Responding to enormous political pressure, Citigroup is exploring breaking its deal with the New York Mets to pay $400 million over 20 years for naming rights to the new Mets' ballpark.
Politicians have complained that Citi is paying all this money for naming rights when it has received $45 billion in government investment plus additional guarantees.
First, such naming rights are a form of advertising, and while I have no idea if it is a worthwhile investment of marketing dollars, it is in principle no worse than other forms of advertising. In fact, I'm sure Citi's marketing budget dwarfs the $20 million per year cost for naming rights. But if it were a good marketing investment, getting rid of it would hurt, not help, the company and its investors - which now prominently includes the U.S. government.
Killing a good investment is hardly a good idea to help the bank recover.
But there is a more profound problem. Citi has a legally binding contract with the Mets. They can't just walk away from it. Presumably, for Citi to negotiate its way out of the naming rights, it would need to pay the difference between what a new party would pay for naming rights and Citi's $400 million commitment.
The other alternative is that the Mets, who received state and city aid to help fund the construction of their stadium, get additional aid from the government to make up their loss.
Scoring cheap political points is easy. Real leadership requires applying good sense.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment