SBJ/June 12 - 18, 2000/This Weeks Issue

ISL in line for NCAA sponsorship rights

Swiss marketing agency ISL is expected to pick up the rights to market NCAA sponsorships through 2013 for $800 million to $850 million, after incumbent sales agency Host Communications Inc. pulled out of negotiations with NCAA rights holder CBS.

Host's current contract with the NCAA, which allows it to sell sponsorships and Internet rights, expires in August 2002. CBS then kicks off its 11-year, $6 billion NCAA deal that includes both television broadcast rights to the men's Division I basketball tournament and the Internet and sponsorship rights to the NCAA and all 81 of its championships.

After signing the NCAA deal late last year, CBS immediately said it would sell the sponsorship rights — but not the Internet piece — to an outside agency, and Host was considered to be the front-runner. At the time, the sponsorship rights were expected to fetch $700 million.

ISL then let CBS know it could beat that offer, and SFX Sports Group also had preliminary talks with CBS, sources say. Host eventually pulled out after several months of negotiations.

"I'm quite frankly relieved," said Jim Host, chairman of Host Communications. "We looked at it every way possible and it didn't make financial sense. The return to the shareholder wasn't going to be there."

CBS Sports President Sean McManus declined to comment on the negotiations, as did Jim Wheeler, who heads ISL's college division.

Host Communications created the NCAA "Corporate Partner" program in the mid-1980s, signing Gillette Co. as the first NCAA sponsor in 1984.

The Lexington, Ky.-based company is at the midpoint of a five-year, $75 million deal with the NCAA. For fiscal 1999, Host generated $24.7 million from its NCAA deal, up from $21.2 million the year before.

Apparently, ISL thinks it can grow those revenues by threefold, even without Internet rights.

CBS can't sign an outside marketing agency without NCAA approval, and ISL is expected to make a presentation to the NCAA later this month, sources said. The parties are already well acquainted, as ISL had pursued the total NCAA media rights package last year but was outbid by CBS.

ISL also has had its sights on college football.

Late in 1998, it offered Division I-A universities $2.4 billion over eight years for the rights to stage a college football championship playoff. Those plans were put on hold when ABC extended its deal to broadcast Bowl Championship Series games through 2005, but ISL has said it still intends to pursue the football playoff once ABC's contract expires. Picking up NCAA marketing rights could give it the foothold it needs in the college market in order to sway university presidents and athletic directors toward the playoff format.

But John Swofford, the ACC's commissioner and chairman of the BCS, doesn't think ISL would necessarily have that advantage.

"I think you're talking about two different situations entirely," Swofford said. "The decision of whether or not we'll move into a playoff system will be made by the presidents and internally through the NCAA. It's not a decision that would be affected by an outside company."

Spending hundreds of millions of dollars to pick up rights to a sports property is nothing new for privately owned ISL, the second-largest sports marketing agency in the world behind IMG. It just kicked off a 10-year, $1.2 billion deal for the media and marketing rights to the ATP, and it teamed with a German media company to pay $2.1 billion for the rights to FIFA and the next two World Cups, in 2002 and 2006. The NCAA deal would represent its largest investment ever in the United States.

Host Communications loses its largest single revenue generator, but one that still only accounted for about one-fifth of the company's overall business, according to SEC filings of Host's parent company, Bull Run Corp.

"There are many things our company is doing that have much bigger margins and less risk that we can grow much quicker," Host said, pointing specifically to the Streetball division, which markets grassroots sporting events.

He said the company still may pick up some NCAA radio or publishing rights from CBS.

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