The Houston Astros’ recent purchase of the naming rights to their baseball stadium did not come as a surprise. The ignominious collapse of Enron Corp. prompted the Astros to pay Enron $2.1 million to remove its name from the stadium. Houston’s purchase of the naming rights served two purposes. It distanced the ballclub from an association with the embattled energy company, and it gave the bankrupt company additional cash with which to payoff creditors. The proceeds will become property of the bankruptcy estate under the Bankruptcy Act (11 U.S.C. § 541(a)). The original deal secured 30 years of naming rights to Enron for $100 million. PSINet and the Baltimore Ravens terminated a similar 20-year, $105 million contract that gave PSINet the right to name the Ravens’ stadium a day after the Enron deal was consummated. PSINet filed for Chapter 11 bankruptcy protection in May.
Initially, Enron did not want to sell its naming rights back to the franchise. The Astros forced Enron’s hand by filing a motion in U.S. Bankruptcy Court for the Southern District of New York to break the agreement. The Astros brought the motion in part to prevent Enron from selling the naming rights to another company. The motion was unusual in that Enron was meeting its obligations to the Astros even after the bankruptcy filing, spending $108,000 for a luxury suite and $90,000 for tickets for the current season as required by the 30-year agreement. The attempt to prevent Enron from structuring a separate deal to sell its naming rights was also unusual because, according to President of Business Operations Pam Gardner, the team must approve any name changes to the stadium. Although Enron initially contested the Astros’ buying back the naming rights merely because of its financial condition, the company recently said that the deal is beneficial to its creditors.
The transaction highlights the length to which a franchise will go to protect its public image by actively buying its way out of a relationship with a disfavored entity. However, this is not the end of the problem for the Astros and the city of Houston. Enron and Compaq were going to be the corporate citizens to transform Houston from a parochial oil town to a technology driven, international city. Enron’s collapse and Compaq’s proposed merger with California-based Hewlett-Packard have derailed the city’s attempt to modernize its image. Conoco had emerged as a bidder for the stadium naming rights. But Conoco is in the midst of merger talks with Philips Petroleum, which threatens to move the new corporate headquarters to Bartlesville, Oklahoma. The name on the stadium will have an impact on the Astros’ public image, but it will also have a broad impact on Houston’s identity.
As a result of this identity crisis, the city of Houston is watching the bidding for the stadium naming rights closely. The most controversial new bidder to emerge is Jim McIngvale, the owner of Gallery Furniture Co., also know as “Mattress Mack.” The self-proclaimed “huckster” is famous for ubiquitous, low-budget commercials. Despite the protests of people like Jim Kollaer, chief executive of the Greater Houston Partnership, who would like to see a more “global” name on the ballpark, McIngvale has not taken his company out of the bidding. In fact, McIngvale claims to have received phone calls from people offering him $10,000 not to put his company’s name on the stadium. Pam Gardner maintains that the Astros will entertain any interested parties because they are more interested in long-term stability and not corporate image.
Whatever reservations Houston’s corporate organizations may have in globalizing its city’s image, it does not have reservations about associating itself with the energy industry. Reliant Resources, another Houston Energy firm, last year agreed to pay roughly $300 million over 32 years to secure naming rights to the Houston Texans’ football stadium and adjacent livestock show and convention center. Perhaps a team’s goal of locking in the most lucrative deal will win out Houston’s goal of modernizing its image.
