COVID's Collateral Damage
The financial repercussions of the COVID pandemic keep spreading throughout college football.
The latest casualty appears to be the lucrative media, marketing and sponsorship deals most Power 5 Conference schools sign with huge corporations like Learfield IMG College, Under Armour, Nike and Adidas.
Nowadays, virtually every school farms out its marketing rights to a third party. In most cases, the contracting company pays the school a guarantee, and then the two parties split the revenues above the guarantee.
For Group of Five Conference schools, the guarantee might be $1 million per year. For high profile Power 5 schools, the numbers often reach $10 or $15M.
The deals include the school’s local radio and TV rights for game broadcasts and coaches' shows, stadium and arena signage, and other sponsorship opportunities like all those annoying scoreboard displays, contests, PA announcements and on-field presentations.
Learfield IMG College resulted from a merger between the two top names in the college sports marketing industry. Today, the combined entity represents 54 of the 65 Power Five schools, according to USA Today.
That near monopoly means the 2020 college football season could prove disastrous for Learfield IMG. Their ability to sell sponsorships will either be eliminated, should no football be played this fall, or severely compromised, if a limited schedule of games is played before a fraction of the usual number of fans…or no fans at all.
With that in mind, Learfield IMG has apparently reached out to its partners in hopes of delaying scheduled payments and restructuring existing deals by reducing or eliminating the guaranteed rights fees.
Most of the schools recognize the sensitivity of this situation, but they’re already facing huge cuts in anticipated TV and ticket sales revenues if the season is cancelled or shortened. Losing another revenue stream would be like pouring fuel on the fire.
To make matters worse, another big shoe might drop (pun intended). That being the shoe and apparel deals many schools sign with the likes of Under Armour, Nike and Adidas.
If the teams don’t play, their shoes and apparel won’t be seen by fans in the stadium or those watching on TV, so the shoe company’s exposure becomes non-existent or dramatically reduced.
Which means, more potential revenue down the drain.
An interesting corollary to the COVID mess is unfolding at UCLA, where Under Armour is apparently trying to end a 15-year, $280M shoe and apparel deal signed with the folks in Westwood just three years ago.
Since 2017 the Bruins have been, to put it mildly, a bust on the field and at the gate. Rather than citing the pandemic, Under Armour said in a statement that “we have been paying for marketing benefits that we have not received for an extended time period.”
Ouch.
The UCLA football team has gone 13-24 the last three years, as the much ballyhooed resurrection under Chip Kelly has failed to materialize. For most of the Bruins’ home games, there have been more seagulls in the Rose Bowl than fans.
So Under Armour wants out, COVID or no COVID.
This will get interesting, and lots of lawyers are going to rack up lots of billable hours.
More Bad News for Pac-12: The Pac-12’s latest tax filings included some disappointing news for the conference. There was a slight increase in overall revenue, to $530 million. But due to rising expenses, including a $5.4 million salary for embattled commissioner Larry Scott, and the continued failure of the Pac-12 Network, the distribution to Pac-12 schools was a disappointing $32.2 million.
Compare this to the Big Ten ($56 million), the SEC ($45M) and the Big 12 ($39M), and you can see why the league is faring so poorly on the field and in the recruiting wars.
