Spielman Lawsuit Could Open Door to Multimedia Rights Profit Sharing for Athletic Departments

July 26th, 2017 | by Dan Gale
Spielman Lawsuit Could Open Door to Multimedia Rights Profit Sharing for Athletic Departments
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With the recent class action lawsuit filed by Chris Spielman against The Ohio State University and IMG College I have received a lot of questions from administrators and leaders as to how I think it will ultimately play out.

Long ago I have learned that I am not a lawyer, so I will stay away from offering a two-cent legal opinion. However, I will say both sides have a good case and it will be intriguing to watch as it will ultimately affect the way rights holders engage partners if they need to negotiate with a ‘Past Players Union’ or each individual former player before selling a campaign with their likeness from the glory days of college.

Almost every campus is doing some sort of past player promotion so it will affect their strategy no question.

However, if history is any indication, the rights holder world will adapt and overcome in the same manner as when rights diminished from large television contracts or the market crash in the mid 2000’s. Both times it appeared the multimedia rights world was left for dead, but came out thriving due to change in approach and intelligent leadership.

Because of this lawsuit, it opens the door to a bigger topic on brand protection and now leads to a bigger elephant in the room that could truly affect the multimedia rights world and drastically prevent future growth…

 

What happens when schools and university’s want to be paid off the acquisition of multimedia rights holders assets?

The Spielman lawsuit is centered around past players protecting their brand and receiving compensation for use of their likeness. It raises the questions about the conflict of interest that could occur when a brand is tied to a former player on top of the compensation argument.

In this same logic, why wouldn’t a college and university want to control who their parent company is owned by or receive a percent of profit from a sale to a venture capital firm? A few schools I have worked with had the clause they could ‘evaluate the terms of the contract’ if the rights holder was acquired or there was major change in leadership, but none to my knowledge had a negotiated percent of sale included or profit share model.

In 2013, Learfield Sports was acquired for an estimated $570 Million then sold in only three years for an estimated $1.2 Billion.

Not too shabby!

This was built off smart acquisitions of verticals in and around college athletics and tying up partnerships with colleges and universities for an extended period.

The argument by the rights holder is they pay for the capability to maximize the revenue and would own the financial windfall of an acquisition due to the contract with the school.

In the legal sense this is very true, but if a school wants to maximize their future return why wouldn’t they want an additional financial revenue stream or ability to control to whom their brand is tied?

What if a major donor is an executive at Disney/ABC and was opposed to the Comcast backed company that acquired Learfield?

What if it cost them a $50 to $100 Million-dollar naming opportunity?

These are all items that need to be examined as there is a bigger picture to partnership and requires knowing who you are and where you fit in the marketplace as a brand.

There are two main elements to this argument that really affect a school’s negotiating position:


1) Determining how much value the rights holder receives from your specific brand?

This concept may only apply for a select few brands in the marketplace, but as a person who spent time in the private sector… The big brands are ‘sexy’ to the outside world!

Those logos can add tremendous value!

When you hear Learfield, you hear University of Oklahoma or University of North Carolina…

When IMG College is mentioned, University of Texas and UCLA are top of mind…

These brands have helped build the overarching value of these companies and although they have received millions of dollars for these rights, could one argue they’re entitled to more?

The venture capital world and market capitalization has clearly shown college athletics is a growth sector.

 

2) How many of the multimedia rights holder’s verticals are tied to your specific brand?

Rights holders have increased the verticals in which they engage with athletic departments over the past few years, which has increased their valuation. They will argue that because they are not just sponsorship focused, the additional payout for profits would not be fair.

I partially agree.

However, why wouldn’t one look to see how many of the verticals the school’s brand is tied to for the rights holder (Internet, Signage Provider, Ticketing Provider, etc.)

This would increase the value of the rights holder brand and could be used by the rights holder as a negotiating tactic.

Example: A university has a ticketing provider, Internet provider and multimedia rights provider from the same parent company. By the university engaging all their assets, it will increase the value to the rights holder, and in turn the rights holder may offer a ‘Profit Sharing Model’ or incentive for consolidation of the verticals.

This tactic could offer a unique advantage in the bid process moving forward and could be viewed as a positive for the rights holder in the future.

The issue of increased value and revenue from the multimedia rights acquisitions is not going to be for the masses, however for the small percentage of universities and colleges that are partnered with a rights holder, it is something to be examined as a means of protecting upside and your brand.

It truly comes down to understanding your place in the market and what assets you are bringing to the table. This takes time and reflection of your brand and an understanding of value in the marketplace. Examining how your brand can be positioned for long term growth and the unique elements that could be on the horizon are key to sustainable growth.

In summary, the premise and issues brought about by Chris Spielman in his suit against his alma mater may not on the surface affect the multimedia rights world, but the ideals and thoughts it will ignite could cause a major shift in the structure of deals at the largest universities moving forward!

Dan Gale About Dan Gale
Dan Gale has been working in and around college athletics for the past 15 years. He has worked in fundraising and operations at the University of North Carolina, Temple University and East Stroudsburg University. He spent the bulk of his career at CBS Collegiate Sports Properties in leadership roles at the United States Air Force Academy, Old Dominion University, Towson University and University of Maryland. Upon leaving college athletics, he spent four years in the private sector building companies focusing with college athletics in the areas of technology and secondary ticket sales. He is currently the President of Leona Marketing Group, helping athletic departments formulate their revenue generation strategies and negotiating their multimedia rights.

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