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Value of IMG deal is hard to pin down

Most everyone with an interest has heard about West Virginia University's new, 12-year multimedia rights deal with North Carolina-based IMG College for the school's sports programs, a deal guaranteed to deliver WVU at least $86.5 million through 2025.

But what we haven't heard -- due in part to the ongoing legal battle between John Raese's West Virginia Radio Corp. and WVU -- is anyone from the university publicly detailing how its new IMG contract compares to its past performance handling the school's media rights in-house.

Under the new deal, IMG will pay WVU a guaranteed minimum royalty of $4.1 million during the first year. (That goes up to $7.1 million if you include the $3 million "signing bonus" payment IMG will pay by June 2014.)

The annual guaranteed royalty goes up to $6.2 million the following year and will continue to rise each year to nearly $8.3 million by 2025.

Those payments also don't include revenue WVU could receive through a revenue-sharing partnership with IMG. Under the contract, once IMG's annual WVU-related revenue crosses a certain threshold (starting at $6 million the first year), WVU gets to keep a 30 percent portion of that additional revenue.

As if that wasn't complicated enough, trying to compare the future to the past is far more convoluted.

Complicating comparisons is WVU's decision to retain some existing contracts with key sponsors and advertisers -- e.g. Nike, United Bank, WVU Hospitals, Bank of America, Chesapeake Energy and Coca-Cola -- all of which represent a significant amount of money pouring into the university.

But if you cull through WVU financial reports and make a few educated projections, one can come up with a comparison that, while not exact, could be somewhere in the ballpark.

Between 2009 and 2012, WVU averaged about $1.6 million in revenue off its broadcast, radio, television and Internet rights. It also averaged an additional $4.9 million in royalties, licensing, advertisements and sponsorships over the same time frame.

If you assume a large portion of those sponsorships -- say $2.7 million -- were the ones WVU is retaining and subtract that amount, the average revenue over the last four years comes to roughly $3.8 million.

If you subtract additional expenses for the former Mountaineer Sports Network -- pegged at about $750,000 in a report to WVU's Board of Governors in 2009 -- one could conclude WVU was making somewhere around $3.1 million to $3.2 million in profit from its multimedia rights in recent years.

From that, WVU would appear to be coming out at least $1 million ahead next year. But the 12-year deal also gives WVU some benefits that are more intangible.

First, staff time formerly devoted to managing MSN, negotiating with additional sponsors and raising money can now be focused on other endeavors.

More importantly, the guaranteed revenue from IMG will give the WVU athletic department some degree of financial certainty (and insulation from another downturn in the economy) going forward.

That means the next time WVU wants to raise capital for some type of expansion or improvement project -- say the Jared K. Hunt Luxury Lounge at Milan Puskar Stadium -- it can pull out its IMG contract, show underwriters a guaranteed revenue source over the next 12 years, and likely secure better financing terms for that project.

Contact business editor Jared Hunt at jared.hunt@dailymail.com or 304-348-4836.


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