JohnWallStreet by Sportico article on Jan. 10, 2022 by Reporter Corey Leff. Features insights from LEARFIELD Chief Revenue Officer John Brody, as well as stats provided by licensing leader and LEARFIELD company CLC.
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Georgia and Alabama will play for the College Football Playoff National Championship tonight in Indianapolis. But at least from a top-line perspective, both schools are going to be winners. By simply making it to the championship game, UGA and ‘Bama are certain to see short-term increases in multimedia sponsorship and licensing -related revenue (along with the additional ticketing and hospitality income that will trickle down from the conference). The lift will be “minor, though, compared to what [the schools should be] able to sustain and leverage long-term” as a result of their on-field success this season, said Paul Archey (chief commercial officer, JMI Sports).
JWS’ Take: It’s obvious schools en route to the championship game would see multimedia sponsorship (think: radio broadcasts, digital assets) revenues grow. As Thomas Stultz (president, JMI Sports) said: “There [is going to be] a lift because [the two teams are playing] an extra two games. The more games you have, the more opportunities [there are] to sell advertising and to add value for your corporate sponsors.” JMI Sports and Learfield represent Georgia in tandem; Alabama is a Learfield client.
The JMI Sports president estimated a run to the National Championship is worth “a high six-figure lift or a low seven-figure lift [in sponsorship revenue] depending on the school. I’ve seen it at $400,000. I’ve seen it at $1.2 million.”
The incremental revenue realized is not all profit. Stultz noted that rights holders “tend to spend a lot of money on hospitality, entertainment, additional broadcasts, carriage fees to stations to carry the broadcasts etc…The net is an improvement, but it’s not a windfall.”
With Power Five schools typically retaining ~50-60% of net revenues, the rise in sponsorship revenue usually “adds up to 4-5% of what [the school] would do [annually] otherwise,” Stultz added.
The incremental sponsorship revenue gained is small in the grand scheme of things, in part because both of these schools have operating budgets in excess of $135 million. But the multiyear nature of many large sponsorship pacts, which often include exclusivity provisions, also limit the schools’ ability to strike when the iron is hot.
So, too, does the quick turnaround between the CFP semifinals and the championship game. As Stultz explained, rights holders “don’t know until a week out [which teams] are playing for the championship. So you don’t know what assets you have to sell until you have [that clarity], and it is not like sponsors are just sitting there with a whole lot of money to spend at the last minute.”
The greatest value in appearing in the CFP (at least as it relates to multimedia sponsorships) is in the long-term, residual impact. “Partners are about affiliation,” said John Brody (chief revenue officer, Learfield), and “affiliation and association are more valuable if you are on the winning side.”
The annual growth rate on properties that win consistently (like Alabama and Georgia) tends to be between 5-7%. “Coming after a championship, [a school is] going to be able to sustain that [growth rate] for a pretty good period of time,” Stultz said, thanks to increased sponsor demand.
It is logical to wonder if Alabama’s extended run of success limits its short-term growth opportunity. But Brody said that it doesn’t. “Brands (and fans) love to support a winner, perennial or first timer. The opportunity for a brand to have access to leverage the IP of a school that has been crowned a champion in any sport is of tremendous value. A long term culture of winning allows for a brand’s connection to excellence….that, like winning, never goes out of style.”
Teams that play for college football championships tend to see a short-term rise in licensing revenue, too. “You’re selling more merchandise,” Stultz said. “So, your bookstore sales, online sales, the royalties you get from the college licensing company, etc… all go up.”
That should not come as a surprise. “People like to associate with and wear gear associated with winning,” Brody added. Participating in the CFP and winning a championship also provides opportunities to create new marks and logos that can be leveraged in the marketplace (T-shirts, hats and fleeces are the top-selling products). According to CLC, retail sales for CFP national championship/champions merchandise for participating institutions averages $15 million in any given year. It’s not clear how much of an increase that is over a non-championship year, since revenue percentages vary school by school.
Ray DeWeese (CEO, REVELxp) said Alabama and Georgia can expect “a nice spike in additional licensing revenues” for their postseason run. But as with sponsorship sales, the greater opportunity is in “bigger, future projects that [the schools] can create and license because they continue to [enhance] the [value] of their brand” (think Disney’s 2020 movie Safety, which is based on a former Clemson football player). For reference, CLC (a subsidiary of Learfield) represents both Alabama and the CFP. Georgia is with Fermata Partners.
Despite the additional sponsorship and licensing revenues generated during a title run, it is not certain the teams will net out ahead in the short term. LSU, for example, reported having to pay out $2.36 million in coaching bonuses when it won the 2019 CFP National Championship.
But down the line, a run to the championship game often leads to an increase in attendance-related revenue. “The fans are excited about next season, so season ticket sales [and premium hospitality numbers] go up,” Stultz said. “[And] donations usually follow, because people want to have premium seats, and they want to make sure that they are supporting the program.”