Learfield-IMG College merger: ‘Anything you want in college’
When news broke last week that IMG College and Learfield were finalizing a groundbreaking merger, even some of the most plugged-in sports executives reacted with shock and disbelief.
“I had to re-read it because I couldn’t believe it the first time,” Oklahoma Athletic Director Joe Castiglione said.
It’s easy to understand why so many people were stunned. Once the merger between IMG College and Learfield officially closes, the combined business, with its size and scale, will be unlike any that’s ever existed in college sports.
IMG College-Learfield will own the multimedia rights to 200 schools, including a staggering 56 of the 65 schools in the power five, marking the first time one entity has ever brought together so many college rights under one gigantic umbrella.
Even when they operated as rivals, Learfield and IMG College touted their respective size as a major selling point. They pitched schools and brands by saying that they were the destination for all things college, from sponsorships and licensing to ticketing and local media. As a merged company, the two will turbocharge that promise by owning 86 percent of the biggest brands in college sports.
“In theory, what they’re going to sell is that they’re a one-stop source for all things non-TV,” said Mike Boykin at Bespoke Sports & Entertainment. “Anything you want in college, they pretty much have. That will be their selling proposition. They’re it.”
It’s not clear if there are any other assets being exchanged.
The companies have not decided on a name and no determination has been made on where the headquarters will be. Learfield operates out of Plano, Texas, while IMG College is based in Winston-Salem, N.C.
Learfield and IMG are not expected to comment until the deal is signed. But industry insiders, from athletic directors and commissioners to sponsors and competitors, were already asking what it means for them once the news broke last week.
The most immediate reaction was that a combined IMG College-Learfield would be a massive selling force across so many schools. Company officials think the size and scale of the merged business will make it a legitimate contender to professional leagues, allowing more sponsorships to be sold on a national basis and, theoretically, pumping more money into the pockets of their schools through new and expanded sponsorship opportunities.
Skeptics emerged as well, suggesting all of that new revenue will flow to their private-equity owners and investors, not the schools. Learfield is owned by Atairos Group; Silver Lake Partners is the majority owner of WME-IMG, parent of IMG College.
Schools also expressed concern that they would lose negotiating leverage because one of the two major bidders for rights wouldn’t exist anymore.
“It’s taking away one of the major players in the space, but there are others out there,” said Castiglione, whose Sooners work with Learfield. “What you do expect is that consolidation will help create a stronger marketplace for advertisers.”
What follows is a deeper look into some of the questions surrounding the merger:
Was it the pure revenue potential that exists for the company that finally consolidated the collegiate marketplace? Was it the financial pressure exerted on both companies by their private-equity ownership?
There’s no clear answer. Marketers dating back to Bill and Pat Battle, Jim Host and Ben Sutton have all taken a stab at consolidation — making the fragmented college space easier for sponsors to navigate, but it clearly never reached this level.
What’s different now is that a merged IMG College-Learfield means less competition when they go after schools and less leverage for sponsors looking for the best prices.
“Will it drive costs up for sponsors? Probably,” said Fishbait Marketing’s Rick Jones, who has worked with Capital One and Infiniti on their college sponsorships. “The other thing I’d worry about is the smaller schools? If sponsors decide to spend solely on the bigger schools, because of the ease with which they’ll be available now, that could hurt the smaller schools.”
On paper, Judelson or Seinfeld would be a logical pick to lead national sales post-merger, and either one has a compelling case.
“The national sales play has clearly been a strategy for the big guys and they’ll double down on that now,” said Erik Judson, CEO at JMI Sports, another rights holder in the space.
Learfield and IMG College said the local sales teams on each campus will not be scaled back.
“Theoretically, they’re coming together to create more value,” said Adam Dettman, director of sports and entertainment marketing for MillerCoors. “But this is also just part of the growing pains with college athletics. How you commercialize in college is different than in the pro leagues, but overall a merger should allow us to be that much more focused. It should help us.”
The merger could be great for the schools. If Learfield-IMG College delivers on their belief that sales will accelerate, the incremental revenue would drive more money into the schools’ coffers.
Who's Got Who?
Multimedia rights holders for power five schools
|Washington State||West Virginia|
|Iowa State||Kansas State|
|Mississippi State||North Carolina|
|Oregon State||Penn State|
|Texas A&M||Texas Tech|
|Michigan State||Southern Cal|
* Fox hired IMG College to manage Florida
^ IMG College and JMI share Georgia's property
# Radio network only
Source: SportsBusiness Journal
There’s also a strong concern among industry experts that the merger will reduce the schools’ leverage by removing one of the two leading bidders from the bargaining table every time they go to market. For now, the companies are saying they expect rights fees to continue escalating. If the merged entity does produce more revenue, as intended, that would mean more money in the system to pay the schools.
There’s also been speculation that some schools have added termination clauses to their multimedia rights contracts in the case of a sale or merger, which became a concern with both Learfield and IMG College operating under private-equity ownership, but there’s no sense of how widespread that might be or if schools would act on it.
“Less competition tends to keep revenues down, so it will be interesting to see who emerges to provide competition,” said Steve Patterson, the former athletic director at Texas and Arizona State. “The innovative ADs have to be thinking about taking their rights in-house as an alternative.”
A merged Learfield-IMG College will own the multimedia rights at 86 percent of the schools in the power five and nearly all of their licensing rights.
That’s a monopoly, right?
“If you have a monopoly, you can dictate pricing,” Jones said. “Sponsors used to be able to buy 10 schools at one place and go get the same price at the other. You won’t be able to do that anymore.”
Several sources said they expect Department of Justice regulators to inspect the deal. The idea of commercialization in college sports is too alluring to pass up.
Once any deal gets in front of regulators, it’s impossible to predict an outcome, though as BHV’s Chris Bevilacqua pointed out, the Trump administration has appeared much more merger-friendly than the Obama administration.
The fact that one company controls so much of the market will raise eyebrows — the lack of multiple bidders has the potential to depress rights fees, which is an area where the government could step in.
On the other hand, schools still have other options. Fox, JMI Sports, Outfront Media and Van Wagner are some of the companies that have established multimedia rights businesses, but each of them have small client lists with just a fraction of the power five. They have been eager bidders, though, and Fox especially is one to watch, sources said. Fox could be the one motivated enough to roll up all of the non-IMG College-Learfield business.
There’s also the question of sector. Will Learfield-IMG College be considered narrowly as a multimedia rights company or more broadly as a media company that competes against Fox and ESPN?
If the Department of Justice does press the issue, IMG College-Learfield could be forced to divest some of their smaller properties from the lower levels of Division I as a means of appeasing regulators.
The size and scope of the merged company is so big, some have speculated that it could wind up competing with ESPN and Fox Sports for national TV rights as they come up.
Then IMG College-Learfield could turn around and sell the rights to an outlet like Amazon or YouTube or Netflix or, even, ESPN and Fox Sports.
“Somewhere down the line, the question is going to be, ‘How do we expand into streaming?’ or other ways to generate more revenue,” Boykin said. “They obviously have the resources, the history and the people to get involved in whatever the new world is. … These guys are playing for down the road, they’re not playing for right now.”
No chance, say several media executives.
Secondly, the Big Ten, SEC, Pac-12 and, soon, ACC will have their own TV networks in place and will not want to take rights away from them.
“College used to have a vibrant syndication business, but that’s all dried up thanks to these channels,” one media executive said. “The only true media that’s left is radio, and there’s not a lot of money in that.”
Bevilacqua noted that conferences would be taking a big risk by putting their TV rights with IMG College-Learfield because the merged company has little experience getting distributors to carry national rights. And the market for selling rights directly to a digital company like Amazon or YouTube is not developed yet.
“Where’s leverage to drive distribution for those rights?” he said.