Third-party businesses built on acquiring the multimedia rights to university athletic departments have had a tough go of it in recent years.
Just ask Learfield. The rightsholder for over 200 schools has spent the post-COVID era trying to extricate itself from a number of its financial entanglements with top-tier programs, such as UCLA and Florida State, while staring down a billion-dollar debt payment to its lenders.
Having cleared some of those obligations last summer through a restructuring of the company, Learfield is once again on the prowl.
But its new business offensive has plenty of built-in defense, as revealed in the company’s fifth amendment to its multimedia rights (MMR) deal with Colorado, which was signed last summer but only made public last month. The deal commits Learfield to paying Deion Sanders’ employer at least $46.8 million, and possibly a lot more under shared revenue, for the next ten years through 2035.
Included in the agreement, which Sportico obtained through a public records request, are extensive and detailed clauses addressing so-called “diminishing events,” situations that could trigger revisions to the stated terms. In a jam-packed, two-page exhibit, the language covers some of the biggest headline-producing disturbances in college sports of late, including contagions, conference realignment, scheduling changes, potential athlete labor disruptions, NCAA bylaw revisions and the knock-on effects of NIL.
“The language in our multimedia rights agreements has evolved as a result of hundreds of renewals, new arrangements and discussions with school partners over the last four years,” Learfield chief legal officer John Raleigh told Sportico in a statement.
“Given the unprecedented changes in college athletics over that period and the uncertainty of future events,” Raleigh continued, “Learfield and our school partners have agreed on the usefulness of contractual clarity and flexibility in connection with continued changes in the business. We have found that our current contract language works well to efficiently, fairly and collaboratively address industry changes that impact the business.”
Diminishing events are not a new concept in rights agreements, including those previously negotiated by Learfield. What makes this newest one notable, among other things, is how exhaustively it defines those events.
The new exhibit goes on to offer a non-exclusive laundry list of things that could trigger an offset to the deal: unwanted public attention or scandal in the form of TV, Internet, print media and other reporting; Colorado allowing athletes to use its marks protected by trademark law in NIL deals, without Learfield’s prior approval; disciplinary sanctions—of any type—for the football or men’s basketball teams; elimination or a substantial curtailment of the football or men’s basketball teams; the playing of fewer than six home football games or 16 home men’s basketball games.
A lengthy footnote addresses what kind of “material rule change” qualifies as a “diminishing” event, including “any change in applicable constitution, bylaws, regulations or policies of the NCAA or any athletic conference in which University is a member.”
Given the convulsive state of college athletics—with college athlete NIL rights clearing the way for athlete employee status and unionization—such rule changes would seem almost inevitable within the time horizon of Learfield’s CU deal. (In December, NCAA president Charlie Baker proposed a “forward-looking framework” for college sports, including a new subdivision of schools that could directly compensate athletes through an “enhanced educational trust fund.”)
Beyond those are force majeure events that include pandemics; terrorist acts; natural disaster; extreme weather conditions; loss of power or labor shortage; and disruptive conference actions such as realignment, disbandment or merger resulting in the loss of a material source of revenue.
Colorado’s athletic department, in a statement, noted that the “diminishing event” clause was “not unusual” with the newer Learfield contracts and “felt the broader language was completely reasonable.”
It’s unclear if this extensive language will be prioritized in all new Learfield MMR deals. A week after its amended Colorado deal was made public, Learfield and Alabama announced a 15-year extension to their partnership. (An effort to obtain a copy of that agreement, through a public records request, was denied by the school.)
The company has spent the last few years negotiating pandemic-related impairments for short-term relief and prioritizing future long-term contracts that shifted money away from guarantees and toward revenue sharing.
Its Colorado relationship fits that mold. An earlier version of their partnership committed the company to paying the school on a strict guaranteed rights fee. In July 2020, that transitioned to a share of adjusted gross revenue. Learfield committed to paying 60% of whatever adjusted gross revenue it earns from CU’s media rights up to $5 million, and 65% for anything over $5 million. Under this arrangement, according to internal documents Sportico obtained, Learfield grossed $5.45 million of revenue in 2022-23 and paid the school about $2.7 million. For the 2023-24 fiscal cycle, which has enjoyed the boon of “Prime Time” mania, Learfield has grossed $8.1 million off the Buffalos’ rights, and is currently projecting to pay CU a licensing fee of $4.46 million.
The newest iteration of their MMR agreement, which kicks in for the 2024-25 season, includes both guaranteed minimums and a revenue share: Colorado will receive 65% of the first $10 million in adjusted gross revenue, then 70% of anything above $10 million.
Discussions of new terms and COVID clawbacks have led to occasional clashes between Learfield and its partners. In September 2020, Raleigh sent a letter to North Texas’ then-athletics director Wren Baker, after the school had given a formal notice of breach once Learfield began withholding MMR payments.
In his letter, Raleigh appealed to the MMR agreement’s broad “diminishing event” language, which he recalled as stating, “any event, action, change in circumstances or occurrence which has the effect or is likely to have the effect of diminishing or eliminating or otherwise negatively impacting [its] Multi-Media Rights.”
North Texas ended up sticking with Learfield, but some other Learfield partners, for various reasons, went elsewhere. Georgia Tech, for example, signed an 11-year, all-inclusive deal with Legends in December 2020, which included multimedia rights, ticketing, fundraising and data and analytics. As Sportico previously reported, in the 2019 fiscal year, Learfield netted only $1.5 million from Georgia Tech’s marketing rights after paying the school a guaranteed rights fee of $5.1 million.
More recently, another longtime Learfield partner, Penn State, filed a federal lawsuit late last year after Learfield formally protested PSU’s request-for-proposal process that led to the school awarding its business to Playfly. The existing Learfield-Penn State deal runs through May 31.
As for its Colorado deal, Learfield seeks to lessen the likelihood of any litigation—and accompanying public court filings—by addressing disputes stemming from interpretation of diminished events.
The exhibit’s dispute resolution mechanism calls for mediation and, if that fails, arbitration, with arbitration listed as “final.” Although a clause saying arbitration is final doesn’t preclude the loser from petitioning a federal judge to vacate the arbitration decision, federal law commands that judges review arbitrations with high deference.
Matters resolved by mediation and arbitration remain out of the court system in ways that are valuable to companies that tend to attract media attention or are publicly traded.
Colorado’s new Learfield deal was signed on Sep. 7, 2023, one week before Learfield restructured its business to alleviate the financial pressure of $1.1 billion in outstanding debt. Three of its largest creditors became its majority owners, allowing the company to clear $600 million in debt and bring in another $150 million in new capital.
Afterward, Learfield CEO Cole Gahagan expressed eagerness to pursue new business opportunities after having spent so many months dealing with debt relief.
“I wasn’t hired as a restructuring CEO,” he said at the time. “That’s not what’s in my DNA. … Now I get to do what I haven’t done for the last 12 months, which is turn my attention to how we continue to evolve this industry and grow it.”