SBJ/July 29-August 4, 2013/Colleges

In rights arena, Spartans stand alone

Once West Virginia signed its 12-year, $80 million multimedia rights deal with IMG College earlier this month, Michigan State became the final holdout.

Every other school in the five major conferences outsources its multimedia rights to a third party like an IMG College or Learfield Sports. The Spartans are the only ones who don’t.

“We’re still here, doing it our way,” said Paul Schager, Michigan State’s associate athletic director for external operations and the chief of the four-person sales and marketing department. “It works for us.”

Just a few years ago, major institutions such as Ohio State, Southern California and West Virginia were among the schools that sold and managed their corporate partner program and other marketing assets in-house.

But that has all changed over the last few years. Ohio State signed with IMG College, Southern Cal did a deal with Fox Sports and, most recently, West Virginia outsourced its rights to IMG. They took the certainty of guaranteed dollars over the anxiety that comes with handling rights internally.

Hollis concedes the school leaves money on the table by not using a third party.
Photo by: AP IMAGES
But it shouldn’t come as a surprise that Michigan State zigged when everyone else zagged.

From their basketball games on aircraft carriers to outdoor hockey matches and their in-house model for marketing, concessions and licensing, the Spartans have built their brand on doing things differently. It’s core to Athletic Director Mark Hollis’ style.

“We tend to fly in new and uncharted territories,” Hollis said with a laugh. “It’s not like we have our head in the sand. We talk to the Learfields and IMGs all the time. And I’m not saying we’ll never engage with a third party, but if we do it’ll be in a manner where we retain a lot of control.”

Hollis came up through the marketing ranks at Michigan State before becoming AD in 2008. Since he’s been in charge, the school has maintained control over its corporate sponsorship program and advertising.

While Hollis makes it a point to never say never when it comes to outsourcing, there are elements to the in-house model that make for more intimate relationships with the school’s partners. Conversations with IMG College, Learfield and other potential rights holders such as Fox Sports are not uncommon.

“Knowing Mark, it’s not surprising that they’re the last ones, but I don’t know that it will last too much longer,” said David Brown, a college consultant who formerly worked at IMG College and Ohio State. “So many times, it comes down to the money and they’ll find they can make more money [if they outsource]. Mostly what you hear from ADs is that it’s just easier to take the check.”

The in-house model is not the most profitable. The Spartans generate about $6 million in revenue annually from their multimedia rights and Hollis admits that they’re probably leaving a few million on the table by not seeking a guarantee from a third party.

Ohio State’s deal with IMG College averages $11 million a year, while Michigan’s pays between $8 million and $9 million a year. Wisconsin’s guarantee from Learfield ranges between $7 million and $8 million annually.

Coincidentally, both IMG and Learfield are owned by private equities and they’re both for sale. Fox has just one property at Southern Cal.

But having a third party control its multimedia rights means that Michigan State probably couldn’t have given General Motors, an MSU corporate partner, a waiver on its rights fee in 2009-10 when the automaker was mired in bankruptcy. Once GM got back on its feet, it continued with its rights fees.

“We’ve got two plants in Lansing; we’re a GM town,” Hollis said. “We felt it was our civic duty to support GM at a time when they were going through difficulties.”

Added Schager: “We figured we could go a year without that sponsorship revenue and waive the rights fee, in exchange for keeping that relationship. If you go solely by the financial return, you can’t make decisions like that.”

GM is one of a handful of corporate partners that have been with Michigan State for 15 years or more. Grocery chain Meijer, Verizon, Pepsi and Gatorade also have long-term relationships.

The Spartans’ biggest deals cost $500,000 to $600,000 a year, while comparable high-end sponsorships at most schools their size run into seven figures.

Keeping their lineup intact: Longtime sponsor Farm Bureau has the spot behind the basket that State Farm owns at many other schools.
Photo by: AP IMAGES
Beyond those five core partners, Michigan State works with about 60 sponsors, and nearly all of them, Schager said, are local or regional companies, such as Meijer, which is based in Grand Rapids, Mich.

The Spartans passed on the nearly ubiquitous Allstate field goal nets sponsorship and put Auto-Owners Insurance on their nets instead. They also said no thanks to the State Farm deal that so many schools have on the basketball goal. Farm Bureau occupies that position in the Breslin Center.

Auto Owners and Farm Bureau have been with Michigan State more than a decade, Schager said.

“I like that they’re the last of a breed,” GM’s Steve Tihanyi, general director of marketing alliances and entertainment, said of the Spartans. “Everybody else has figured out a way to monetize this, but I respect the fact that Mark and his team put the emphasis on the personal side. It’s important for me to know that I can call Mark directly and get unfiltered information. We know where we stand.”

While IMG College and Learfield have spent the last few years building national sales staffs to sell sponsorships across multiple properties, Michigan State looks at college sponsorships as an inherently local buy.

“We do a lot of $30,000 or $40,000 deals that others would pass on,” Schager said. “We have that flexibility.”

National ad agencies bring advertising and sponsorship buys from time to time, and the Spartans pay commissions on those deals, even though none of the agencies are on retainer. New York-based Van Wagner has worked with the Spartans on several deals, including Mutual of Omaha, O’Reilly Auto Parts, Konica Minolta, Hankook Tires and Aspen Dental, while Signature Sports Group in Charlotte brought in Ro-Tel, Wolf Brand Chili and Eckrich.

With a sales and marketing staff of just four, the Spartans occasionally need an assist. IMG College’s sales staff at Ohio State, by comparison, numbers nine, while the IMG staff at Michigan is seven. And that doesn’t count the marketing personnel who are full-time school employees.

“Our staff’s too small,” Hollis said. “They have to sell and implement. But what you see is that everyone gets involved. The coaches are extensions of our sales force. They speak to the companies we’re working with and they do it because they like to be around smart people. It’s not a burden. Tom [Izzo, men’s basketball coach] looks at it as a way to get smarter. … And when we do go out and sell, the companies know us and they know our coaches and athletes. We’re not one of 30 or 40 schools in a portfolio.”

Whether Michigan State can afford to keep its rights in-house remains to be seen.

“I’m surprised that there’s even one school out there” that hasn’t outsourced, said Todd Turner, a former athletic director at Connecticut, Washington, North Carolina State and Vanderbilt. “They must be really satisfied with how it’s working.”

When Turner was an AD from 1987 to 2008, he outsourced the multimedia rights because “it professionalized your sales operation and put people trained in sales in that position. Athletic departments don’t train people for sales. That’s not what we do.

“But you give up some control over your inventory and your messaging, even the presentation of your events. You’re giving away pizzas at timeouts instead of honoring the dean who won the Nobel Peace Prize. There’s a level of commercialization that takes over.”

Industry experts don’t envision a time in the near future when schools will reverse the trend to outsource.

“At some point, there’s going to be a big watershed moment when somebody takes their rights back,” said Rich Klein, whose Rockbridge Sports Group consults with athletic departments. Rockbridge just finished working with West Virginia on its multimedia rights deal with IMG College.

“Taking it back in-house would be a lot of work,” he added. “If somebody could give you the road map and a way to compensate sales employees, it could be done. But as of right now, the answer for most athletic departments is still no.”

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