The Globe and Mail, James Bradshaw & Susan Krashinsky Robertson, 31 August 2017
In the waning hours of Aug. 15, Bank of Nova Scotia had a decision to make: Nail down a blockbuster deal to win the coveted rights to rename Toronto's Air Canada Centre, or risk giving rivals a chance to snatch away the prize.
The $800-million agreement with arena owner Maple Leaf Sports and Entertainment (MLSE) would anchor Scotiabank's marketing strategy for the next two decades. And with the major terms of the deal agreed, neither side wanted to let the opportunity slip away.
The companies gathered their boards for separate, hastily-arranged conference calls and won approval. Lawyers from both sides then came together and locked themselves in a room, guarding against possible leaks. "The magnitude of the deal was going to attract a lot of attention," David Hopkinson, MLSE's chief commercial officer, said in an interview.
At 2:30 a.m. on Aug. 16, the agreement was signed and sealed.
The 20-year pact, announced this week, is Scotiabank's ambitious attempt to secure its front-runner status in hockey sponsorship by imprinting its name on two of the sport's crown jewels – the soon-to-be-named Scotiabank Arena and the Toronto Maple Leafs. By virtue of its size and scope, it is also a landmark in Canadian sports marketing.
When the rights to name one of Canada's premier sports venues became available, a total of eight companies kicked the tires, including other banks. A smaller number progressed to more serious talks with MLSE.
That left Scotiabank facing the prospect that a competitor might try and challenge the position it has spent years building at considerable expense, in an effort to tap into the deep emotional bond many Canadians have with the sport.
"We knew right away that there was a horse race here," said Scotiabank's chief marketing officer, John Doig, in an interview.
Royal Bank of Canada was among the most determined rivals waiting in the wings, according to sources familiar with the process. A spokesperson for the bank declined to comment.
But Scotiabank also had an important competitive edge in negotiations.
Air Canada had the first window in which to bargain exclusively, as the existing naming sponsor since the arena opened in 1999. But the two sides couldn't agree.
As part-owners of MLSE, telecommunication giants BCE Inc. and Rogers Communications Inc. had an agreement to stay out of the bidding, according to sources familiar with the process.
Instead, Scotiabank emerged as the heir apparent. After Air Canada's exit, the bank enjoyed its own 60-day window in which to negotiate exclusively, though that didn't preclude MLSE from carrying on less formal discussions with other suitors. The exclusivity clause was written into an existing sponsorship deal Scotiabank had as official bank of the Leafs.
"The deal got done within that window," Mr. Hopkinson said.
The price tag Scotiabank agreed to has raised eyebrows. The deal will pay MLSE – owner of the Leafs, Toronto Raptors and Toronto Football Club, among other properties – an average of $40-million per year, sources confirmed. The price tag in the first year is lower, and escalates thereafter.
But Scotiabank had been preparing for a moment like this for years. Some had viewed the bank's approach to sponsorship as somewhat scatter shot, and it undertook a multiyear strategy to set its sights on a narrower stable of properties.
The bank dropped its sponsorship of the Canadian Football League in 2013, then wound down partnerships with individual teams. In late 2015, it elected not to renew sponsorships with arts and culture events in Toronto: Nuit Blanche, Caribbean Carnival, BuskerFest and the CHIN International Picnic. That year, the bank had funnelled about $25-million into community events in the Toronto area.
"We knew we needed to tighten the focus on our properties, and we knew exactly which ones were performing the best for us," Mr. Doig said. "Hockey was performing the best."
Scotiabank already sponsors community hockey clubs across the country, all seven Canadian NHL teams, and is the official bank of the NHL. When the opportunity to rename the rink came up, the bank had freed up extra cash to help cover the significant cost of acquiring the naming rights.
Structurally, the deal is complex, and the name on the building's exterior is only one component. Sources said roughly one quarter of the annual cost is to renew Scotiabank's existing status the Leafs' bank for the full 20 years – albeit at a higher price. The bank has also committed to spend an unspecified eight-figure sum on philanthropic and community causes over the life of the deal. And Scotiabank has hinted that there are other considerations that have yet to be announced.
Scotiabank will dip into other areas of its existing marketing budget – such as broadcast, out-of-home or event digital ads – to help pay the tab. The bank spent $617-million on "advertising and business development" in 2016, and $144-million its last fiscal quarter, according to financial disclosures.
"There's a certain percentage that we will shift to accommodate this deal," Mr. Doig said.
There is also a competitive dynamic at play in Toronto's expanding downtown financial corridor. Toronto-Dominion Bank has nabbed rights as the financial sponsor for the bustling Union Station, and Canadian Imperial Bank of Commerce plans to move its headquarters to two new 49-storey towers to be built between the station and the current ACC. Starting next July, the renamed Scotiabank Arena will give the bank a visible presence just next door.
"This may be another leg in the push to try to grow a larger platform, and this gives them a runway of 20 years," said John Aiken, an analyst at Barclays Capital Canada Inc., in an interview.
Most analysts shrugged off the price of the arena deal when put in context with the bank's overall financial might. "It's a large chunk of change. But it's still not going to have that much of an impact on earnings," Mr. Aiken said.
Considered as a whole, marketing experts say, Scotiabank hasn't taken undue risk by signing such a large deal. Arenas of this stature are few and far between. And the bank expects to get so-called brand lift as well as new ways to attract customers and deepen ties with existing clients using hockey's magnetic draw.
In research tracking the effects of advertising during the World Cup of Hockey, conducted by Toronto-based Solutions Research Group Consultants Inc. (SRG), Scotiabank ranked first among brands that fans could recall unaided. That was ahead of other big spenders like Tim Horton's and Canadian Tire.
"So they are trying to solidify that position and ownership," said Kaan Yigit, SRG's president.
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In the waning hours of Aug. 15, Bank of Nova Scotia had a decision to make: Nail down a blockbuster deal to win the coveted rights to rename Toronto's Air Canada Centre, or risk giving rivals a chance to snatch away the prize.
The $800-million agreement with arena owner Maple Leaf Sports and Entertainment (MLSE) would anchor Scotiabank's marketing strategy for the next two decades. And with the major terms of the deal agreed, neither side wanted to let the opportunity slip away.
The companies gathered their boards for separate, hastily-arranged conference calls and won approval. Lawyers from both sides then came together and locked themselves in a room, guarding against possible leaks. "The magnitude of the deal was going to attract a lot of attention," David Hopkinson, MLSE's chief commercial officer, said in an interview.
At 2:30 a.m. on Aug. 16, the agreement was signed and sealed.
The 20-year pact, announced this week, is Scotiabank's ambitious attempt to secure its front-runner status in hockey sponsorship by imprinting its name on two of the sport's crown jewels – the soon-to-be-named Scotiabank Arena and the Toronto Maple Leafs. By virtue of its size and scope, it is also a landmark in Canadian sports marketing.
When the rights to name one of Canada's premier sports venues became available, a total of eight companies kicked the tires, including other banks. A smaller number progressed to more serious talks with MLSE.
That left Scotiabank facing the prospect that a competitor might try and challenge the position it has spent years building at considerable expense, in an effort to tap into the deep emotional bond many Canadians have with the sport.
"We knew right away that there was a horse race here," said Scotiabank's chief marketing officer, John Doig, in an interview.
Royal Bank of Canada was among the most determined rivals waiting in the wings, according to sources familiar with the process. A spokesperson for the bank declined to comment.
But Scotiabank also had an important competitive edge in negotiations.
Air Canada had the first window in which to bargain exclusively, as the existing naming sponsor since the arena opened in 1999. But the two sides couldn't agree.
As part-owners of MLSE, telecommunication giants BCE Inc. and Rogers Communications Inc. had an agreement to stay out of the bidding, according to sources familiar with the process.
Instead, Scotiabank emerged as the heir apparent. After Air Canada's exit, the bank enjoyed its own 60-day window in which to negotiate exclusively, though that didn't preclude MLSE from carrying on less formal discussions with other suitors. The exclusivity clause was written into an existing sponsorship deal Scotiabank had as official bank of the Leafs.
"The deal got done within that window," Mr. Hopkinson said.
The price tag Scotiabank agreed to has raised eyebrows. The deal will pay MLSE – owner of the Leafs, Toronto Raptors and Toronto Football Club, among other properties – an average of $40-million per year, sources confirmed. The price tag in the first year is lower, and escalates thereafter.
But Scotiabank had been preparing for a moment like this for years. Some had viewed the bank's approach to sponsorship as somewhat scatter shot, and it undertook a multiyear strategy to set its sights on a narrower stable of properties.
The bank dropped its sponsorship of the Canadian Football League in 2013, then wound down partnerships with individual teams. In late 2015, it elected not to renew sponsorships with arts and culture events in Toronto: Nuit Blanche, Caribbean Carnival, BuskerFest and the CHIN International Picnic. That year, the bank had funnelled about $25-million into community events in the Toronto area.
"We knew we needed to tighten the focus on our properties, and we knew exactly which ones were performing the best for us," Mr. Doig said. "Hockey was performing the best."
Scotiabank already sponsors community hockey clubs across the country, all seven Canadian NHL teams, and is the official bank of the NHL. When the opportunity to rename the rink came up, the bank had freed up extra cash to help cover the significant cost of acquiring the naming rights.
Structurally, the deal is complex, and the name on the building's exterior is only one component. Sources said roughly one quarter of the annual cost is to renew Scotiabank's existing status the Leafs' bank for the full 20 years – albeit at a higher price. The bank has also committed to spend an unspecified eight-figure sum on philanthropic and community causes over the life of the deal. And Scotiabank has hinted that there are other considerations that have yet to be announced.
Scotiabank will dip into other areas of its existing marketing budget – such as broadcast, out-of-home or event digital ads – to help pay the tab. The bank spent $617-million on "advertising and business development" in 2016, and $144-million its last fiscal quarter, according to financial disclosures.
"There's a certain percentage that we will shift to accommodate this deal," Mr. Doig said.
There is also a competitive dynamic at play in Toronto's expanding downtown financial corridor. Toronto-Dominion Bank has nabbed rights as the financial sponsor for the bustling Union Station, and Canadian Imperial Bank of Commerce plans to move its headquarters to two new 49-storey towers to be built between the station and the current ACC. Starting next July, the renamed Scotiabank Arena will give the bank a visible presence just next door.
"This may be another leg in the push to try to grow a larger platform, and this gives them a runway of 20 years," said John Aiken, an analyst at Barclays Capital Canada Inc., in an interview.
Most analysts shrugged off the price of the arena deal when put in context with the bank's overall financial might. "It's a large chunk of change. But it's still not going to have that much of an impact on earnings," Mr. Aiken said.
Considered as a whole, marketing experts say, Scotiabank hasn't taken undue risk by signing such a large deal. Arenas of this stature are few and far between. And the bank expects to get so-called brand lift as well as new ways to attract customers and deepen ties with existing clients using hockey's magnetic draw.
In research tracking the effects of advertising during the World Cup of Hockey, conducted by Toronto-based Solutions Research Group Consultants Inc. (SRG), Scotiabank ranked first among brands that fans could recall unaided. That was ahead of other big spenders like Tim Horton's and Canadian Tire.
"So they are trying to solidify that position and ownership," said Kaan Yigit, SRG's president.
