Upcoming Conferences and Events
May 31 - Jun 2
SBJ/Dec. 6-12, 2010/SBJ In-Depth
Agencies expand rights, deepen relationships
Published December 6, 2010
A giant houndstooth hat hangs over a concession area inside the University of Alabama’s Bryant-Denny Stadium, a tip of the cap to the Crimson Tide’s illustrious football history and former coach Bear Bryant’s signature headwear.
The 12-foot-long, 600-pound fiberglass hat signals to fans that they have entered the Bear’s Den, one of many themed concession areas created by Centerplate around the stadium. Centerplate began running Alabama’s concessions in 2008 and won the business, in part, because of its creative approach to branding concession areas.
But unlike most concession and hospitality deals, Centerplate didn’t make the agreement directly with the school. Its contract is with Learfield Sports, the rights holder for the Crimson Tide’s athletic department.
Learfield and Alabama struck their first agreement in 1998, but concessions and beverage rights were included only in their most recent contract, which kicked in two years ago and runs through 2018. Learfield is a 75 percent partner in Crimson Tide Sports Marketing, while ISP Sports is a 25 percent partner, which gives Learfield the controlling interest and decision-making power.
Learfield’s ownership of beverages and concessions at Alabama is yet another way rights holders are deepening their relationships with their school clients. It also indicates how comfortable schools are with outsourcing functions and rights that used to be handled internally.
Everything, from concessions to ticketing and travel to apparel, is now on the table when schools negotiate with their rights holder, which not too long ago handled only the radio network and TV coaches show.
“Schools are getting more and more comfortable with the rights holders and more confident that they can provide value to the school,” said Greg Brown, Learfield’s president and CEO. “These deals used to be all about the radio network not that long ago, then it was radio and TV, then it was radio, TV and print. When the schools see how we can exploit the rights, they start to wonder what else we can do. Who knows what might be next?”
The numbers associated with collegiate multimedia rights deals can be staggering. Schools are guaranteed as much as $7 million, $8 million, and in some cases more than $10 million a year by rights holders whose sales force is limited by such restrictions as bans on alcohol sales or a lack of sign positions in the football stadium. That’s not the case everywhere, but some schools are more conservative than others when it comes to commercializing athletics.
Even in a tough economy, though, the rights fees continue to escalate. Learfield’s deal with Alabama, negotiated just after the arrival of football coach Nick Saban, guarantees the Crimson Tide $7 million this year. The school will probably make an additional $1.5 million to $2 million as part of a revenue-sharing agreement when sales are good, as they have been during Alabama’s recent football success, including last season’s national championship.
Some schools such as Texas and Ohio State make more, but the struc ture of Alabama’s agreement with Learfield is typical of most deals, except that it includes a few more rights (see chart, page 27).
Learfield’s Brown said the guaranteed money is what often makes the headlines, but what is lost is how much deeper these contracts are than they used to be.
“The rights are much more substantial now,” said Brown, whose agency represents more than 50 schools, but has concession rights at just four of them. “The more rights we have, the more attractive we are to the sponsors and advertisers, and the more revenue we can generate.”
If Learfield’s revenue from the property exceeds $11.4 million this year, the agency and the school will share the additional revenue 50-50. Learfield has generated $14 million in each of the past two seasons.
In addition to selling against the radio and TV broadcasts, Learfield has Alabama’s Internet, promotional, sign, print, beverage (pouring and isotonic) and concession rights, according to its contract with the school.
“It’s a deal that’s been very good for both sides,” said Mal Moore, Alabama’s athletic director. “They’ve got more things to sell and it helps promote the school.”
Deepening its rights with school clients is becoming more and more critical because it’s so difficult for agencies like Learfield, IMG, CBS Collegiate Sports, Nelligan Sports and others to acquire new schools. Most every BCS-level school has a long-term agreement with a rights holder, with a few notable exceptions such as Southern California and West Virginia.
Rights holders are also renewing and extending those existing deals three and four years before they expire to keep the contracts at 10 years or more and to prevent them from hitting the open market.
Having more schools under contract mitigates risk for the rights holder in what has traditionally been a high-risk, low-margin business. The idea is that even if a few school properties have an off year, enough will do well to keep the agency thriving.
“You’re going to have some that are up and some that are down,” Brown said. “I don’t love that about this business, but that’s how it is. It’s tough. But if we can keep growing our rights, we can use the assets we have to make ourselves more attractive to the sponsors.”
As much as a third or more of Learfield’s $14 million in annual revenue from the Alabama property comes from sources not associated with ad sales or sponsorship, including concessions, pouring rights, isotonic beverage rights and online rights.
Many schools, for example, do their own agreements with Gatorade or Powerade for the isotonic category. Those beverages pay low to mid-six figures a year to put their brand on the sidelines on coolers, cups and drink carriers. At Alabama, that money goes to Learfield, which has factored such revenue into the annual guarantee it pays the school.
Learfield also collects from Centerplate for concessions, CBSSports.com for
RollTide.com, TeamFanShop for merchandise sales and Coca-Cola for pouring rights. These deals typically provide Learfield with a guarantee plus a share of revenue once it hits a threshold, meaning that the property enjoys a certain revenue stream before it sells the first ad or sponsorship, which has helped diversify its business away from strictly selling ads.
The concession rights also give Learfield a flexibility and additional revenue it couldn’t command before. Now each of the items sold in concessions, such as Golden Flake chips or Bryan hot dogs, has a media buy on radio and TV broadcasts built into its agreement.
It also enables Learfield and Centerplate to tag team on promotions during the game. For the Dreamland BBQ deal of the day, the iconic Tuscaloosa restaurant, which has several locations within Bryant-Denny Stadium, buys advertising to promote the deal on the pregame radio broadcast and on the stadium’s video board. When fans text a message for the deal of the day, they’re rewarded with a bounce-back coupon for BBQ sandwiches at a reduced rate.
Papa John’s, Dippin’ Dots ice cream and Coca-Cola/Dasani, all of which sell their products inside the stadium, have similar arrangements with their media buys. Those promotions drive concession sales, of which Learfield gets a piece through its deal with Centerplate.
“We are utilizing the expanded property assets to do more cross-promotion,” said Steve Gowan, senior vice president for Learfield’s Atlantic region. “What we’re finding is that this is a better answer all the way around.”