SBD/July 26, 2012/Marketing and Sponsorship

Learfield Not Currently Looking To Restructure Penn State Contract Amid Sanctions

Learfield President said Penn State will still generate a large audience
Learfield Sports, the multimedia rights holder at Penn State, said it will not immediately seek to restructure its contract with the athletic department in the aftermath of the NCAA’s harsh penalties against the PSU football program. Learfield President & CEO Greg Brown said yesterday he is taking “a wait-and-see approach” on how his company’s business might be impacted by the Jerry Sandusky scandal and the fallout from the sanctions. “Penn State is certainly one of our larger properties and it’s very significant to us,” Brown said. “But I don’t lay awake at night worrying about whether Penn State will treat us fairly. Does this create stress? Yes. Are we worried about it? Yes. But Penn State football is still going to generate a huge audience and we’ll continue to find ways for companies to connect with that audience.” PSU is one of nearly 50 schools that Learfield does business with. The Nittany Lions rank among the crown jewels in Learfield’s stable, along with North Carolina, Alabama, Oklahoma, Stanford, Wisconsin and Missouri. Brown said that if business drops way off in the coming months, then it is conceivable that Learfield might ask to renegotiate the guarantee it pays PSU annually, but he is not convinced that will be the case. PSU is not subject to the typical public disclosure laws, so the terms of its multimedia rights agreement with Learfield are not certain. But industry experts believe Learfield pays an annual guarantee of $5-6M a year, plus a revenue share if sales exceed projections. The guarantee is not as high as other Learfield properties, such as North Carolina and Alabama, which make $8-9M a year, because PSU takes more of a commercially conservative approach to advertising and sponsorship, Brown said. Also, local TV rights for Big Ten schools belong to Big Ten Network, which takes some of the value out of each school’s multimedia rights deal.

STATE FARM SHIFTED INVENTORY: The most immediate fallout from the NCAA’s penalties this week was State Farm’s decision to pull its advertising out of PSU football. Brown said it was incorrect to say that State Farm dropped its sponsorship. Instead, the insurance giant shifted its inventory out of football to other sports. But as long as fans continue to fill Beaver Stadium on Saturdays, Brown said Learfield will have a legitimate product to market. The Nittany Lions’ attendance has dropped over the past three seasons from an average of 107,008 in '09 to 104,234 in '10, and 101,427 last season, none of which can be attributed to the Sandusky scandal. But Brown said he expects fans and alumni to rally around the program now, even as the football team moves into an era of reduced scholarships and bowl bans. “Can they build a team that will be successful and continue to attract a large audience? I don’t know,” Brown said. “That’s just something that can’t be answered right now. But I can tell you that we’re in constant contact with Penn State and we’re always talking. If something needs to change, we’ll figure it out. We’re partners with Penn State and we’ll deal fairly with them, just as they’ve always dealt fairly with us.” Brown said that Learfield’s new ownership group will not impact the way the company handles the situation. L.A.-based Shamrock Capital Advisors bought a majority share of Learfield in December, after the Sandusky scandal already had broken, and has been aware of the developments.
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