many levels. Air Canada Centre had a great run but this isn’t like the TD Garden in Boston or the Flyers rink where it had 3-4 names in as many years. People just want outrage.


Adam Puddicombe

It had to be the big dogs based on the $800 million price tag. I think Arena works. They could have went Scotiabank Gardens for something different and a throwback to the past. But that speaks more to the Leafs vs. the Raps. It seems Arena is making a comeback. There was a time when it had to be Centre or Place to speak to multi-purpose vs. sports. Which I always found a bit odd. From my experience, a promoter will go to a field in the middle of nowhere for the right price no matter if it’s U2 so I’m not sure why “Centre” was such a big deal.


Jeff LushJeff Lush

Yeah, just get something that sounds reasonable. I do draw the line at Stadium versus Centre though. If you are an indoor court/ice surface, you are not a Stadium. However, yeah they could do Gardens, Forum, Arena, Centre. I do wonder if any of the tech guys got in on this one, Amazon, Microsoft, Google, like something based out of the States that everyone has been rumouring to get involved in sports sponsorships in a bigger way. Do you think we are thinking the price is large because MLSE can demand USD type sponsorship prices even though they are based in Canada? Like what’s this in USD? Then maybe it doesn’t sound as impressive. Nevertheless, great for MLSE and hopefully they hire a few more scouts and analytics guys…


Adam Puddicombe

Yeah you’re right. As of today 40 mill is closer to 30 mill per year US. That puts it in line with MSG. So the value does depend on where the dollar sits.

I don’t think any of the tech players were in on this. They seem reluctant to spend this sort of cash on sponsorship. It would be unprecedented I do believe.


Jeff LushJeff Lush

Oracle would be the group that stands out, but that was in their hometown.


Adam Puddicombe

I think it was the big dogs in Canada. The players you mentioned earlier.


Jeff LushJeff Lush

The other thing is if you’re a Ford or other entity, is it worth it to go up to this level of sponsorship? I don’t know. Ford has great presence there now as it is. So it probably had to be somebody kind of new. I also wonder if Air Canada had a right of refusal or matching opportunity, and that’s why a WestJet was kept out? Also, that kept the bidding very high.


Adam Puddicombe

I would imagine Air Canada had a crack at this for sure. I think it was players who are familiar with the arena naming rights game. Rogers, Bell, the banks, the telecoms. They are in the game and can properly evaluate this sort of opportunity. Nobody is coming out of left field on a $800 million deal. Whereas the jersey sponsor. That could have been literally anyone.

But I think you raise a good point. Is there any American interest in Toronto? Some active players in the US may have been in on the action. You mention Ford. Staples. Honda. A Pepsi or Coca-Cola.


Jeff LushJeff Lush

MasterCard is the one for me. They have a relationship with MLSE and naming rights specifically. Could they have constructed a deal where it’s less cash but also a break on processing fees? Or lock out Visa/AMEX? People that can actively do something business related in the building are always intriguing to me. Maybe you get a deal like Barclays Centre where you don’t even do business there but the arena is so famous and far reaching that it almost makes sense to you. Or maybe you go with something like a GE who has so many business units and means different things to different people. It’s somewhat fascinating that it is actually just another arena for Scotiabank.


Adam Puddicombe

Yeah or a Loblaws. That would be an interesting one. Again, I think it comes down to Scotiabank being in the game. Understanding valuation of arena naming rights. Being able to sell it up the line. And away you go. They likely outbid others because they could and understood what they needed to do to make it work.

Not to beat a dead horse but I expected a new player with the Raps jersey sponsor. I thought that was a missed opportunity to bring a new company under the tent. Maybe Sun Life is that. But I was thinking a Shopify. A Freshii. I’m sure there was red tape with existing category deals but after seeing some in the US, it presented an opportunity for brands to get into pro sports sponsorship that wouldn’t have otherwise. And maybe you grow that. Especially if it’s a growing company.


Jeff LushJeff Lush

Yeah, I thought the same thing. Shopify, Amazon Web Services, Salesforce, or one of those “Clash of Clans” companies that just rotates the games consistently. Sun Life I agree seems boring to me, and I’m sure they have other offerings for them.

Also, imagine this was 5 years ago and Blackberry bought the naming rights. I wonder if consideration on the strength of a brand is a thing. Curious if Scotiabank wanted Tangerine on there but MLSE said no.

Maybe 7 years ago now…how long ago was Blackberry relevant?

 


Adam Puddicombe

I think we’re on the same page there. And that’s an interesting point. I would think that plays into it. Scotiabank isn’t going anywhere. It’s a safe bet that they’re around in two decades. But I think most of the big dogs are a safe bet. Blackberry is in the minority. That’s the problem with the tech space in general. So unpredictable. I think about Jim Balsillie trying to buy an NHL team multiple times. It seems like a dream! But back to Loblaws for a minute because I meant to elaborate. They could be signing fans up to PC cards/points on the concourse. Sampling. Offering things at concessions. Giving away bagels at the door. It’s endless.

Question: if ACC is #1 in Canada. What’s #2? I think it gets interesting. Looking at the calendar for Rogers Place, that’s quickly moving up the ranks. Could be the novelty but it’s a darling right now.


Jeff LushJeff Lush

That’s a great question. Rogers Place is certainly the hot spot right now with nearly every major tour stopping there and the events and general development just making things very interesting. However, I think the difference between 1 and 2 is so far that you could make the argument for any of them. I think number 2 is probably Rogers Centre where the Jays play. I also think the concept of a “Scotiabank Theatre” that they have with Cineplex is interesting. Nevertheless, if we are talking strictly arenas, I think it’s Montreal, Vancouver, and Edmonton in some order. The potential around that Ice District development and Edmonton in general as a team and entertainment group is so high.


Adam Puddicombe

Yeah I think you’re right. ACC is the only to have two pro teams. The Leafs and Raps. Skydome still has the country’s only MLB team playing out of it for practically half the year. And some mega events.


Jeff LushJeff Lush

Yeah I think you need to have at least one pro team, another big night killer like a junior team, and then get most major concerts. That’s the thing for me.


Adam Puddicombe

Edmonton is ticking all boxes right now.

Jeff before we go. What’s the chances the Leafs/Raps get a new building before this 20 year deal expires?


Jeff LushJeff Lush

I would have to say minimal just based on land availability, how much they’ve built up around it, and the incredible investments they continue to make into the facility. I think ACC is a venue that was designed for the long haul. Sure they’d love to put another row of suites in, or wider concourses. However, in general, that thing was a gift and I can’t imagine they’d do much to screw with it. I think that will be around for the next 20 years with a high level of certainty.


Adam Puddicombe

I think you’re right. Much like Skydome. Despite coming at the end of the era of mega stadiums, it’s in the heart of downtown and has a retractable roof.


Jeff LushJeff Lush

I bet they’d love to majorly redevelop the dome, but where would they play their games in the interim? That building shows its age. The times I am in ACC, it doesn’t completely feel like a 17 year old building. Sure the concourses are a bit cavernous, and tight, and the seats feel kind of cheap. However, in general it has everything you would want.


Adam Puddicombe

Yeah you’re right about the dome. Where do you go in the interim? Same goes for ACC. The big difference is the capital investment. MLSE have invested in ACC. Skydome hasn’t had as much love. I think the big reno coming up to Skydome is going to be a game changer there. But unfortunately, there’s only so much you can do with the existing foot print.


Jeff LushJeff Lush

Yeah, it’s time for a big reno. However, will Rogers invest the money? It will require digging down, and also really steepening things. It’ll be crazy and they will probably have to play somewhere else for a full year. it’s just crazy.


Adam Puddicombe

Well it depends how they approach it. I’ve read it’ll be in $250-400 million range. I think they bring the seats closer to the base lines. More social fan experiences like the flight deck. Likely remove seats. Try and make it more cozy and intimate which will be no small task.


Jeff LushJeff Lush

I heard the first priority is not having the 100 level be so far stretching. They want to make it steeper to allow more room for concourses and suites. I think the flight deck, and things like that would be amazing for them. The part where there’s no behind home plate club seating is a major issue for them. The place just doesn’t have any of the amenities you’d see in a ballpark today.


Adam Puddicombe

No you got that right. My favourite was the custom suites when the building first opened.


Jeff LushJeff Lush

It’s crazy how the thinking has changed. From everything being custom down to the light bulbs to now it’s just 100 of the same rooms and it is totally scaleable. It is great. Some ideas just do not last well overtime.


Adam Puddicombe

Yes. In retrospect, the dome was built at the worst of times. But Jeff we’ll leave it there for today. Thanks for chatting. We’ll have to pick this one up again in 2038.


Jeff LushJeff Lush

Thanks, looking forward to it.

Sports Business Canada

Covering the top stories at the intersection of sports and business in Canada.