San Antonio Express – September 12, 2015 – By Bruce Selcraig –
By now, even the most casual observer of the University of Texas athletics program probably knows that UT boasts the most lucrative college sports empire in the country for the past decade and that its last football coach, Mack Brown, departed with an annual salary of $5.4 million and a $2.75 million buyout.
Some Burnt Orange loyalists even may know that until this year, the Longhorns ranked No. 1 in collegiate merchandise sales for nine consecutive years, and that a recent building bonanza renovated athletics offices ($4.1 million), expanded its stadium club ($4.5 million), opened a nutrition center for its 500 athletes ($7.8 million), and housed its women’s volleyball team in a $6.2 million practice palace that feels like a Scandinavian hotel.
But few know that helping to drive this exponential growth in empire building at Texas and dozens of other campuses — built on everything from T-shirt sales to concerts and complex multimedia rights deals — has been a global sports marketer and talent agent that dominates its industry yet remains largely invisible to the casual fan.
Born from a legendary handshake deal in 1960 between its founder, Mark McCormack, and golf icon Arnold Palmer, IMG Worldwide has offices in 30 countries and represents more than a thousand clients, from Tiger Woods and model Kate Moss to the Bolshoi Ballet and about 200 major college athletics programs, including football juggernauts Ohio State, Alabama, Oregon and, since 1983, Texas.
“What we sell is the intellectual property,” explained IMG spokesman Andrew Giangola. “The (Texas) mascot is extremely valuable. It’s a beloved national brand, and a storied athletic program. People love those Horns.”
IMG’s influence is so pervasive at Texas that on six Saturdays this fall, Longhorns fans could have a game-day experience almost entirely marketed by the IMG College division. They’d cruise to Austin in their $48,000 Chevy Silverado — the Official Truck of Bevo, the Longhorns’ live steer mascot — tune into San Antonio’s Ticket 760, where Craig Way, the “Voice of the Longhorns” charms listeners on some 30 IMG affiliate stations across Texas, then eat some IMG-licensed Chobani yogurt.
They can get cash from the ATM at Austin’s University Federal Credit Union, an IMG client that put up $13.1 million to get its name on UT’s renovated UFCU Disch-Falk baseball field. And if Mom and Dad get over-served with Coors and fall head-over-pompoms out of their rented, Longhorn logo’d seatback (owned by IMG College Seating, whose UT sales have increased 74 percent over 2014), they may be aided by staff from Austin’s St. David’s Medical Center, a loyal IMG partner that runs a clinic at the stadium.
Altogether, with some 21 corporate sponsorships alone, including giants AT&T, Coca-Cola and UPS, IMG helped generate nearly $32 million for the athletics department in 2014 in royalties, advertising and sponsorships, according to UT’s 2015 annual report. Ticket sales brought in the lion’s share for all sports, at $53.6 million, followed by contributions ($37.6 million) and NCAA/Big 12 conference money ($23.9 million), as part of a $161 million budget that is the envy of the nation’s elite collegiate programs.
The Texas revenue machine puts pressure on coaches to win, and win big, something new football coach Charlie Strong knows full well. Mack Brown left after three straight winning seasons, but the Longhorns were 8-5, 9-4 and 8-5, well short of contending for a national championship, which is what Texas fans expect and Brown achieved during the 2005 season. After Notre Dame defeated Texas 38-3 in this season’s opener, Strong demoted two assistant coaches.
For Texas Athletics Director Steve Patterson, who some alumni and faculty believe has over-commercialized the Longhorn brand in a quest for athletic supremacy, all of the IMG-driven sponsorships, the blaring electronic stadium signage, the Rudy’s BBQ miniblimp dropping coupons on disgruntled UT basketball fans — all of it — is not just some necessary evil in the escalating college athletic arms race. He likes it.
“I love what I’m doing. I don’t think we should be ashamed,” Patterson said as he gave a recent tour of Royal-Memorial Stadium’s impressive new tutoring, nutrition and sports medicine centers, Olympic sport weight rooms and women’s volleyball Shangri-La. “Sometimes you have to think like the pros, and that shocks some people when I say that.”
Elevator doors opened on a covey of busy hardhats finishing a new cafeteria for athletes, as Patterson, a former NBA executive with the Houston Rockets and Portland Trailblazers, smiled upon the Longhorn fortune.
“Everyone knows about Mack Brown’s salary,” said Patterson, whose own $1 million paycheck is 10 times that of a UT music professor, “but they don’t see what we’re doing for women’s sports, for injured athletes and educating athletes. …”
Added Patterson, who was named UT’s athletics director in November 2013: “What we’ve been looking at are two sides of the same coin. We can’t provide any of these services — the mentoring for athletes, the facilities for coaches, the amenities for our fans — if we don’t generate the revenue. That’s a cultural shift for a lot of public institutions, particularly among educators, but at the end of the day, these partnerships are what you’re seeing all over campus.”
Yet those corporate relationships and the nonstop fundraising trouble many UT professors, fans and alumni.
“All this marketing and globalization of big-time sports entertainment based at public universities has invaded and transformed the whole politeia of the university,” UT classics Professor Thomas Palaima said. “Students come to campus now not feeling awe at the prospect of learning and investigating truths about our world and ourselves but to get ready for game day and have a ‘college experience’ and then get a job.”
Palaima said he recently walked past the University Co-Op, a campus institution, and thought the storefront an apt metaphor for what critics believe are the school’s misplaced priorities: It “was entirely given over to images of footballs and Longhorns souvenirs. Not a book in sight or any suggestion that there was a center of learning across the street.”
Behind the fundraising
The bulls-eye for much of that criticism would be sports marketing firms.
Virtually every major college athletics program outsources its sponsorships and lucrative media rights deals to two firms — IMG, which arguably has the most elite collegiate sports factories — and its longtime rival and occasional partner, Plano-based Learfield Sports, which represents about 100 colleges, including Texas A&M, Alabama and Oklahoma, plus many Drexels, Vermonts and Bucknells.
Though they often bid intensively for the same colleges, big-name sponsors and a slice of the $4.6 billion collegiate licensed merchandise market, IMG and Learfield have a joint partnership for online ticketing, and at four colleges — Alabama, Clemson, South Carolina and Miami — they jointly manage older, inherited contracts.
“The industry is still fairly collegial,” said Tom Stultz, a former IMG executive who is now the president of a rising boutique firm, JMI Sports. “Some people have known each other over 30 years.”
Lately, the Goliaths have gotten competition from both San Diego-based JMI, which signed basketball power Kentucky out from under IMG in 2014, and Atlanta’s Fermata Partners, which signed Georgia, Oregon and Miami to licensing deals, then got bought out this year by another large IMG rival, CAA Sports.
IMG and Learfield are so intimately involved in the daily life of their college clients that they often have offices within the athletics departments and are sometimes given titles that make them appear to be university employees.
IMG’s Giangola said its campus sales staffs have offices within the athletics departments at colleges such as Baylor, Rutgers, Tennessee and Marshall, but not at Texas, where the 10-member IMG College staff is housed off-campus. The arrangement, Giangola said, is determined by space availability and parking.
“There are absolutely no ethical considerations,” he said. “We are a trusted partner, interacting with the athletics department seven days a week. We’re an extension of the athletics staff.”
At Baylor, a private Baptist institution, the athletics department website staff directory has the IMG College staff listed right beside administrators, trainers and track coaches. They sport “Baylor/IMG College” titles like general manager, account executive and the “assistant AD/Broadcasting,” who turns out to be the Bears’ longtime radio announcer, John Morris.
IMG says Morris is a full-time Baylor employee yet receives an IMG consultant fee for doing occasional sales work.
On the Baylor website, some Baylor/IMG College staff have email addresses that read “baylor.edu,” while others are img.com or imgworldwide.com
At the University of Texas at San Antonio, where Learfield has helped energize the Roadrunners by increasing sponsorship revenue almost eightfold — from $140,000 in 2011 to some $1.1 million in 2014 — Athletics Director Lynn Hickey said it was imperative to have Learfield’s four-member staff just down the hall from her office.
“What would they have us do, ostracize them?” she asked, referring to those who believe for-profit marketers and corporations have blurred the priorities of public educational institutions.
“We were a startup brand,” she explained. “We had no perceived value. So we had to raise money 12 months a year, 24/7. I don’t think it has anything to do with ethics.”
Her athletics budget has grown to $25 million with a guaranteed $1.325 million a year from Learfield.
“I’ve never heard anyone even ask this question before,” said Greg Brown, CEO of Learfield Sports, who then put the issue precisely in the context that most concerns academic ethicists. “There are private (businesses) all through these (universities) … chemical and drug companies, like Monsanto, Glaxo, Lilly, trying to help society, working hand-in-glove with these schools. The notion that private industry working with an institution is somehow an untoward relationship is not how it works.”
“But it is true,” countered B. David Ridpath, associate professor of sports management at Ohio University, that when marketers are housed within the athletics departments “they really look like regular university employees, yet their motivations might be different. … Groups like IMG want to make money. And lots of it. That does seem to clash with nonprofit higher ed in many ways. It can cause some ethical issues for sure if not managed correctly, such as when a football coach is the most powerful person on campus.”
The marketers usually try to distance themselves from what some of them dismiss as an academic debate.
They simply are the dealmakers, industry executives reason. They merely tap into what is already fanatical college sports devotion and team loyalty and then share the wealth with grateful, usually cash-strapped, colleges that often have to subsidize athletics.
At UT, when IMG’s adjusted gross revenues surpass a certain threshold — ranging from $5 million to $15 million — the partners split their profits on a scale that increasingly benefits UT as more money is earned. This year, IMG took 17 percent of what it raised for UT athletics and paid the school a $2.26 million annual-rights fee.
Texas, which brought in $161 million for 2013-14 against $169 million in expenses, is one of only seven major public universities that did not require a subsidy for its athletic programs, NCAA figures show. Ohio State, LSU, Oklahoma, Penn State, Nebraska and Purdue are the others.
Hundreds of colleges require subsidies from student fees or other sources, often as much as $10 million to $25 million, thus the need to have national marketers maximize a school’s income, administrators say.
Despite running some $8 million in the red last year, the Texas athletics department says it continued to be one of the few programs in the country that returns money to the campus general fund.
Through what is described by the athletics department as an “informal” agreement with the UT president, Longhorns sports anticipates contributing $6.7 million this year to the campus budget, including one-half of the annual Longhorn Network revenue and $1 million of the yearly gross from trademark licensing.
While this contribution has increased over the years, it is remarkably less than what’s given by some other major athletic programs, such as Ohio State, which reports that its athletics department will transfer $35.7 million back to the campus this year.
Some faculty at UT would like to see all the athletics department revenue put into the general fund.
“There’s a common misconception that the UT athletics department is an independent entity and can therefore keep what it earns and cannot be part of the overall university budget,” said Michael Granof, a distinguished UT accounting professor and former member of the school’s Athletics Council. “There’s nothing that says the president can’t take money from the athletics department (and put it) into the general fund … so that athletic priorities have to be ranked with other campus priorities. We then could make rational decisions about what we spend on salaries for coaches.”
The simpler days
In a more innocent era, struggling college baseball coaches and local radio announcers might be expected to sell advertising for game programs or outfield fences.
“We scrambled for money and fans in just about any way we could,” UTSA’s Hickey recalled. “That was especially true for women’s athletics and the Olympic sports.”
Then the sports marketing landscape changed in 1974 when former University of Kentucky baseball pitcher Jim Host bought the radio rights to the hugely popular Wildcat basketball games for $52,000. Those were the early days of Host Communications, which pioneered the third-party rights business in college sports, eventually moving into print publications, sponsorships and endorsements.
Then ESPN was born in 1979. Crowds got larger. Coaching staffs ballooned. Nike and Adidas began spreading their wealth, and network TV transformed college athletics.
By 1983, Texas athletics had signed with Host, and the idea of an outside marketing firm handling sponsorships and licensing appealed to many athletics directors. They were guaranteed a set annual fee over usually three to five years by the marketer, thus sparing the college some budgeting worries.
The marketers were better connected with national sponsors, and the athletics directors, who almost always were former football players and not MBAs, could concentrate more on their athletes than herding a sales staff.
The biggest programs, such as Texas, could quickly see a day when lucrative national radio, TV and merchandise deals — not just tickets and hot dogs — would fuel big-time college sports. Radio alone grew exponentially.
Driving across America today on a fall Saturday listening to football, it would be difficult to avoid hearing an IMG-produced broadcast on one of its 2,200 national affiliates — America’s largest independent sports radio network, all fed through studios in Winston-Salem, North Carolina.
Learfield, which started as a radio network in Missouri in the 1970s, now has about 1,300 stations in its network.
In 2004, Kentucky signed an unprecedented 10-year contract with Host for $80 million, including coaches’ endorsements and corporate sponsorships.
Three years later, IMG further solidified its role atop the sports marketing industry by acquiring the Collegiate Licensing Co., which represented nearly 200 colleges, plus the Heisman Trophy and NCAA, and then buying out Host Communications for $74 million. Today both firms are wrapped within IMG College.
That same year, 2007, IMG College took over the media rights for Longhorn sports (radio play-by-play, coaches’ shows and pay-per-view), stadium signage, corporate sponsorships, game-day programs and securing endorsement deals for coaches, among other duties. (That media rights deal expires in 2022; the sponsorship contract ends in 2016. IMG said it pays part of the salaries of some college coaches, but none at Texas.)
Through 2021, those current, multiyear sponsorships with Chevrolet, Coca-Cola, Coors, H-E-B and some 17 others are expected to bring Texas at least $98 million. The Longhorn Network brings in another $12.5 million annually.
Cut out the middleman
Despite the popularity of outsourcing, one of the more controversial ideas to arise in sports marketing of late has been a proposal by the Pac-12 conference to return to the days of yore and cut out the middlemen marketers. The idea is to save the individual schools as much as $2 million to $3 million in outsourcing fees.
It won’t happen soon. The Pac-12’s Oregon, California, UCLA, Arizona, Washington and Washington State still are signed to IMG. Learfield has Stanford, Colorado and Oregon State — and some industry experts question whether any college has the clout and expertise to compete with experienced national sales staffs. But just the discussion is rocking boats.
“It’s very disruptive to the current model,” said Stultz, the JMI Sports president, who helped negotiate the Longhorn Network deal when he was with IMG. “This will be like Uber to the taxi business, like digital photography to Kodak.”
Eventually, according to Sports Business Daily, Pac-12 Commissioner Larry Scott wants to have the schools’ and conference’s rights combined into one package when it comes time to renegotiate their TV deals with ESPN and Fox, whose 12-year, $3 billion deal with the conference closes in 2023-24.
Currently, Pac-12 schools are only receiving $1 million each as their cut in the Pac-12 Networks, couch change compared to ESPN’s new SEC Network ($5 million per school) and the Big Ten Network ($7 million).
“Larry Scott is trying to create his own IMG,” Hickey said.
“The Pac-12 is gonna take their business back,” one outspoken former IMG executive said. “And as for these long-term IMG contracts, any contract can be broken. It happens all the time. Nebraska renegotiated. Syracuse renegotiated. Ohio State needs to. The people who know this business know IMG is in trouble.”
“Absolutely not,” said Tim Pernetti, the president of IMG College Multimedia. “There’s been a lot of loose talk. Not every Pac-12 school will participate, and that leaves the door open for us. We’re still clearly the market leader.”
But IMG’s throne is wobbling.
Last summer, IMG College lost the multimedia rights to the University of Kentucky and its NBA-ready powerhouse basketball team, lost the licensing rights at Kentucky and Miami, renegotiated a contract with unhappy Syracuse, and then in October, was fired by Arizona State, which claimed more than $5 million in damages from IMG for allegedly not meeting its contract obligations.
Specifically, ASU charged that IMG failed to maximize its radio coverage in the lucrative Las Vegas and Southern California markets — a charge denied by IMG, which claimed ASU was liable for some $34 million in damages for terminating their multimedia rights deal.
“I’ve never heard of a university firing IMG or Learfield,” said an industry veteran close to both firms. “It’s unprecedented. It doesn’t happen.”
The Longhorns’ Patterson was the Arizona State athletics director during much of IMG’s contract tenure there. Though he praises IMG’s current work at Texas, when asked if he saw problems developing with IMG during his time in Tempe, he said simply, “Yes.”
To avoid such disagreements, Patterson said he meets weekly with IMG’s longtime general manager on the Longhorns account, Scott Willingham, who came to the job in the 1990s under Host Communications and was mentored by former UT athletics director DeLoss Dodds.
“Scott and his IMG staff are like family over here,” said UT director of external services and women’s athletics director Chris Plonsky. “Scott has this gift, this innate drive, to represent college athletics and make it his passion. We’ve built this relationship brick by brick with IMG; so there is very little that is not transparent.”
Privately, sources inside and out of the IMG-Texas relationship say that Dodds’ disciplined-but-personable business approach has been missed since the arrival of Patterson, who is said to be chafing under the constraints of IMG’s licensing deal, which expires in 2022.
“DeLoss negotiated very hard using the leverage he had,” said JMI’s Stultz. “He wanted … a revenue-share model instead of a guarantee (with IMG) and by sharing in the risk was able to capture $98 million more for UT from the Longhorn Network than the university would have received under the typical multimedia rights guarantee structure.”
“DeLoss was a great negotiator,” fondly recalled Hickey, who was first hired to coach basketball by Dodds at Kansas State. “He’d light his pipe and compliment you on how you look, and when you left he had gotten everything he wanted and you felt really good about yourself.”
But in today’s cutthroat collegiate sports market, up-front guaranteed money often trumps long trusted relationships.
In its collegiate debut, JMI Sports stunned the sports business world in July 2014 by signing the Kentucky Wildcats and their charismatic basketball coach, John Calipari, to a 15-year multimedia deal that guaranteed the former IMG clients a staggering $210 million. Industry sources confirm that JMI’s successful bid beat out IMG by some $30 million.
“It’s just not accurate to think you’re in control of the market,” Stultz said of his dunk over IMG, “when there is someone like us who will be a disruptive force.”
Stultz, who has deep Kentucky connections, acknowledged that the deal was sealed with the guaranteed money, adding that he hoped JMI’s hijacking of Kentucky would send a message to other premier programs “that they could be the first of several elite schools (for JMI) instead of just one of 70 (for IMG).”
IMG said in response that it had signed 80 new or renegotiated university contracts this year and was not feeling particularly threatened.
Industry in flux
As the competition has intensified in the industry, so has the instability of its heavyweights.
Both IMG and Learfield now have new owners. IMG was bought out in 2014 by William Morris Endeavor, now WME, whose clients include Oprah Winfrey and Ben Affleck, while Learfield was acquired by Providence Equity Partners in 2013.
In an effort to show how its links to Hollywood and the music industry set it apart from other sports marketing competitors, WME/IMG is bringing one of its country music artists, Brad Paisley, to the campuses of clients Virginia Tech, Arkansas, Baylor and Texas for a series of free concerts in September. Paisley played at UT on Thursday.
In a critical Vanity Fair article about the “risky” $2.4 billion IMG/WME merger, journalist William Cohan portrayed WME co-CEO Ari Emanuel, brother to Chicago mayor and former Obama chief of staff, Rahm Emanuel, as a frenetic-but-brilliant business strategist — he often makes 300 phone calls a day — who was misled by rosy valuations of IMG’s college sports business.
Before the May 2014 merger, underwriters JPMorgan Chase and Barclays reportedly estimated 2014 profits to be around $90 million. They proved to be closer to $60 million.
Those bank documents reportedly placed the new company’s cash flow at about $448 million, “some 88 percent more than the $238 million sum the two companies had reported for 2013,” Cohan wrote. Last December, IMG laid off 100 employees, a month after the firm was fired by Arizona State.
But Patterson, taciturn one moment, jovial businessman the next, seems unbothered by any troubling reports about IMG.
“I don’t have any information on their financials,” said Patterson, a UT Law School grad. “(Scott) Willingham is doing a good job, but like any organization, we can always do better. I’d like more integrated marketing. How do you co-brand, co-promote? How do you help the sponsor meet his goals?”
And by pleasing sponsors — corporations that may only see the University of Texas as a vehicle for making profit — Patterson believes everyone, even his critics, will benefit.