CANADIAN MEDIA and cable company, Quebecor Media, have bought the naming rights to the city’s arena for a 25-year period, even though it’s yet to be built.
The company will invest between $110m and $200m in the project, depending on whether the city lands an NHL franchise. Of this, the company will contribute $33m for the naming rights in the absence of a professional hockey team, rising to $63.5m if an NHL franchise signs on.
As part of the overall deal, Quebecor will pay the city between $3.15m and $5m annually for the all-important right to manage the Arena. The deal is a binding contract although some details have still to be negotiated over the next six months.
The Property
The multi-purpose 18,000-seat Quebec Arena will be located just outside the downtown area with construction set to begin at the end of 2012 and an opening slated for autumn 2015. The $400m facility will be jointly-funded by the City of Quebec and the Province of Quebec with the City remaining the building’s owner.
The facility will boost Quebec’s chances of landing an NHL team and may position Quebec for a future bid to host the Winter Olympics.
The Deal Makers
Having failed in a joint bid to buy the Montreal Canadiens in 2009, Quebecor President Pierre-Karl Paladeau has made it his personal goal to bring an NHL franchise to Quebec City.
In pursuit of this objective, he assigned Martin Tremblay, Senior Advisor, Special Projects, Quebecor Media, as the main negotiator with the city of Quebec. Tremblay was backed by an internal team of media property experts from Quebecor’s wide-ranging broadcast and print media businesses.
In addition, external sports marketing specialists were employed to benchmark the naming rights valuation against other NHL and NBA arenas, and advise on the overall arena management business plan. NHL officials were also contacted for guidance.
From the City side of the deal,Quebec City Mayor Regis Labeaume appointed well-known local businessman, Yvon Charest, President and Chief Executive of health insurance and financial services company Industrial Alliance as the main negotiator. With no direct experience of arena businesses, Charest was coached by a group of consultants for research and valuation support.
The Clincher
Quebecor’s arena management and naming rights deal was a strategic move to take full control of the building and its assets so as to put Quebecor in the strongest possible negotiating position with the NHL going forward.
Crucially, the addition of the naming rights to the arena management fee ensured that Quebecor would have the most valuable proposition for the City and help counter a rival bid from media conglomerate Bell, along with Evenko (the concert promoter owned by the Molson brothers) which are the joint-owners of Canada’s leading NHL franchise, the Montreal Canadiens.
The naming rights deal is also pivotal to Quebecor’s hopes of sourcing premium content for a proposed new sports channel. Quebecor recently acquired a license to launch a sports channel in Quebec province and so could ill-afford to lose to Bell, which owns the RDS channel, the only Francophone sports channel currently operating in the province.
What does it mean?
As a strategic deal, Quebecor may never put its brand name on the building. The naming rights could be transferred to one of Quebecor’s subsidiaries: Videotron, for example, a broad-based telecom provider is a favourite for the role as reported by the local media.
Equally, Quebecor could put the naming rights back on the market before the facility opens in 2015. Martin Tremblay believes Quebecor paid a “fair price” for the rights but believes the rights could be “valorized” and a profit made on the deal pre-2015.
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The Quebecor partnership will set the stage for the NHL’s return to Quebec by insuring the financial viability of the arena outside of the NHL season.
Quebecor will control the management, bookings and strategic positioning of the proposed facility, as well as the negotiations with the NHL. Quebecor has “hedged” its investment in this agreement from a “downside” financially: the Naming Rights alone will provide the proper ROI for future branding and if necessary, Quebecor could broker those rights to either the NHL or directly to club ownership.
In the end, the Naming Rights value will be driven by a number of factors, market size, impression analysis, and direct business back potential. I would venture to say that the maximum value for an opportunity like this would come from a multinational company with strategic plans to build the brand across North America.
With the NHL’s “Sun Belt” experiment failing miserably in the US, the lure of a new arena and it’s guaranteed revenues will drive this relocation, ultimately solving another financial “Black Hole” for the League while fortifying and energizing it’s Canadian roots.
Although I don’t believe it would be fair to compare a Canadian arena to that of a US arena because of sheer market demographics and media outlets, I do believe that the "Tangible, Intangibles" - Quebec's passion for hockey, the Olympic factor etc - will certainly allow the seller to achieve maximum value.
The Naming Rights financial value will ultimately be what the particular suitor is willing to pay for it, based on their individual goals and objectives.
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