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West Virginia Radio defends proposal for WVU broadcast rights

CHARLESTON, W.Va. -- West Virginia Radio Corp. is defending the value of its proposal to partner with West Virginia University's athletic department to manage its Tier 3 multimedia rights.

While bid documents obtained last week said the university would net an additional $5.7 million over the next 10 years through the partnership, West Virginia Radio officials say the true value of the proposal is in excess of $71 million.

Meanwhile, North Carolina-based IMG College — which eventually won an $86.5 million bid to manage WVU's rights — said that using West Virginia Radio's standards, the value of their proposal would soar well beyond $100 million.

Last month, WVU signed a 12-year deal with IMG allowing the company to manage the athletic department's so-called Tier 3 multimedia rights, which include radio, digital and some television broadcasts.

The contract states IMG will pay WVU a guaranteed minimum of $86.5 million over the next 12 years to manage its Tier 3 rights. WVU will also receive revenue from some of its existing contracts and through a revenue-sharing agreement with IMG.

It was the second time IMG prevailed in WVU's multimedia rights bidding process. The original round of proposals was scrapped in April after Attorney General Patrick Morrisey found "significant errors and sloppiness" in the way it was handled.

West Virginia Radio Corp. participated in the first round of bidding, and company owner John Raese has been a vocal critic of how the process was handled. The company did not participate in the second round and has since filed a lawsuit claiming WVU officials rigged the entire process in IMG's favor.

On Thursday, following a Freedom of Information Act request, WVU provided the Daily Mail with copies of all proposals submitted during both bid processes.

In both rounds, IMG guaranteed WVU the most revenue, offering a minimum of $78.3 million over 10 years in its initial proposal.

West Virginia Radio did not offer guaranteed revenue in its proposal, however the company projected the university would net roughly $5.7 million over the next 10 years by creating a "unique partnership" with the company.

Instead of outsourcing management of WVU's Tier 3 rights — as the university was hoping to do — West Virginia Radio proposed allowing WVU to retain control of those rights through the school's existing Mountaineer Sports Network.

"It was our idea that WVU would keep their rights and that West Virginia Radio Corporation was in a very unique position to help the University enhance and grow their revenues while keeping complete control of their own product," company president Dale Miller said in a statement Friday.

The company said all revenue currently generated by WVU would be "grandfathered" to the university, allowing it to keep 100 percent of that existing revenue.

As part of its proposal, West Virginia Radio sales staff would continue to sell, service and fulfill all of these existing contracts at no cost to WVU, with the university retaining all of those revenues.

Revenue from any new advertising, minus some expenses, would be split between the company and WVU, with the university receiving a 65-pecent share in the split.

By pledging to continue offering roughly $500,000 in free advertising to WVU each year, the company's bid estimated the total value of this revenue sharing arrangement at roughly $10.7 million over the next 10 years.

The Daily Mail on Friday reported details of West Virginia Radio's bid, based on the financial projections provided in the bid documents. West Virginia Radio attorney Bob Gwynne was provided with the financial breakdown in advance and asked if the company would like to comment, but did not respond to that request.

West Virginia Radio officials have since said the original Daily Mail report based on the company's bid documents was "inaccurate and misleading."

Company officials were further angered when The Associated Press picked up the http://www.dailymail.com/Sports/201308150200 ">Daily Mail report and distributed it nationally.

"I don't care if you didn't understand the bids or didn't have the facts," Miller and company vice president Joe Parsons said in an email Saturday. "The reality is that his story is false and misleading and becomes a matter of fact that literally went across the country.

"We expect an apology and a correction as soon as possible!" Miller and Parsons said.

The company said the true value of its proposal must include the value of current contracts managed by WVU's Mountaineer Sports Network.

West Virginia Radio officials said Friday those contracts brought in more than $6 million over the last year.

The company said factoring in the value of the current MSN revenue would increase the overall value of their proposal from $10.7 million (which includes the $5 million in promotional advertising) to more than $71 million.

By factoring in a 5 percent increase in ad rates over the period, the company said the potential value of the proposal would increase to $81.6 million.

Those projections were not included in the bid package the company submitted to WVU. A West Virginia Radio official said that was because WVU already knew the value of its MSN contracts, and could therefore do the calculations internally.

Company officials maintain their proposal, while still less than the guaranteed $78.3 million offered by IMG during the first round of bidding, was still competitive given all the intangible opportunities the company could bring to the table.

"The sums were not guaranteed but were certainly within the expected revenue potential," the company said in its statement Friday.

"Additionally, by partnering with WVRC, WVU could have insured that ALL dollars generated by the 3rd Tier rights of West Virginia University would have stayed in the state of West Virginia," the company said.

West Virginia Radio's current estimate concerning the value of the existing MSN contracts is slightly higher than what was detailed in the university's original request for proposal.

The university estimated last year its existing MSN contracts were valued at $5.3 million. Using that estimate, the overall value of the West Virginia Radio bid would decline to $58.7 million in revenue, plus an additional $5 million in promotional advertising.

Regardless of these potential revenue projections, IMG remains the one company willing to guarantee the most revenue through both rounds of the bid process.

Those guarantees remained a key factor in the evaluation of the proposals. Guarantees protected the university from potential revenue swings caused by economic conditions or other factors that could affect advertising and licensing rates.

IMG vice president Andrew Giangola said the company did not believe WVU was looking for revenue projections when it issued its request for proposals.

"IMG was asked to submit a proposal. We took that to mean guarantees, not projections," Giangola said. "We made a clear and substantial bid, which was chosen as the best."

While its final contract with WVU guarantees the university will receive a minimum of $86.5 million over the next 12 years, there are several other factors that can raise the overall value of the contract.

WVU has opted to retain some of its existing advertising, sponsorship and licensing agreements, including those with United Bank, Nike, Coca-Cola, Bank of America, WVU Hospitals and Chesapeake Energy.

Those agreements could net the university in excess of $1 million in additional revenue each year.

 Additionally, WVU will receive money through a revenue-sharing agreement with IMG. Once annual revenue crosses a certain point each year — starting at $6 million the first year — WVU gets to keep a 30 percent portion of that additional revenue.

IMG said adding in those factors would significantly increase the overall value of their proposal.

"Beyond our guarantees, projecting the full value of our contribution to WVU over these next 12 years would be substantially in excess of $100 million, perhaps even priceless," Giangola said.

Like West Virginia Radio, the company is also providing free promotional advertising for the university across its radio affiliate network.

Each of the 40 affiliates currently signed to the Mountaineer Sports Network from IMG will provide at least 40 30-second promotional spots each week promoting the university.

While Giangola did not specify exactly how much those radio spots were worth, he said the advertising "represents extraordinary value for WVU."

Contact writer Jared Hunt at business@dailymail.com or 304-348-4836.

 

 


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