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Anheuser-Busch Sues MLB
Wall Street Journal, November 13, 2010
By Chad Bray and David Kesmodel
Anheuser-Busch Inc. sued Major League Baseball, claiming that baseball's licensing arm reneged on a multiyear renewal of the company's beer-sponsorship rights and demanded "exponentially higher" fees.
The maker of Budweiser claims Major League Baseball Properties Inc. agreed to renew its rights to be the league's official beer sponsor in April but then demanded to renegotiate the pact after the brewer announced a sponsorship deal with the National Football League, according to a suit filed Friday in federal court in Manhattan.
Budweiser and other Anheuser-Busch products are closely identified with America's national pastime. The brewer, now a unit of Leuven, Belgium-based Anheuser-Busch InBev NV, has sponsored Major League Baseball for more than 30 years and is the official beer sponsor for 26 of the league's 30 teams. It also owned the St. Louis Cardinals franchise until 1996, and it still holds the naming rights to the team's ballpark, Busch Stadium.
"Anheuser-Busch has spent decades, and millions of dollars, building the reputation and goodwill of Budweiser and the other Anheuser-Busch brands with these fans," the lawsuit said. "Their loss would be unquantifiable."
Anheuser-Busch is seeking a court order stating that the April agreement is valid and that any negotiations with another beer maker would interfere with its exclusive sponsorship rights.
Matt Bourne, an MLB spokesman, said that MLB Properties hadn't been served with the suit on Friday afternoon. "We don't normally discuss active litigation," he said. "However, we have a different view of what's been reported."
It is "relatively rare" for a dispute in sports-sponsorship negotiations to wind up in court, said Jim Andrews, a senior vice president at IEG, a Chicago-based unit of WPP PLC, a consultant on sports and entertainment sponsorships.
"That said, in my experience, there are always two different views on what the exclusive negotiating period is, and there's a lot of competition for these types of marquee sponsorships."
In 2006, Federation Internationale de Football Association, soccer's governing body, awarded an eight-year sponsorship deal to Visa International for the World Cup. Credit-card rival Mastercard Inc. sued FIFA, claiming it had the right of first refusal after a 16-year World Cup relationship . FIFA settled the dispute for $90 million in 2007.
Mr. Andrews estimated that the fee to be the official sponsor of Major League Baseball alone is worth about $10 million a year but that commitments by the sponsor to pay for television advertising during games and other promotional activity can easily bring the total value of the sponsorship to "four or five times" the annual rights fee.
In its lawsuit, Anheuser-Busch said the company will invest "tens of millions of dollars" in advertising and promotions involving its Budweiser brand related to the MLB this year.
In May, Anheuser-Busch announced that its Bud Light brand would be the official beer sponsor of the NFL in 2011, replacing rival Coors Light, which is brewed by MillerCoors LLC. The deal was reported to be valued at $1.2 billion over six years.
At the time, the move led to speculation in sports-marketing circles that MillerCoors might seek to become the official beer sponsor of baseball. MillerCoors, the second-largest U.S. brewer after Anheuser-Busch, is a joint venture of SABMiller PLC and Molson Coors Brewing Co. MillerCoors declined comment.
In its lawsuit, Anheuser-Busch claims it reached a letter agreement in April to renew its sponsorship deal with MLB. The brewer claims that all that was left was the ministerial step of drafting a long-form contract.
"We are excited about the extension of this amazing partnership. Congratulations partner!!," an MLB Properties marketing executive allegedly said in an April 22 fax regarding the agreement, according to the lawsuit.
After the NFL deal was announced, MLB Properties began to complain that the economic terms of the renewal were no longer satisfactory and that the market had changed, according to the lawsuit.
Citing a change in "marketplace dynamics," MLB Properties demanded on May 27 that Anheuser-Busch agree to pay much higher fees to remain the official sponsor, the lawsuit says.
Anheuser-Busch continued to try to reach an agreement over the summer to continue the relationship, but to no avail, according to the lawsuit. In October MLB Properties notified Anheuser-Busch that it planned to offer the sponsorship rights to the company's competitors, the lawsuit says.
On Oct. 8, Anheuser-Busch sent letters to several of its U.S. rivals, notifying them that it would defend its exclusive sponsorship rights if they entered into negotiations with MLB Properties, according to the lawsuit.
"As our renewal with MLB begins with the 2011 season, a timely resolution is important, and we hope to resolve this issue as quickly as possible," said Keith Levy, vice president of marketing for Anheuser-Busch, in a statement. "Major League Baseball remains a top priority for our Budweiser brand and is important to our plans."