The name of the game then for athletics directors is to maximize available resources and seek new revenues. One of the ways Division I athletics departments are meeting both of those objectives is through outsourcing, or turning over to outside marketing firms the sponsorship sales re- sponsibilities that have traditionally fallen to their in-house marketing staff.
Essentially, outsource marketing deals work like this: Marketing Company A proposes to take over the sponsorship sales for Institution B in exchange for a guarantee, or fixed amount of money. The hook for institutions is that the guarantee money is more than the in-house staff is generating.
Robert Zullo, an assistant professor of sports administration at Mississippi State University, said outsource marketing agreements generally encompass all or part of the following areas: radio, multimedia (including Internet), signage, printed game-day promotions, hospitality and titleship. The more an institution is willing to turn over to an outside firm, the higher the amount of guarantee money the athletics department may receive.
According to Zullo, who has conducted extensive research on the trend, outsourced marketing is primarily a Division I enterprise because of a simple and familiar economic concept: return on investment. For marketing companies, this exchange is high risk versus high reward. Simply meeting the guarantee means the company has broken even. To make money, the company must exceed the guarantee.
"A company is not going to guarantee a school money if it can't make its money back. That's why you're going to see companies approach Division I-A schools, particularly those that have large followings in men's basketball and football," Zullo said.
Among the sports always or most often included in outsourcing deals are football and men's basketball, and to a slightly lesser extent, women's basketball, because they draw the largest volume of fans and typically provide a school, and by extension a sponsor, with the highest visibility and exposure. But the sports that are covered under a deal also may fluctuate depending on the region of the country. For instance, in the Northeast, lacrosse may be highlighted, or in the South, baseball. However, in a number of cases all sports in an athletics department are tied to a sponsorship sales contract with the outside marketing vendor.
Jim Host, founder of Host Communications, Inc., is credited with launching the trend about 30 years ago. In 1974, two years after establishing the company, Host inked a contract with the University of Kentucky Athletic Association. Host continues to be a major player in the sports marketing industry after recently signing Kentucky to a new package that guarantees the school $80 million over 10 years. The deal not only has set the high water mark in terms of rights fees paid to schools, but it also is unique because of provisions for scholarships and academic benefits outside the athletics department (see related story, page A3).
Other influential names in the marketing business besides Host are Learfield Communications, International Sports Properties (ISP), Action Sports Media and ESPN Regional.
Seeking to better understand the impact of outsource marketing on the athletics climate, Zullo and student assistant Megan Atkins surveyed 117 Division I-A athletics directors about their marketing efforts. For comparison purposes, Zullo separated the 90 schools that replied into the so-called major conferences and other I-A leagues.
Fifty-four of the former and 36 of the latter responded. Of the former, 42 indicated they have established an outsourcing relationship. The trend is slower to emerge in other I-A schools, where only 12 indicated they had contracted out their marketing operation.
However, of the schools that have turned to outside marketing firms for help, most said they did so because of the guaranteed additional revenue for the athletics department. Zullo's research also indicated that the financial guarantee for the so-called major conference schools is more -- most pull in $3 million or less, although there are two with guarantees of more than $4 million a year. The other schools are striking deals that run about $750,000 or less.
About two years ago, the University of California, Los Angeles, relied on its in-house marketing staff to handle sponsorships sales. Glenn Toth, then the associate athletics director for corporate relations and now the associate athletics director for sports/administration, said potential financial advantage was one reason that led his school to switch to an outside vendor. UCLA assigned ISP Sports oversight of five areas: corporate sponsorships, radio, programs, Web page and television. All of the Bruins athletics programs are covered under the contract.
"We looked at what we were making from the combined five elements, and we looked at the progression in those areas over the past 10 years and projected what kind of growth we could expect in the future," said Toth. "Once that analysis was completed, and once we saw the numbers from these companies, the conclusion was rather obvious and inevitable."
While money is a significant motivator for schools, such outsourcing deals offer other attractive features as well. For Gary Barta, director of athletics at Wyoming, the outside marketing companies that handle sponsorship sales for athletics departments also provide expertise.
"Clearly, these companies that specialize in outsourcing are just that -- specialists. Every day they wake up and they are marketing athletics departments across the country," said Barta. "The second thing you have when you go with an outsourcing company is greater buying power. A company like Learfield, if they have, say, 21 properties, can go to a corporate partner and have a discussion at a level I couldn't, based on just one university."
Additionally, the University of Georgia's Alan Thomas, associate director of athletics for external operations, said that with the times being as tight as they are, trying to add internal staff is not easy, so outsourcing becomes a way to increase the size of the staff. Greg Brown, a senior vice-president at Learfield, said issues related to finances and staff are common motivators.
"I would say that financial implications are key, but also the ability to put more human horsepower behind the whole corporate sponsorship business, which we can more freely and easily do," Brown said.
Generally, once an outsourcing agreement is reached, the school's internal marketing personnel shift their focus to tasks such as game-day atmosphere and filling seats. But Leslie Wurzberger, assistant director for marketing at the University of Washington and president of the National Association for Collegiate Marketing Administrators, said that even with an outsource marketing relationship in place, marketing staffers aren't completely out of the selling business.
"There's still a lot of work that has to be done by those in-house marketing people to make that relationship work. You still are directing a lot of that and making sure the company represents you well," said Wurzberger.
For as many advantages and benefits as schools derive from outsourcing their sponsorship sales, there are institutions, such as the University of Southern California, that continue to forge their own path with in-house personnel. Not only does Southern California retain all sponsorship sales efforts in-house, the school also handles all of its own licensing and it retains its own radio rights. The school buys air time from a radio station, repackages it and sells it to sponsors.
Jose Eskenazi, associate athletics director for sponsorships and licensing for the Trojans, and two other staff members shoulder the load. The school's location in Los Angeles, the second largest media market in the nation, works to Southern California's advantage by giving the athletics department access to large advertisers and national accounts.
Said Eskenazi, "Our athletics director firmly believes that no one can sell USC like USC."
He also said the school wants to retain total control of its brand and how it is marketed. He said that trumps the revenue that might be realized by using an outside company. "Based on what we've seen in terms of rights fees that are paid, we make more money. We do very, very well, so we don't feel like we're leaving any money on the table."
According to Eskenazi, many of the sponsors he and his staff work with enjoy direct access to school representatives, and while he understands why schools may choose to go with an outside firm, he believes over the long term, schools could make more by controlling their own sponsorship interests. To do so, however, takes time and patience, two elements athletics directors could be operating without these days.
"I think currently a lot of athletics directors are under pressure to deliver immediate returns, especially financially, and cover their budgets. The guarantee dollars on an annual basis make it easy for them to make that decision," said Eskenazi. "But if there's some future vision to it and you're able to be patient, I think in the end it comes out to be pretty successful for you. It does take time. Mike (Garrett, Southern California AD) has been doing this type of model since the mid-90s. It's really starting to pay dividends now."
For those schools that establish and maintain relationships with an outside marketing firm, one of the concerns is ensuring a balance between the institution's higher education mission and the marketing company's mission of selling sponsorships in an effort to meet, and preferably exceed, the guarantee threshold.
At base, there needs to be an understanding on the part of institutions, and more specifically the athletics departments, that marketing firms are out to make money. Marketing companies, for their part, must understand that the institutional mission in the collegiate model is extremely different than the missions of professional interests.
There's no one-size-fits-all path to finding that balance. Some schools prefer a more aggressive marketing approach, others less so. However, having a formulated philosophy with regard to sponsorship sales and clear communication are important elements to have in place.
Thomas said that at Georgia, the common goal from the president to the athletics director to the individuals who execute the sponsorships is for the on-campus experiences of the student-athlete, fans and alumni to be supreme. To meet that target, the athletics department, through its two outside marketing entities, has tried to create partnerships that have a rhyme for the reason.
With television, Thomas said, there's more time to fill during timeouts, so Georgia is aiming to use those opportunities with vignettes or features that may highlight games or spotlight academic achievements of student-athletes. For example, through a partnership with a local newspaper, student-athletes are shown doing community outreach with youth.
"If we're going to have a sponsor who's going to be up on our scoreboards, there has to be another element. We display a lot of our sponsors with in-game statistics that we didn't have before. We're not only able to provide great sponsorship recognition for the partners, but we're also about to give an element back to our fans by giving them more information than what they would have had before," said Thomas.
In addition to having a strategy and philosophy, schools also may control concerns through contractual stipulations, such as reserving final say on any sponsorships that are established. Sponsorships for certain products such as alcohol or tobacco also may be limited.
In many cases, schools also may restrict what they are willing to relinquish to a marketing company for sponsorship availability. For instance, an athletics director may be comfortable with selling radio sponsorships, but less so with introducing signage into facilities. In that instance, permanent signage in athletics facilities may be off limits.
Ben Sutton Jr., chief executive officer for ISP Sports, said there are varying thresholds of commercialization in different leagues and schools, at least in part because the priorities differ from place to place. However, one area that has remained consistent is that schools are clear -- both in the actual contract as well as within the relationship -- about where sponsorships and advertising may be sold and places where the company is prohibited from broaching.
Said UCLA's Toth, "There's obviously a give and take there. We made it clear up front when talking with all three of our potential partners that UCLA was not interested in significantly changing the commercial presence at our athletics events. Certainly they were going to ask for some commercialism, corporate presence, signage and so on that we had previously not employed. But there's an understanding that we are going to ultimately be the governor of what is done or not done."
Aside from establishing contractual boundaries, communication among key positions within the schools, such as the athletics director, the president and marketing company representatives, is critical to any successful venture. ISP Sports, which is the exclusive< rights holder for 26 Division I-A schools, believes in that idea so deeply that the company prefers to establish an office of its personnel on the campus and, if possible, directly in the client's athletics department.
"We hire a team of managers and sellers. In our view, they need to become part of the fabric of the athletics department," said Sutton. "When people see our Virginia Tech or Auburn folks, we really want them to believe they are affiliated with the university because we consider ourselves part of Virginia Tech or Auburn. Having a presence where you have access every single day provides real accountability in the relationship."
Regardless of how it is controlled, the turning over of sponsorship sales to an entity that is outside the academic realm may fuel perceptions that intercollegiate athletics is indeed overcommercialized.
Wyoming's Barta, however, disagrees.
"I don't think there's a connection. To the outside world, our marketing efforts will look very similar. If we continue to maintain the same approach as we did prior to outsourcing, I don't know that you can make a logical argument that it's furthering the problem or creating a problem," he said.
Sutton also disagrees with that line of thinking, pointing out that what is lost in the debate is that schools are giving away millions of dollars in tuition, and room and board to student-athletes who may not have otherwise had a chance to attend college.
"As long as the student-athlete is the focus of our business, and you use that as your guide, I truly believe that an appropriate balance can be struck," he said.
In fact, rather than striking a balance, Zullo said that depending on how a contract is structured, outsourcing could actually stem the perceived tide of commercialization.
"You don't want to look like you are a used-car lot trying to hawk and sell every corner you can. That only creates clutter," said Zullo. "That's when a school goes to the marketing company and says 'let's get more dollars from fewer people.' The president is happy, the fans are not overwhelmed with advertising messages and your sponsors are happy that their advertising messages are heard more clearly."
With the trend of schools contracting out the sponsorship sales portion of their marketing efforts fully established, Zullo said the future looks bright, as long as marketing companies are getting good returns on their investments, which certainly seems to be the case. In fact, as more and more Division I schools continue to gain exposure and a greater fan base, it is no longer just the major programs inking outsourcing deals.
Zullo believes this will continue to remain a Division I phenomenon for the most part, but he said that in the future, Division II or III schools and conferences may be bundled together as part of an outsourcing deal with sponsorships sold regionally.
ISP's Sutton agreed, saying that his company is realizing some interest along those lines. "Our experience, at least at the Division I-A level, is that there's a sweeping momentum toward outsourcing, which is not any different than most of the other industries in our country. I think this is a trend that is here for now, and hopefully, in my view, here to stay."