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SBJ/July 28-Aug. 3, 2014/Colleges
JMI, an underdog with a big bid, wins over UK
Published July 28, 2014, Page 1
“This is the call you’ve been waiting for, and now I can’t get in touch with you,” Jason Schlafer, the University of Kentucky’s senior associate athletic director, joked in the message.
Stultz, who had engineered an upstart bid from JMI Sports to take over UK’s multimedia rights, wasted no time in returning the call. That’s when Schlafer relayed the news that the school had selected JMI’s staggering $210 million, 15-year bid, including a $29.4 million signing bonus.
In the world of collegiate marketing, this was Appalachian State beating Michigan in the Big House.
JMI, which had no experience in the world of collegiate multimedia rights, outbid IMG College, with has rights to 80 schools, by $30 million in an upset rich with story lines.
While JMI was a newcomer to the multimedia rights space as a bidder, Stultz’s presence gave the San Diego-based agency founded by former Padres owner John Moores an inside lane.
College writer Michael Smith and Assistant Managing Editor Tom Stinson discuss the increased competition in the college multimedia and licensing space, why it's happening and what it means going forward.
A decade later, the Greenup, Ky., native has done it again.
“Generally, the incumbent has the advantage, and a lot of times they renew early,” said Stultz, who now works out of Greenville, S.C. “Kentucky wanted to understand its real value. They wanted to make sure they weren’t leaving any money on the table. … And they were willing to dare to be different.”
Even though five companies attended the pre-proposal meeting, only JMI and IMG College submitted bids on April 1. Schlafer at first was disappointed in the response, until he saw the numbers.
If IMG College is the behemoth, then JMI is the boutique firm with the personal touch. JMI Chief Executive Erik Judson consistently referred to JMI’s “white-glove customer service” in the agency’s presentation, and Stultz adopted the phrasing. Both JMI executives told UK that they will be heavily involved in the property.
JMI also emphasized branding the school. IMG co-brands its radio networks with the name of the school and IMG. For example, it’s the UK IMG Sports Network. JMI countered by saying that the network will use only the school’s name, not the firm’s.
“We’re not branding ourselves, we’re branding the school,” Stultz said.
While IMG College has built a network of schools across the country, which enables it to sell national sponsorships, JMI’s focus will be on local and regional sales.
That resonated with UK, a school that in the past had opted out of national deals to protect local sponsors. When IMG College sold a national deal to Hyundai, Kentucky elected not to participate because of a long-standing relationship with Paul Miller Ford in Lexington. IMG College officials, however, said that national sales contributed $1.6 million in annual revenue to the property, revenue that will dry up.
IMG College’s own presentation highlighted its deep resources, national sales and global strength. In its presentation to Kentucky, IMG touted its depth of 1,000 IMG College employees and a “back office” of 300 people to provide operational and administrative support.
JMI used IMG College’s size against it. With IMG College, UK is one of 80 clients. At JMI, UK is the only client.
“It’s nice to think that JMI will go to bed and wake up in the morning thinking about how to make UK stronger,” said Schlafer, who spearheaded the request for proposal process. “We understand there might be some risk with no scale, and the national deals can be attractive, but they haven’t really impacted us that much.”
Added Kentucky Athletic Director Mitch Barnhart: “For us, we become one of a very special group of clients for them. I always want Kentucky to be special for our partners. There’s no doubt they will be absolutely focused on us.”
And then there were the numbers.
The annual guarantees to the school were roughly the same between IMG College and JMI. IMG’s started at $10 million and increased to $14 million, while JMI’s started at $9 million and grew to $16 million.
The big difference was evident in the signing bonus. JMI promised $29.4 million to be paid over the first two years of the deal. IMG offered $5 million paid over four years.
UK’s RFP had requested bidders to present bonuses that could be used for installing Wi-Fi in Commonwealth Stadium, additional premium seats at Commonwealth, a new baseball stadium, video boards and other facility projects.
JMI’s signing bonus not only provides UK with the capital to start funding new projects, it added credibility for a first-time bidder.
“There’s no question Tom’s relationship with the university helped tremendously, but we won the deal because of his expertise in the industry and the financial strategy we have as a company,” Judson said.
Going forward, the question looms: Will JMI be able to make money on the property? IMG College was generating almost $14 million in annual revenue from sponsorship and signage sales, the UK radio network, hospitality, publishing and other rights. JMI, meanwhile, has committed an average of $14 million annually. So where can it grow revenue?
New inventory, including several naming-rights opportunities, will spur new revenue, JMI said, and the campuswide signage and sponsorship inventory will present new selling opportunities. Any nonathletic sponsorship revenue will be shared — 70 percent to the university, 30 percent to JMI. The firm keeps 100 percent of its naming-rights revenue.
The only rights that came out of the old deal were third-tier TV, which included a live football game and five live men’s basketball games, inventory that now belongs to the SEC Network.
Stultz emphasized that JMI took apart every piece of inventory and priced it out to ensure that JMI wasn’t digging too deep of a hole with its guarantee.
“You do it by adding inventory, by working harder and working smarter,” Stultz said. “We’ve also got an aggressive plan to create non-live programming to replace what has been lost to the SEC Network. We see a huge upside.”