While most of the media coverage of sponsorships in college athletics over the last two years has focused on name, image, and likeness (NIL) and athlete endorsement deals (and rightfully so), another tremendous development is taking place. Learfield—the largest multimedia rights (MMR) holder in college athletics—is facing over $1 billion worth of debt payments coming due in the next year. Although the company remains optimistic publicly, there are major concerns about its ability to satisfy its debt payments. Learfield’s potential bankruptcy and/or restructuring has the potential to shake things up in intercollegiate athletics as much as NIL has. 

What is a multimedia rights company and how do they work? 

In college athletics, MMR companies sell sponsorship assets on behalf of athletic departments. For example, an MMR holder will typically sell the rights to static and dynamic stadium signage to local or national businesses. Think the LED board flashing a McDonald’s logo on the sideline during a basketball game or a local pizza chain’s logo on the outfield fence in the softball stadium. MMR holders will also typically sell sponsorship space in places like the athletic department’s website and in game programs. 

In exchange for the rights to sell the sponsorships, the MMR companies (like Learfield) have to pay the athletic departments. They do so with either a yearly lump sum or a negotiated percentage of the sponsorship revenue. Generally, the universities prefer the lump sum—it helps with budgeting and provides guaranteed revenue. But if Learfield purchases the MMR for $5 million, it would need to sell the total sponsorship inventory for more than $5 million to break even or turn a profit. Otherwise, the company would lose money, which it has on a handful of its MMR deals in recent years.

Of course, the MMR fees range substantially from school to school. Some schools can command a fee in the tens of millions per year, while others receive less than $1 million. There are several factors that determine what a university’s MMR fee will be worth, such as its local market, national exposure, alumni base, and game attendance. 

Learfield’s financial troubles 

In 2018, Learfield merged with IMG College—then its biggest competitor. Prior to the merger, both companies took on some “bad” deals (in which they were not able to turn a profit) to gain market share. The COVID-19 pandemic and its effect on the total number of games played and fans in attendance during 2020 and 2021 caused further issues for the combined company. The recent economic downturn has made things worse, as sponsorship dollars have dried up industry wide. Learfield has renegotiated a handful of its MMR deals and is currently attempting to restructure its debt in order to avoid bankruptcy, although it is uncertain whether or not it will be able to do so.

Considerations for sponsors of college athletics 

Thousands of companies have purchased sponsorship inventory from Learfield. Those companies range from the largest Fortune 500 companies to local businesses with a single location in a college town. For some, college athletics sponsorships may be their largest marketing spend each year. Regardless of whether a sponsor has signed a contract for thousands of dollars or millions of dollars, each business that has purchased any sponsorship inventory from Learfield should consider the following contract concepts and how they may be affected by a potential bankruptcy or restructuring: 

Termination clauses

Can either party terminate the contract at any time or are there express conditions that must be fulfilled prior to termination? What are the potential repercussions of termination? 

Renegotiation clauses

Would any specific occurrence trigger renegotiation of the contract?

Successor clauses

Does the contract provide any insight concerning successors in interest? This is particularly important as Learfield may face bankruptcy or restructuring. 

Assignment clauses

Does the contract allow one of or both of the parties to assign the contract to another party at any time or for any reason? 

Force Majeure clauses

How broadly is this clause drafted? Could it include bankruptcy?

There may be other clauses within the contract that could affect the sponsor’s rights and abilities. Depending on contract language (and of course what ultimately happens with Learfield, which is hard to predict), sponsors may need to reconsider their marketing plans and budgets. It is important at this point to review any sponsorship contracts and understand the potential risks, liabilities, and opportunities. To best manage and mitigate risks associated with college athletics sponsorship contracts entered into with Learfield, consider working with experienced counsel.