Learfield IMG asking schools to take on more risk
Learfield IMG College, the multimedia conglomerate that spent big over the past decade to buy up radio, marketing and sponsorship rights for top athletics programs, quietly approached several schools this spring amid the COVID-19 pandemic asking for 60-day delays to make scheduled payments before the last fiscal year ended on June 30 and to restructure deals in ways that would reduce or eliminate schools’ guaranteed rights fees, according to officials at nine schools that have partnerships with the company.
Learfield IMG, according to some of those officials who spoke to USA TODAY Sports on the condition of anonymity due to the sensitivity of the situation, has even raised the prospect of drastic measures like activating force majeure clauses to get out of contracts if schools aren’t willing to renegotiate.
Some schools have agreed to replace their guaranteed distributions from Learfield IMG with a revenue-share arrangement, citing the possibility they would not be able to collect any sponsorship money at all in the near-term if football isn’t played this fall.
“We want to be good partners and we know there’s a lot of uncertainty now,” TCU athletics director Jeremiah Donati said.
But administrators at other schools, whose budgets have already been upended by the cancellation of the NCAA basketball tournament and expected loss of football revenue this year in even a best-case scenario, have been angered by the company’s approach. They see Learfield IMG as using the pandemic to either get out of some of its less-profitable deals or secure more favorable terms on contracts that, in many cases, extend out for years.
Said one Group of Five administrator: “People are madder about this than anything I’ve seen in my years as an AD.”
Learfield's reach in college sports
The Learfield IMG College name has a familiar ring to college sports fans because one aspect of the company’s business involves acquiring a school’s local radio and TV rights and then arranging networks for the broadcasts of games and coaches’ shows. The company also acquires the school’s marketing and sponsorship rights, then bundles everything together, selling packages to companies that can include anything from ads during a game broadcast to signage in a stadium.
After a reported $2 billion merger between Learfield and IMG College in 2018, which was only approved after a lengthy investigation by the Department of Justice into whether or not it would represent a monopoly, the combined company has become one of the most powerful entities in college sports. Its portfolio includes 54 of the 65 schools in the Power Five, including the University of Kansas and Kansas State. Learfield IMG also has deals with dozens more programs throughout Division I and deals with the Big 12, the Big Ten and the Rose Bowl stadium.
Schools have flocked to Learfield IMG College because of the guaranteed revenue they were offered — anywhere from around $1 million for Group of Five schools to the $10 million-to-$15 million range annually for higher-profile programs.
Though schools could potentially sell those rights themselves, the allure of a contract with Learfield IMG is knowing exactly how much money they’ll get from sponsorships every year, access to national ad campaigns and a team of Learfield employees servicing the school who are trained and paid by the national office.
Learfield IMG signed those long-term contracts — and perhaps overpaid, in some instances — with the expectation that the value of their properties would grow over time, especially after the merger, and that the company’s big money would be made on the back end.
In some instances, the parties’ contracts allow Learfield to seek payment adjustments for a year in which any of a variety of events occur that would affect its ability to conduct business as usual. What rankles some administrators is that Learfield IMG is not only proposing a significant short-term cut — which they might be willing to entertain, given the economic conditions — but also trying to shift the long-term risk back to the schools.
“I want to be a good partner, but they want to go from the rights fees we agreed to years ago to zero rights fees,” said one Group of Five athletics director. “We have no obligation to agree to that.”
In a statement to USA TODAY Sports, Learfield IMG said it had undertaken “an aggressive campaign to recoup millions in at-risk revenue on behalf of the universities and conferences we represent” following the cancellation of spring sports, but that the economic fallout and uncertainty about fall sports necessitated discussions about adjusting these contracts.
“From the very beginning, our sole objective has been to ensure that all parties are in a position to weather this storm together, and to exit the other side cooperatively invested in a thriving partnership,” the company wrote in part.
Entering 'the great unknown'
Some of the company’s current contracts include provisions under which the school receives a guaranteed amount from Learfield, but then the parties agree to share revenues if those amounts reach certain levels.
Kansas State athletics director Gene Taylor said converting the entire Learfield IMG contract to a revenue share “compares pretty closely to where we were with the guarantee as long as we can hit their numbers” and that it could eventually be a better deal for some schools if the economy normalizes.
“Did I want to do it? No,” he said. “Did I understand it? Absolutely.”
Learfield IMG College is not the only company in the college sports business that is seeking to rework deals with schools. The Los Angeles Times has reported that Under Armour has decided to end what was supposed to be a 15-year, $280 million shoe-and-apparel deal with UCLA that began in 2017, saying in statement, “we have been paying for marketing benefits that we have not received for an extended time period.” UCLA has said it is exploring options to contest the action.
The same kind of legal wrangling is likely to happen at several schools if Learfield tries to exercise a force majeure clause or withhold a scheduled distribution should a school refuse to renegotiate. Though every contract is slightly different, multiple athletics directors said that after consulting their general counsels they would be prepared to fight it out in the courts or through arbitration if Learfield IMG tried to terminate the contracts.
The disagreement over this issue has already frayed relationships and torpedoed goodwill with a company that was as trusted a partner as schools had in college athletics. As multiple administrators pointed out, several athletics directors testified on Learfield’s behalf during the DOJ investigation to help the merger go through.
Now, with the company under new management after longtime CEO Greg Brown retired in April, there’s suspicion that the company’s private equity owners are using the pandemic to remedy deals that were probably overvalued in the first place.
Donati, the TCU athletics director, said that despite assuming more risk in the new model, there was upside in maintaining the partnership at a time when the football season is “a coin flip.”
"Obviously it’s the great unknown in what this looks like for any of us, but for them to be held to these guarantees isn’t sustainable,” he said. "We negotiated a pretty aggressive model from a revenue share that benefits us. There’s an incentive there that I think will serve us well. All of this is a little up in the air, but I really expect this deal will be a good deal.”
Others aren’t so sure and could see more schools either leaving Learfield IMG for competitors or bringing their marketing rights in house.
As one administrator at a top Learfield IMG property said: “The lawyers are going to be really busy.”
Steve Berkowitz contributed to this report.