Does Irish deal help or hurt Learfield-IMG?
Notre Dame’s surprising multimedia rights deal with JMI Sports and Legends could impact the pending Learfield-IMG College merger.
The proposed union between Learfield and IMG College, clearly the two leaders in college marketing, shook up the space last September when the news first broke. Almost eight months later, the Department of Justice’s antitrust division still is interviewing industry experts to determine if the merger would create a monopoly and whether it should be allowed to proceed.
In question is whether the combined company, which would own the multimedia and licensing rights to 200-plus schools and is expected to be valued at more than $2 billion, would restrict competition or create barriers to entry, core elements of an antitrust case.
The DOJ, as part of its ongoing review of the merger, has questioned a variety of industry insiders, ranging from athletic directors to executives currently and formerly in the college space. Those who have been contacted, some as recently as last week, say the questions about competition, barriers to entry and national sales have grown deeper and broader as the investigation has progressed.
Given that a combined Learfield-IMG College business would own the rights to 82 percent of the power five schools (53 of 65), DOJ investigators want to know how much the merger would limit opportunities for other bidders already in the space or those trying to get in.
Notre Dame’s recent 12-year multimedia rights deal, which evolved out of a bidding process with nine interested companies, including Learfield and IMG College, indicates there remains plenty of room for competition. The Fighting Irish selected JMI and Legends to manage their sports property two weeks ago in a bidding contest that started in October 2016. JMI holds the rights to six college properties, including the Irish, while Legends is new to the multimedia rights space.
Who's Got Who?
Multimedia rights holders for the 65 schools among the big five conferences
• IMG College (28)
Arkansas, Arizona, Baylor, Boston College, Duke, Florida*, Florida State, Georgia*, Georgia Tech, Kansas, Michigan, Mississippi, Nebraska, Ohio State, Oregon, Pittsburgh, Rutgers, South Carolina, Syracuse, TCU, Tennessee, Texas, UCLA, Vanderbilt, Virginia Tech, Wake Forest, Washington, Washington State, West Virginia
• Learfield (25)
Alabama, California, Colorado, Illinois, Indiana, Iowa, Iowa State, Kansas State, Louisville, Miami, Minnesota, Mississippi State, Missouri, North Carolina, North Carolina State, Northwestern, Oklahoma, Oklahoma State, Oregon State, Penn State, Purdue, Texas A&M, Texas Tech, Utah, Wisconsin
• Outfront Media Sports (3)
LSU, Maryland, Virginia
• Fox (3.5)
Auburn, Florida*, Michigan State,
• JMI (3)
Clemson, Georgia*, Kentucky, Notre Dame*
• Pac-12 MMR (1)
• In-house (1)
• Legends (0.5)
* Florida is jointly represented by IMG College and Fox, Georgia is jointly represented by IMG College and JMI, and Notre Dame is jointly represented by JMI and Legends. These were factored as a half-share for each agency.
Source: SportsBusiness Journal
That two firms with such a small percentage of market share won the rights to one of the marquee brands in college sports represents a glaring example of where the underdogs prevailed. The victory for JMI and Legends shows that bidders with a unique approach can carve out a piece of the college business and, seemingly, that competition has not been snuffed out.
The outcome also presents a curious case for Learfield and IMG College. Both companies, which are still operating independently until the merger closes, pursued Notre Dame’s rights and didn’t get them. On the other hand, the win for JMI and Legends might actually help the case for the Learfield-IMG College merger.
Not everyone agrees.
“Is that really competition, though?” one industry source said, citing JMI’s four clients among the 65 power five schools, compared to 53 for a combined Learfield-IMG College. “It’s hard to know how the DOJ will look at that.”
In fact, JMI clients like Clemson and Kentucky say they picked the firm, in part, because it has fewer clients, which leads those schools to believe they’ll receive more individualized attention.
“For us, an individualized approach was paramount,” said Jack Swarbrick, Notre Dame’s athletic director. “Given our approach to commercialism — no signage, no video advertising — you just can’t bundle us. It doesn’t work. That’s a case where [a smaller firm] probably works better.”
The Notre Dame deal goes against the narrative that Learfield-IMG College will restrict competition and hold down rights fees, a concern expressed by some athletic directors who worry about a marketplace with one fewer bidder.
JMI, Fox Sports and Outfront Media Sports each own the rights to a handful of schools in the power five (see chart), but their ability to grow their portfolio of college properties likely will be severely limited in the future. The long-term nature of most Learfield and IMG College contracts means that their rights and revenue will be locked up for the next several years, leaving very little room for competitors to grow their business. Multimedia rights deals commonly go out 10 years or longer.
Rights holders also have become quite savvy about extending their deals long before they expire with incentives of cash or facility upgrades, meaning few blue-chip properties ever get to a bidding stage. Notre Dame was an exception after being with Scott Correira’s Play By Play Sports for 15 years.
As for barriers to entry, Legends’ joint venture with JMI indicates that companies without previous multimedia rights experience can find a way into the college space. But Legends had a unique advantage, having worked with the Irish since 2013 on premium-seating sales and hospitality during the Campus Crossroads stadium renovation.
“I don’t score wins and losses and upsets,” said Mike Ondrejko, Legends’ president of global sales. “I just think there are brands and companies that fit together better than others. We’ve been at Notre Dame for the past four years, so this was a natural extension of our relationship.”
The third question that keeps coming up from the DOJ is about national sales. By bringing so many schools together, Learfield-IMG College would be the closest thing to a one-stop shop for brands that the college space has ever seen.
Will Learfield-IMG College, with its massive scale, dominate national sales and raise prices? And if it does, is that restricting competition or just good business?
The DOJ’s questions about the potential for higher sponsorship costs indicate that national sales are a looming concern among the college insiders interviewed so far.
“This is not about the companies,” one industry expert said of the DOJ review. “They take that chance when they go into business. This is about what’s best for the schools and the sponsors.”