Sports Business Journal – August 17, 2015 – By Michael Smith –
UCLA has decided to renew with IMG College instead of joining the Pac-12’s new multimedia rights business, industry sources say, and the new deal will pay the Bruins $150 million over 10 years.
The sharp jump in UCLA’s rights fees — triple what the Bruins were getting in their old deal — represents the new cost of doing business in the Pac-12, sources said, because of the conference’s new multimedia business.
The Pac-12’s new company, a wholly owned subsidiary, will provide sales and support for schools that want to cut out their multimedia rights holder and bring their rights in-house, theoretically enabling the schools to keep more of the profits. Several schools whose rights are up in the next two to three years — California, Oregon and Stanford among them — are evaluating the new opportunity with the Pac-12 versus staying with a traditional third-party rights holder.
UCLA opted not to join the new Pac-12 venture, which is being called NewCo until a formal name is determined, and will stick with IMG College, a longtime partner that’s been in business with the school since 2005.
But the value of the deal, which will be among the most lucrative in the country, is a clear signal that the Pac-12’s new company represents a threat for rights holders that want to stay in business with Pac-12 schools. IMG College has the rights to six of the conference’s 12 schools, while Learfield has three and Fox Sports and Outfront Media each have one.
The renewal between UCLA and IMG College is said to be in the final stages and could be completed this fall. Neither side would comment.
The Bruins’ deal, at an average of $15 million a year, will be just shy of Alabama’s $16 million-a-year renewal with Learfield Sports last year. Texas and Notre Dame are believed to be among the nation’s leaders in multimedia rights revenue at more than $20 million each because of their unique television agreements, Texas with ESPN on the Longhorn Network, and Notre Dame with NBC. Kentucky last year struck a 15-year deal with JMI Sports that averages $14 million a year.
UCLA was thought to be a vital property for IMG College to retain because of the presence UCLA provides in the Los Angeles market, a key component in IMG’s national sales portfolio. Fox has USC’s rights through 2022, so IMG College would have been locked out of Los Angeles for some time if it didn’t hang on to the Bruins.
Sources said UCLA’s old deal, which had two more years on it, was paying the school a little more than $5 million annually.
While the company will be writing much larger checks for UCLA’s rights, IMG College will have more rights to monetize, sources said. IMG College is picking up more signage and advertising inventory at Pauley Pavilion, for starters, as well as other football and basketball assets to be determined. Traditional multimedia rights typically include corporate sponsorships, radio and TV advertising, hospitality, digital, printing and in-venue signage.
IMG College’s team of Jason Lublin, Tim Pernetti and Ben Sutton worked on the renewal with UCLA Athletic Director Dan Guerrero.
Lublin, chief operating officer for WME-IMG, has made college sports much more of a focus in the past year, sources say. Pernetti, the president of multimedia rights for IMG College, joined the company earlier this year. Sutton has been transitioning from president of IMG College into the chairman’s role this year.
It remains to be seen whether UCLA’s new deal will have any impact on other schools that have to make similar decisions, but sources say most of them are strongly considering the Pac-12’s multimedia business.
Oregon, an IMG College school, is believed to be leaning toward the conference-run company, but its current deal runs three more years. Cal is in talks with both IMG College and the Pac-12, sources say, and the school has not eliminated the possibility of a request for proposal that would open up bidding. Stanford, likewise, is mulling its options while taking a hard look at the Pac-12 model.
Arizona State, which cut ties with IMG College last fall and currently is managing its own rights, expects to join the Pac-12 company.
The rest of the Pac-12 schools have their rights tied up in longer-term deals that go beyond 2020.
Pac-12 Commissioner Larry Scott, working with consultant Tom Stultz of JMI Sports, has told schools they would keep more of the revenue that’s made off their rights by joining the conference’s company. Schools could keep 25 to 30 percent more of the revenue by eliminating the middle man — the rights holder — the conference told schools at a presentation during conference meetings in June.
IMG College and Learfield have disputed those numbers, saying their profit margins are much smaller and that the conference has underestimated the cost of creating the infrastructure to support sales and service.