- Potential merger is seen as a way of taking college sports to the same level as other major sports and entertainment properties
- IMG College represents 90 colleges and universities and Learfield around 130
- 2016's top-earning school, Texas A&M, generated $194m in revenue, of which half was from rights fees and tickets
The proposed merger of IMG College and Learfield, the two powerhouses of US college sports marketing, seems tailor-made to maximise revenues from college sports at what many observers see as a time of unparalleled commercial opportunity.
With media and marketing rights fees for the major schools and conferences continuing to strengthen ahead of further shake-ups anticipated in the sports media landscape, the timing of the deal – should it receive regulatory approval – appears to be on the money.
While regulatory scrutiny means neither party is discussing the deal on the record, sources say the merger is built around the idea it will take college sports to a new level, competing with other major sports and entertainment properties, from the NFL to Live Nation, for marketing dollars.
And while the two parties may have competed for business on some levels, they have already worked as partners in IMG Learfield Ticket Solutions since 2012. Last year that organisation sold $1.3m (€1.1m) of basketball tickets, $10m of football tickets, 55,000 new football season tickets and, critically, raised $15m in donations for its college and university clients.
These are the only properties that include ‘donations’ on the balance sheet. But driving alumni donations on the back of sports programmes is critical to funding university sports.
Best kept secrets
According to highly-respected international sports business academic and commentator Prof Simon Chadwick of Salford University, US college sports remain one of the sector’s best kept secrets.
“While there are rules pertaining to the commercial development of US college sports, the size of the country’s universities, the predisposition of Americans towards sport, and the fact that many top-class athletes attend US universities on sports scholarships means that significant numbers of people are engaged with or attend college sports events,” he explains.
“For example, in the NCAA (National Collegiate Athletics Association) it is common that, for example, American football games attract stadium crowds of 100,000 or more. Furthermore, retail outlets across US campuses are normally full of merchandise produced by the likes of Nike and Champion.
“Unlike sport elsewhere in the world, where grassroots and amateur sports structures feed professional leagues, in the US it is college sport that underpins elite professional sport. The draft system employed by the likes of the NBA, NFL and so forth centres on the best college athletes being ‘picked’ for US sports biggest teams. To illustrate, it is worth remembering that Michael Jordan was a North Carolina University student when he was drafted.
“As such, college sports are deeply embedded in the overall US system of talent acquisition and development, as well as being the lifeblood of many fans’ sport consumption experience.
“Most towns and cities have a local university, many are not close to an NBA or NFL franchise, hence college sport is the most easily accessible form of sport and, consequently, is where fans often spend most of their money.”
The IMG College-Learfield agreement is the latest evolution in college sports marketing, which has been shaped by a host of mergers and acquisitions over the years. IMG itself established its position in the market with the acquisitions of the Collegiate Licensing Company and Host Communications back in 2007, before adding ISP Sport three years later.
Learfield, which started life as a local radio operator, was sold to private equity company Atairos Group in 2016 for some $1.3bn, while IMG was acquired for £2.4bn by WME and Silver Lake Partners in 2013, ushering in a new era for the sports marketing giant.
IMAGE: University of Texas are one of the biggest draws in college sport (Getty Images)
Ahead of IMG’s arrival, college sports marketing was widely considered to be somewhat sleepy and parochial and certainly undervalued . But where IMG led others – including CAA, Fox Sports and Outfront Media – have taken positions and the entire sector has been transformed.
At the time of IMG’s acquisition by WME it’s college business contributed about a third of its total revenue and the belief is there is far more where that came from. But in a newly competitive and more professional market the merger creates many new opportunities not simply to take advantage of scale but to make the new – and as yet unnamed – business yet more sophisticated and competitive outside traditional areas of business.
The scale of the merged operation is clear. IMG College represents 90 colleges and universities and Learfield around 130. Across the board, representation extends from media rights to sponsorship and ticketing, licensing and consumer products. According to Forbes, their combined client roster accounts for 70 per cent of Division One Universities and 85 per cent of the schools comprising the Power 5 conferences: the ACC, Big 12, Big Ten, Pac-12 and SEC Conferences. These represent the top level of college football which, along with basketball, delivers the biggest bucks of all.
For those who haven’t grown up in the US sporting environment it is worth taking a moment to consider the sheer size of the college sports business. According to a USA Today report, the top-earning school in 2016 was Texas A&M – a member of the SEC (South Eastern Conference) – generated $194m in revenue of which some $47m was from rights fees and $45.8m from tickets.
State neighbours University of Texas of the Big 12 ranked second in the revenue league with $187m, with Ohio State (Big Ten) in third with $170m, Alabama fourth with $164m and Michigan fifth with $163m.
In each case rights fees and ticketing accounted for over two thirds of revenue, with donations making a significant contribution to the total.
To give these figures some context, for the year to the end of June 2016, Leicester City – then champions of soccer’s English Premier League – had a turnover of £129m, roughly equivalent to the third ranked school. Leicester was the eighth highest earner in the Premier League and, like all of the 20 Premier League clubs, in the European Top 30.
So college sports is clearly big business and all indications are that it is about to get even bigger. In terms of TV rights there is a keen sense that in the nation which gave us the cord-cutting generation, the emergence of major new digital media companies with massive war chests to spend on rights will see a new level of competition when the next rounds of college rights come up for grabs.
In an interview with SportBusiness International earlier this year, Pac-12 Commissioner Larry Scott summed up the mood in collegiate sports when he says: “I’m really excited about the future. My view is that the cable TV model will still be significant – although smaller than today – but that new technologies and means of distribution will also be important.
“We are seeing the emergence of massive new players like Amazon, Facebook and Google which are from different eco-systems and introducing technology which is disrupting the live video [market] where sport remain the killer app. Going forward we will no longer be limited by who is the provider of the cable or satellite dish.
“As a content rights owner I think we are seeing a world with more competition and more ways to engage with our fans.”
The merged Learfield-IMG College will be positioned not simply to take advantage of the anticipated upturn in the value of college sports rights and additional visibility from new deals, but to add value in other areas.
‘Significant investment’ is anticipated in areas such as data, ticketing and retail insight, all of which will not simply expand customer bases but maximise spend per fan by better understanding their wants, needs and purchasing preferences.
Unsurprisingly, Prof Chadwick too sees digital as the path to significant growth, but he also sounds a note of caution.
“Digital and social are inevitably important areas in which college sport can grow and develop,” he says. “Building fan engagement is important too.
“There are two big challenges facing college sports: resisting the challenges posed by other sports such as soccer, which has grown in strength over the last decade; and building the appeal of US college sports elsewhere in the world.
“The former implies the need for more dynamic, strategic management; the latter is much more of an issue, and one wonders whether the potential for growth will ultimately be constrained by the absence of an overseas market for college sports.”
Those in the college sports field don’t share the view that overseas markets are a closed door and as education becomes a truly global industry, many US universities see their sports teams as a tool for developing their brands in new markets, and there is some evidence to support their confidence that the needle is moving in the right direction. In October the Chinese digital giant Alibaba signed a deal to screen 175 Pac-12 sports events across its various platforms, a move which comes after Pac-12 basketball teams had played exhibition games in the country. This relatively small step may be significant if it provides an overseas springboard for college brands.
But Prof Chadwick doesn’t see things that way.
“In my opinion the scope for international growth is limited. Not only do college sports have to contend with the obstacles faced by the wider international development of, for example, the NFL, it also faces perceptions elsewhere in the world that are similar to the challenges faced by Nascar. That is, that they are somewhat parochial and without relevance or meaning to overseas markets,” he says.
So against a background of growing rights values at home and some movement internationally, how does Prof Chadwick view the IMG College-Learfield merger?
“Competing with one another in sports characterised by a strange dynamic – massive at home, but not overseas – is a zero-sum game,” he says. “One senses that collaborating for the greater good seems to be their chosen strategy; indeed, it is almost as though the integration of competences is something of a patriotic duty, intended to safeguard the future of college sports.”
Patriotism is one thing but, given the massive scale of recent investment into both IMG and Learfield, one thing is clear: while others focus on conquering new territories, this is about the recognition of significant growth opportunities in a valuable sports market neatly contained between sea and shining sea.