SBJ/Dec. 6-12, 2010/SBJ In-Depth
Ben Sutton sold his company to IMG College to create a national powerhouse. But is bigger always better?
Published December 6, 2010, Page 1
Ben Sutton spent $10 million a few years ago to build a 35,000-square-foot headquarters, a shrine to all things ISP Sports in the agency’s hometown of Winston-Salem, N.C.
The lobby is a replica of a basketball court with a goal, courtside seats and a red ISP logo in the foul lane. ISP is etched in glass that borders the second-floor balcony and the tile in the bathroom. Even the black leather chairs in the conference room have a red ISP emblazoned across the back.
Sutton, the founder and CEO of ISP, might well transform the entire collegiate sports marketplace before he figures out how to turn all of those ISP marks into IMG, which acquired his company.
“I go to bed dreaming about selling college sports and I wake up thinking about selling college sports,” Sutton said. “What we’re about to do is change the whole buying and selling paradigm.”
When IMG completed its acquisition of ISP in October, the agency trumpeted its intention to take on the NFL for sponsorship and advertising supremacy. Now under the IMG College banner, Sutton, the new president, believes he has the critical mass of rights to make the college marketplace significantly more attractive for sponsors seeking a national platform.
With the marketing and licensing rights to more than 80 schools, a slew of conferences and bowls — and the ability to sell the NCAA’s inventory as well — IMG has placed a major bet on the college space, spending close to $300 million in the last three years to acquire ISP, Host Communications and Collegiate Licensing Co., all of which now form IMG College.
Not everyone, though, agrees that brands will come running to IMG with check in hand. While college sports have held up well through the recession, with ratings and rights fees on the rise, the marketplace traditionally has been cumbersome for sponsors to navigate.
Aggregating the rights to 30 or 40 schools to create a truly national program has meant negotiating 30 or 40 contracts with multiple rights holders, from IMG to Learfield Sports, Nelligan, CBS Collegiate Sports Properties and, formerly, ISP.
That many deals often become an expensive proposition, and companies don’t have the marketing infrastructure to manage so many different properties anyway. Most sponsors seeking a national college platform in the past, for example, have simply gone to ESPN. It was just easier.
IMG is trying to change that dynamic by making the college space easier to manage for companies. Through the ISP acquisition, IMG College now has many of the top brands — Texas, Ohio State, Nebraska, Notre Dame, Georgia, UCLA, for starters — and coverage in 49 of the top 50 U.S. markets.
“When you think about signage in 49 markets, ad sales in 49 markets, digital, sponsorship, it’s a very integrated set of rights that we can offer,” said George Pyne, president of IMG Sports & Entertainment. “This also represents a reinvention of IMG in America.”
IMG Chairman and CEO Ted Forstmann projects that “in a few years, college will be bigger than all of our other businesses put together. We’ve gone in a couple of years from having no business in the U.S. worth talking about to college being a huge business for us” with $400 million in revenue and 700 employees.
A simpler approach?
Todd Fischer manages State Farm’s national sponsorships, which include Major League Baseball, the NBA and college sports. Unlike MLB and the NBA, there is no league office for college sports sponsorships; there is no one-stop shop.
In order to construct a national college platform, State Farm title-sponsors ESPN’s basketball “College GameDay,” it is an NCAA corporate partner, and it has relationships with 90 colleges across the country. The NCAA deal gives State Farm marketing rights to the Final Four and other national championships.
“It’s definitely a challenge to create a unified front across all of those deals,” Fischer said. “You have to work really hard to create synergies amongst all of the pieces to tie them together in a unified program.”
Without surprise, the greatest challenge is maintaining the 90 schools with which State Farm has relationships. Those deals have been accumulated over the last 30 years, Fischer said, and The Marketing Arm has been a key partner in building State Farm’s program.
“We don’t have 90 people to manage each one of those partnerships; we have a few people,” said Fischer, who added that he’s optimistic that consolidation in the college marketplace will make life easier for the brands that are committed to being in it.
“It would be so much easier to invest with a national partner versus cutting 90 separate team deals,” Fischer said. “It’s a very challenging landscape to navigate. It takes a lot of time and dedication. We’ve been in college sports nearly 30 years and we’re still learning and evolving.
“For us, it’s become a very effective platform, but it’s only as effective as all the pieces working together.”
Insurance is one of the few mature categories in the marketplace. State Farm and Allstate have both found a way to make it work in college sports. Allstate has relationships with more than 70 schools, most of which raise Allstate-branded nets for field goals and extra points.
The other mature categories include soft drinks, isotonics, health care, banks and wireless, according to IMG’s Sutton, who spent 19 years building ISP into one of the nation’s foremost college sports marketing agencies before selling.
“You look at the pros and they have about 30 developed categories and we have six,” Sutton said.
Comparing prices in the college game to the pro leagues can be difficult because of the fragmentation in the collegiate market, but most pro league deals run in the low to mid-seven figures. School sponsorships at the highest level go for the high six figures to seven figures, but the costs vary depending on how many signage, radio, TV and digital rights are included in the deal.
Getting schools to work together
Those untapped categories — consumer packaged goods and consumer electronics, among others — present a significant opportunity for IMG with its new collection of properties from the ISP acquisition, but it will have to convince the buyers.
“It’s so hard to get ownership and create a sustainable position,” said Mike Boykin, executive vice president at GMR Marketing, which represents NCAA corporate partner Hershey. “You run into totally different mind-sets from school to school and conference to conference.”
If a brand wants to own a certain piece of the field or position on the video board, it will have to do without Michigan, Stanford or the other schools that don’t allow signage in their stadiums.
“It could require more flexibility from the schools,” said Jim Livengood, athletic director at UNLV and a former AD at Arizona and Washington State. UNLV is an ISP client that is transitioning to IMG College.
“All of college athletics will benefit from these moves if we’re willing to do more of the same things and what’s best for the whole, as opposed to competing against each other on the marketing side,” Livengood said.
Boykin, for one, is curious to see if schools are willing to show that flexibility.
“If you do get a program together and think, ‘Wow, that looks great’ on paper, you’ve still got to manage all of that day to day,” he said. “It takes significant resources to activate and to make sure you’re leveraging all of the assets.”
State Farm’s Fischer politely described the management of all these assets as a “potential growth area” for rights holders in general. “What we hope is that IMG, with all of its resources, will be able to ramp up the strategic planning and work more with partners. That’s certainly an area that could be a point of differentiation for a rights holder.”
Better activation and planning ideas might also help the rights holders fend off the primary competition for a national college presence: ESPN.
“You can be a massive player in college sports through ESPN,” Boykin said. “For some brands, it’s OK that they’re not on the ground with the local team deals. They get the exposure and brand awareness they need. What you get with the rights holders, though, is the ability to take it more in-depth and to get on the ground with these schools and touch their fan bases.”
Learfield Sports has tried to create a national sales approach of its own over the years with varying degrees of success. It has a six-person sales team that has access to all of the inventory at Learfield’s 46 school properties.
Learfield and ISP in the past also sold across their properties — more than 100 in all — in an attempt to do more national deals. Despite their combined efforts, “it’s difficult to get two separate organizations on the same page,” Sutton said. “We never really got integrated.”
Learfield President Greg Brown, a close friend of Sutton’s and a veteran of the college marketplace, understands the skepticism associated with creating a national platform out of multiple school deals.
“There’s still a real lack of symmetry in the college space,” Brown said. “There just aren’t that many brands that have been able to launch a broad-based program. If there’s a way to make it more of a cohesive process, then it becomes a worthwhile venture, but you’re still going to wind up with a big price. Part of the magic of unlocking this space is making it more efficient, something we’re all trying to do.”
AJ Maestas, president of Chicago-based Navigate Marketing, works with schools to help them determine the value of their multimedia rights.
“The national value of these deals has been overstated,” Maestas said. “The number of deals that come to the table because they’re looking for something national, that’s a very small percentage. And dollars have been prevented from coming into the market because it has been so inefficient. But there are benefits to it for the rights holders, so I can see IMG continuing on its acquisition path.”
Building a sales team
One of IMG’s first tactical moves has been forming a 20-person national sales team that will have offices in New York, Atlanta, Los Angeles and possibly Dallas and Chicago. That staff is expected to be in place by the first of next year.
This team will serve as an umbrella unit to sell against all of IMG’s properties. Each school will continue to have its own sales staff locally.
“One sales representative can represent all of our properties in one fell swoop,” Sutton said of the national office. “If you’re at Procter & Gamble or Johnson & Johnson, you’ll have one person who can put that package together for you, as opposed to working with 40 different general managers. We think it will appeal to a broader and deeper group of sponsors.”
Sutton is in the process of hiring someone to lead national sales. Among his other moves, Sutton has brought in Tony Crispino from IMG’s Cleveland office to serve as IMG College’s chief operating officer. Crispino had been senior vice president of finance operations.
Most of the executives from the old Host Communications office in Lexington, Ky., including senior vice presidents Tom Stultz and Lawton Logan, will move to the new headquarters in Winston-Salem. The Lexington office is not expected to stay open.
Teams of ISP and IMG executives also have formed six committees to work on their merger: Sales, finance, legal, human resources, operations and IT.
“It’s about putting something together that competes with MLB, the NFL, ESPN,” Sutton said. “When you look around and see DuPont taking thousands of people to NASCAR races or all of the hospitality at PGA Tour events, there’s nothing like that in college sports. Yes, we have suites and some hospitality, but frankly, they’re not great offerings. We’ve got to be more competitive. There’s no reason to cede that to the PGA or anybody else.”
Pyne and Forstmann also envision new lines of business developing out of IMG’s deeper dive in the college space through the sale of premium seats, facility financing, database marketing and ticketing, all of which are emerging as potential streams of new revenue from college sports.
Whether that propels IMG into another round of acquisitions remains to be seen. Competing rights holders Learfield, CBS Collegiate, Nelligan and other smaller operations could offer further industry consolidation if acquired by IMG. ISP and Learfield very nearly merged last year, but the deal never closed.
As Forstmann contemplates future acquisitions, the new company would have to bring considerable leverage. Do Learfield’s rights at 46 schools, multiple conferences and the KFC Yum! Center in Louisville, Ky., represent enough new territory for another IMG acquisition?
“If we’re already in 49 of the top 50 markets, how much leverage do we gain by being in the top 60 markets?” Forstmann said. “The whole secret to acquisitions is the leverage. … Our task right now is to execute. We really have a lot to do and we’ve got hundreds of millions in guarantees that have to be paid. I think we’ve reached the necessary critical mass we need and now we’ve got an opportunity to grow like hell.”