Wednesday, March 21, 2007

Rangers Are the 1st to Adjust:
The Last Three Letters of "Trend" are "End"  

While most management teams jump on trends that seem inevitable, about 85% of those trends turn out to be ephemeral. Another 10% become survivals, like the buttons-that-don't-button at the end of men's sportscoat sleeves or like people saying "God bless you," even though they don't really believe sneezing opens up the sneezer to demonic possession or a sudden self-destructive desire to watch Bernie Mac on t.v. or admit they really did bet on Reds' games before or reorganize as an LLC. The last 5% of popular trends are either highly-adaptive, or at least functional enough that they tend to add value over time.

Selling corporate naming rights to stadia is not one of those 5%. The Texas Rangers have figured this out more quickly than most teams, and though they have a little more incentive than most (more about that), as a pioneer in dumping the corporate name off their facility, they are way ahead of non-baseball organizations in figuring out a trend is not a legacy is not a foundation for the future.

According to Anthony Andro's story in the Ft. Worth Star-Telegram:

The park that has been known as Ameriquest Field in Arlington since 2004 is now Rangers Ballpark in Arlington after the ballclub ended its naming-rights deal with Ameriquest Mortgage Co. It is the ballpark's third name since it opened in 1994.

"We did a lot of research last year and one of the things that came across is we have a huge asset in the perception of the ballpark," Rangers owner Tom Hicks said. "For the amount of money that was left on the agreement, it was worth more to me over the next 26 years to have our brand back."

The 30-year, $75-million agreement ended Friday when the Rangers and Ameriquest agreed to part ways. There was no buyout, and the club has no plans to resell the naming rights.

"A year ago they [Ameriquest] weren't interested at all [in ending the deal], but they are in an industry that's having issues now," Hicks told Star-Telegram columnist Randy Galloway on Monday during his ESPN/103.3 FM radio show. "We were able to complete the deal Friday. Things changed for them, and they changed for us. Their industry is going through a lot of change now. We just quit taking their money."

While I have rarely been a fan of Hicks' decision-making, he seems to have gotten significantly more astute or perhaps humble over the last two years. This decision was very astute. Think about decisions made in your own span of control you might re-consider.

For one thing, in the context of the organization, the net income from the agreement was not big bills -- naming rights are an opportunistic way to cash in on what appears to be almost free money -- as long as you put your own reputation at risk by combining with another organization over which you have no control beyond the naming rights contract. That organization may devolve or mutate or in the case of Ameriquest, be exactly who they are and bring great public shame to an entire industry

I had a client who insisted on pre-paying for a three-year contract for phone service rather than paying a monthly bill because she would get a 6% discount. I'm not kidding. One of the primary arguments the salesman had made to her was that she would save a lot of money in not having to take on the effort of paying monthly. This is a risible argument, because if that was true, the seller would be saving an equal amount of money, so they could afford to discount the package in a more meaningful way. Six months into the contract, her provider bought another company, and her quality of service tanked (perhaps because they were trying to recover the purchase price by pimping their existing customers, perhaps because they were distracted). The seller was glad to make some partial refunds to her, as long as she jumped through their hoops. A little lost business from outages, a lot of paperwork, a lot of time spent waiting on busy customer service lines listening to demented Kenny G tunes and pressing the pound sign.

The less control you can exert, the more you put at risk by putting your fate in another organization's hands. The bigger they are relative to you, the more risk you have taken. Are you doing this anywhere in you own shop?

Oakland's stadium has changed names a couple of times as corporate entities have bought sponsors. San Francisco's Telecommunications Corporation Park changes names annually to adapt to whatever the new name is for the corporation is. Some of those names have some lustre -- some are generic. Some will undoubtedly become the next Enron. It hasn't happened yet, but I'm waiting for the Seattle Mariners' park, now called Safeco Field after a local insurance company, to have to rename itself after a takeover to New York Life Field, which would cause riots in the New York-disdainful Northwest that could only be quenched by hosing down the wilding mobs with streams of high-pressure soy low-fat double-foam shot-of-almond latte.

Beyond baseball, bigger organizations are very slow to keep up with what they put into place because of an ephemeral trend. The easiest thing to do is to leave a decision unattended, as humans we have been able to progress because we make decisions we can safely leave unattended and focus our attention on new challenges, but that leaves survivals. 

My buddy Eric works at an organization with a 401K program that they formulated in 1999. It proffers the choice of a wide range of high-tech, high-beta high-volatility mutual funds and a single conservative money market fund. No bonds, no international choices, no big energy companies. This is a classic survival -- what was encountered for the first time and made perfect sense in a single, mica-thin moment in time is ridiculous if you leave it unattended.

Attending to survivals is not a binary, all or nothing choice. A semi-annual review of unattended decisions is actually a pretty fun exercise. Make a list (get someone from outside your department shadow your work for a day because insiders tend not to see survivals -- when was the last time someone questioned the non-buttoning buttons on blazer sleeves? -- and offer to return the favor for them). Go through the list and ask the questions "How would we do this if we were starting it from scratch today? Five years ago? A year ago? No organizations have no survivals that could use at least a little tweaking.

There's another changing context here. The Rangers' stadium was out in the middle of nowhere (intentionally) when built. Now, Hicks and his partners are developing it.

The addition of the new Dallas Cowboys stadium to the area as well as Hicks' Glorypark town center development also spurred the Rangers to pursue the move, Rangers president Jeff Cogen said.

"We're going to have millions of football fans and shoppers and restaurant- and theater-goers that may have never seen a baseball game," Cogen said. "It's important to us that they see the Rangers' logo on the side of the ballpark and not a corporate entity's logo."

New potential customers, those who live in the area or those who come to other venues, are more likely to notice baseball if the facility has some identification/branding of its own. It's hard to imagine any corporate name on the building could have value to the team greater than its own name in this context.

Nothing in life is totally certain now except that Pete Rose could hit a baseball, would bet on anything including an exit date from Iraq, and behaves as though he is a pathological liar

The context that turns ideas into broadly-applied trends evolves away from the original, more often than not enough so that the costs of not making a change to the status quo are higher than the costs of making a change.

I believe the corporate naming rights trend is coming to an end as a uniform lockstep franchise behavior. I say lockstep because the determination to do it was so strong that teams turned down bigger bids from citizens' groups that wanted to keep corporate sponsorship out of their publicly-subsidized facilities. The amount of money to be harvested is generally too little relative to the risk in many cases, and too little relative to the teams' own reward potential from having their name on their facility.

Baseball has figured out how to deal with survivals (even if it requires giving booked income back). ┬┐Can you?

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