UPDATE: Citigroup confirms retaining the naming rights deal with the Mets. See details.

Just over two years ago, the New York Mets announced that they had reached an agreement with Citigroup for the naming rights to their new ballpark slated to open in 2009 for a record $400 million over 20 years, or $20 million annually.

The extraordinary deal highlighted the power of MLB and naming rights allure in the New York market. And, even at $20 million annually over 20 years, it has a provision by which the parties can extend the deal for up to 35 years, showing the investment and returns that Citigroup saw in the Mets' new stadium. Given that naming rights for new Yankee Stadium were not up for grabs, the Citigroup deal was seen by many as the next best thing.

It was a staggering deal, eclipsing the record amount for a naming rights deal brokered by the NFL Houston Texans and Reliant Energy for $10 million annually to 2032. The deal brokered in 2002 is $100 million less than the Mets will pull in from Citigroup.

The deal with the Mets was before the economic downturn. Even before the heavy slide in the credit market, Citigroup had begun to cut costs, reducing their assets by 20 percent since the first quarter of this year.

Today, Citigroup announced that 53,000 workers will be laid-off – a staggering sum totaling 20 percent of their workforce.

According to The Associated Press, “a Citigroup spokesman said that while certain regions and businesses might have higher concentrations of job cuts, they would generally be across the entire company and around the world.”

And while the steep declines in the financial sector have Citigroup deeply entrenched within it, in the naming rights world, one is reminded of the self-inflicted collapse of Enron that cut short the deal that the energy giant had with the Houston Astros for the name of their stadium.

So, the question is, will the steep losses at Citigroup scuttle the most lucrative naming rights deal in American sports history with the Mets?

The answer from the Mets is, no.

Reached for comment, Mets spokesman Jay Horwitz simply replied that the deal with Citigroup is not in peril.

“Everything is fine with our naming rights deal for Citi Field,” Horwitz replied by email.

With cuts being made by Citigroup over the course of the year, and today's announcement, if the Mets' comments are true, it may be that nothing short of a total collapse by Citigroup will derail the record naming rights deal.

Comments (2)

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written by Greg Wapnick, November 17, 2008

Maury:
Thanks for your interesting post. I have been very curious as to what the implications of our struggling economy will be towards the new Citi field. Our country is at a point right now where it feels like every single day our economy is turning for the worse. It does not look like we are going to see change any time soon in this regard. 53,000 employees laid off, and yet there is no problem with the naming rights deal. For some reason I find this information very hard to believe. When a company goes ahead and fires nearly 20% of their work force, it is very clear that it is struggling as a whole. I am curious whether this is the whole truth, or there is information being held up. The $400 Million deal is one of the most lucrative naming rights deals of all time. With Citi Group struggling so much as a whole, I would think that the $20 Million annually that they will have to pay for the next 20 years may be difficult. Where were you able to pull these sources from? I'm sure that in the end Citi Group will retain there naming rights, but as the company is walking on thin ice, I would guess that this deal could collapse at any moment in time.

What are your opinions on the matter? Do you think that there is truth to what Jay Horowitz has said in response to the questioning? I don't see how a company that is locked in to such an expensive deal cannot feel any stress regarding the situation right now. When a company has to let that many employees go they are clearly facing difficult times. It probably came down to a decision of what was more important, and the deal with the Mets was the correct choice. Thanks for keeping me updated on what's going on.

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written by Maury Brown, November 18, 2008

Good comments, Greg.

Looking back on the comments from the Mets, saying that "everything is fine" may not be the same as "it hasn't changed." I have not responded back to the Mets on this clarification, but for argument sake, let's say that the deal is locked in and will not be altered.

It is, of course, very easy to look at the deal against the backdrop of the announced layoffs and say that Citigroup has their priorities misaligned. Most would agree that given the scope (amount in fees) of the agreement and its duration, it sends a completely wrong message at this time of downsizing.

Playing devil's advocate, backing out of such an agreement isn't as easy as just walking away from the table.

The Mets would surely sue for lost revenues and the damages a*sociated with breaking the agreement. I think we'd all agree that finding another corporation that would have come close to Citigroup's offer would have been difficult when the economy was moving forward at a decent pace. Now, it would be almost certainly impossible.

So, Citigroup can say that they can pour money into an agreement that they willingly brokered, or pay for lawyers and damages and get nothing in return. Yes, backing out of the naming rights deal under some form of settlement would most a*suredly be less expensive than the deal itself, but there are other matters that go with.

As we have seen in far more serious affairs (read: more than one war), when a commitment is made by a large entity -- be that a country or corporation -- backing out of an agreement sends an incredibly negative message to the global community. You can hear the words in the boardroom now. "If we back out of this deal, what kind of message does it send to the global markets? Who will take us at our word?"

All this aside, the jobs are clearly more important. Or, at least they should be viewed as such. It would be one thing to say that Citigroup had paid the whole $400 million naming rights fee up-front, but this deal has installments of $20 million annually. If Citigroup sees more pressure, such as foregoing bonuses for executives, how easy would it be to renegotiate for shorter terms, or backload the agreement with less up-front and increased fees in the future when the economy begins to right itself? Naming rights over jobs is just a terribly difficult matter to sell as being responsible for Citigroup.

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