Tuesday, January 26, 2010

Sommet Deal Good, not Great, for Predators

Yesterday the Predators announced that a deal has been reached with the Sommet Center.  Allow me to provide my two cents on the deal.  I'm going to speculate about all of the details of this post, because none of them are public, so please keep that in mind.  Feedback is welcome in the Poll and in the comments section.

The Known Terms of the Deal:
Prior to the agreement, the Sommet Group was sued for non-payment under the terms of the naming rights agreement with the Predators.  According to the Nashville Post, the deal allows for the Sommet Center to Remain the Sommet Center for the time being.  Additionally, the Predators are free to look for a new naming rights partner.

What we Can Speculate About the Deal.

  • Renewed Payment:  The Sommet Group will begin to (re)pay the predators.  I imagine that the value of these payments is only a percentage of the price that was negotiated in the original contract.  This makes sense given Sommet's financial troubles, desire to get out of the deal after the expiration of the lease, etc.

  • Preds Ability to Negotiate with Potential Partners:  I would imagine that under the old naming rights agreement, the Preds were contractually prohibited from attempting to find new naming rights partners.  This fact might be the most important reason why the Preds had to go to such lenghts as a lawsuit in order to force Sommet to the table.  Said another way, why would the Sommet Group voluntarily allow the Preds look for a new partner, when it could NOT pay for the rights and get all the benefits of being the only Company in town who could possibly own the rights.

  • Confidentiality Agreement:  The Sommet President Brian Whitfield triggered alot of unnecessary negative press for the predators by bringing to light David Freeman's IRS issues.  I'd have to think that the Predators forced Whitfield to sign a confidentiality agreement about this deal, meaning that the only things you are going to hear from him from this point out will be rosy and devoid of substance. Good.

  • Option to Extend:  I'd further guess that the new negotiated deal provides that the Sommet Group has an option to extend the deal at the end of their three year agreement.  That option could likely allow for the Sommet Group to keep the naming rights (for a reduced fee) until such time as the Predators find a new Naming Rights sponsor.  The Sommet Group has expressed its desire to NOT continue the deal, and it likely cannot afford to.  However, the option I described above is in the interest of both parties.  It keeps some revenue coming in for the Preds (even if its not full value), the Preds get to look for a new partner, and the Sommet continues to get advertising from the deal.  The only reason this would NOT happen, in my opinion, is if the Predators feel they can sell the naming rights at a higher price if the building has an ambiguous name, such as the Nashville Arena.

Why this is a Win for the Preds:

  • It gets "Financial Trouble" Stories out of the News:  Its bad for the team, I'm tired of them. Lets focus on the playoffs.

  • It Brings Money in the Door:  always a good thing.

  • It Frees them to Find a New Partner: hopefully using this period before the current naming rights deal ends will allow a seamless transition.

  • Perfect Timing:  If you are going to lose a naming rights sponsor, the timing couldn't be better.  The Predators are playing well, and are poised for a playoff run.  A sustained playoff run is exactly what this team needs to solidify a new partner, and the run could also force a higher rate for the naming rights.
What are the Downsides?
  • Less Money in the Door:  depending on how much money is lost versus when this year's budget was prepared, it may be enough to swing the preds from a profit to a loss.  It may not be that big of a deal. No one except the Preds can be sure.

  • Naming Rights Partners are Hard to Find:  The economy is down, name changes take time, and it would be the third name in ten years.  
The Poll

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