MORGANTOWN, W.Va. — It’s no secret West Virginia Radio Corp. owns this website, and that the parent company has questioned the ethics of the bidding procedure for WVU athletics selling its third-tier media rights.

The process has grown sticky thanks to conflict-of-interest allegations involving West Virginia Media’s dealings with bid-winner IMG College. While the deal is stalled for review — drawing the attention of state attorney general Patrick Morrisey — perceptions of the debate are being shaped, and in some instances, misshaped by media reports attempting to clarify an issue that’s surprisingly complex.

Take Mike Casazza’s article last week in the Charleston Daily Mail, a piece asserting West Virginia Radio Corp. has benefited from a sweetheart deal with WVU in light of the university receiving no radio rights fees. Casazza writes that the “inequitable terms” of the soon-to-expire, three-year contract could prevent WVU from renewing with West Virginia Radio, and he sought out two industry sources for feedback on whether the deal followed national norms.

The Daily Mail article quotes the manager of a Chicago-based research company, Dan Kozlak, who said rights fees in this case typically should net $300,000 to $400,000 and described the most recent contract as a “huge missed revenue opportunity” for WVU. This would be accurate had the university forfeited the radio rights fees with nothing in return. Obviously the school was not so delusional.

Under the current arrangement, West Virginia Radio Corp. pays no rights fees — that much is accurate — but instead it absorbs costs for on-site and studio production, satellite distribution, equipment, engineering, voice talent, etc., as well as providing WVU with free advertising slots on 13 stations statewide.

The company valued the complete package at $563,985 for the past year. (Unbilled commercial airtime, even when calculated at a less-expensive contract rate, accounted for $298,000. The Daily Mail article vaguely glossed over this as “a small amount of free advertising.”)

As for Kozlak, he initially said West Virginia Radio stations are “likely selling advertising spots surrounding those games, and they are reaping the higher commercial rates and higher audiences generated by WVU, and not giving any of that share back to the school.”

MetroNews followed up with Kozlak, sharing a more complete financial picture of the revenue WVU nets from the current contract. In corresponding with Kozlak, we also pointed out the university’s Mountaineer Sports Network sells and retains all revenue from sponsored statewide ad slots, which compose about 65 percent of the broadcasts. Local radio affiliates have the chance to sell only the remaining slots.

“We were not aware that the network has been footing the bill for production costs, providing free advertising, or providing local revenue slots for the schools,” Kozlak replied via e-mail. “In lieu of this additional information, all of these assets would add up to the approximate value we placed on the value of radio advertising in the sponsorship portfolio. So it doesn’t seem like there are any additional opportunities missed, but rather a different type of structure than we normally see.”

In defense of the Daily Mail article, it’s common for journalists to seek out expert sources as a means of adding context to local issues. Yet these experts typically make their assessments based on national trends that may or may not be applicable when the issue is scrutinized up-close.

WVU has every right to maximize the revenue from its sports inventory, so long as that’s accomplished in an ethical, and preferably, transparent manner. Obviously, the current bidding controversy raised enough red flags to warrant closer inspection. Once the situation plays out, selling these rights to IMG may wind up being the most profitable path for the university, though there’s a camp that believes the university is costing itself money in the long term by taking IMG’s guarantee and not retaining the rights in-house.

The coming weeks should be interesting as WVU attempts to settle its third-tier situation in advance of the 2013-14 academic year. The media can do its part by fully detailing the bidding process and illuminating what the bid winners will provide in excess of the in-house model. And when confronting the “inequitable terms” of a lapsing contract, it can more accurately represent what those terms actually are.

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Comments

  • Casual Fan

    Alan: I can't help but notice that neither you or the Dominion Post has subjected the origination of your company's deal with WVU to the same level of scrutiny and disdain as you have the pending deal with IMG. Was your deal competed? Who made the decision to award and re-award your company's deal over the past 40 years? Was it in the best interest of WVU to enter into that deal or was it based on personal relationships within your company, the Athletic Department and the University?

    I am thoroughly dissapointed in Metro News and the DP in using its position to attack the University in such a obviously biased way. Just about every day the front page top story in the DP is a negative and biased story about WVU. I'm sure it's not a coincidence. It comes across (and in a blatant way) as your bosses exacting a price for WVU for not continuing the previous business relationship with your company which has benefited your company tremendously over the past 40 years. Did all of this supposed malfeasance within the Atheltic Department and the BoG just suddenly come to your company's attention once it realized that it was the unsuccessful bidder, or have you and your "sources" known about it all along? What journalistic credibility you and your company might have had is being seriously eroded by your actions. Maybe the bidding process for the IMG deal was tainted. Your company has the right to due process and has asked for the review, which is happening now. But to use your media outlets to bully the University and the BoG, and launching personal attacks in an attempt to influence the outcome (not to mention Hoppy's patronizing commentary on the Attorney General a day or two after it was anounced he would be party to the IMG review)should be beneath you and your company. Good grief! You are giving every indication of being guilty of everything you accuse others as being. Take a detour from your current path to the high road!

    • will

      It seems to me that Metro News and the DP are doing their job. The job of reporting on the issue. It is pretty obvious that the bidding process was tainted. So, are the media outlets to simply set back and be quiet? I think not. They need to report openly and honestly on the issue. If the process was indeed tainted, the public deserves to know about it. WVU is the pride and joy of our great state and the media has a responsibility to report the news....good or bad. Keep up the good work. Ultimately the truth will come out.

      • cutty77

        @will,
        The Only Media outlets that are reporting about this is Metro News,and DP.Openly and Honesty too,don't forget to mention Fair and Balanced.These 2 news outlets are trying for the truth not to come out,that why there screaming so Loud The Sky Is Falling.The Sky Is Falling.The Truth has already come out,and they don't like it.Good Luck spinning this story.

      • James Stanley

        Looks like you are an employee of the DP or MSN. All of this is just sour grapes by Raese. I have cancelled my subscription for the DP and I think WVU should pull all advertising from that disgusting excuse for a newspaper. Done!

    • Luke

      I don't understand the vitriol directed at John Raese or the Raese family business interests. Why is it OK for some corporate entity headquartered in NC to come into the state and profit from the WVU sports programs but not the Raeses who have lived and provided work for untold numbers of West Virginians for decades?

      Since the BOG has delegated all of its authority to enter into contracts to the University President, why did the BOG Chairman inquire into the details of the bids? If IMG did not submit a joint Phase I qualification application with WV Media Holdings, why was Bray Cary at IMG's bid presentation? Why did the WVUF "invest" $7,000,000 in WV Media Holdings stock which had a limited market and paid no dividends? Who else at WVU or its related entities owns stock in WV Media Holdings besides Coach Huggins? There are a lot of questions that bear on the granting of this contract to which the taxpayers of WV deserve an answer.

      In the end, all this additional income that will allegedly go to the WVU Athletics Department will come out of the pockets of WVU fans and WV businesses who advertise on the WVU sports network. So while you may cheer WV Radio's competitors, don't come crying when you can no longer afford to attend a game. Be careful what you wish for in this life, you may just get it.

  • Brian

    I can't make up my mind yet on this. Raese looks like a big jerk, but it also looks like he has some good points. With Luck and Payne being involved with both WVU and WV Media, it certainly gives the appearance of impropriety.

  • hoot

    While I'm sure Alan is merely repeating stuff cause he has to, he left out some things.
    1...WVRC's "equipment costs" would be minimal,since they already had gear for remote
    broadcasting, as well as satellite uplink
    facilities, using them for Metronews. Dual
    use cuts your costs.
    2. Thirty years+ in radio leads me to be very
    suspicious of the value placed on the "free
    advertising" given to the university. Despite
    what Alan says, that is NOT a lot of
    advertising.
    3. About "absorbing" costs for voice talent, etc..
    I'm willing to bet lots of those folks get paid
    quite well from more than one source, be it
    WVRC, Metronews, MSN, or the WVU
    Athletic Department. I doubt WVRC
    "absorbs" costs for anything.

    • David

      The cost to WVRC for offering production is not the point. What would it cost WVU to produce or have a broadcast produced? That is the value that WVRC offers to the school in the current deal. It is cheaper for the guy who owns Jiffy Lube to change his oil than it cost me to have him change my oil. If I get a free coupon, am I getting the value of what it cost him to do it, or the value of what it cost me to have it done?

  • Questions: Please Clarify!

    I'm interested in this point:

    "Under the current arrangement, West Virginia Radio Corp. pays no rights fees — that much is accurate — but instead it absorbs costs for on-site and studio production, satellite distribution, equipment, engineering, voice talent, etc., as well as providing WVU with free advertising slots on 13 stations statewide."

    My question is this: how is this different from the IMG deal or any other broadcast arrangement? If IMG gets the rights, won't they likewise absorb the overhead costs of producing these broadcasts? Maybe I'm wrong about this, but I don't think WVU would have to pay for these things under the IMG deal. By IMG paying WVU for the rights, aren't they, by default, also assuming the broadcast (and associated costs) itself? It seems like IMG would pay for the rights, pay for the costs of broadcast, sell advertising, and the difference is IMG's profit for the whole thing.

    Also, I'm assuming free advertising would likewise be part of a third-party deal. Isn't this why WVU gets like 2 commercials during every ESPN broadcast? WVU doesn't pay ESPN for those do they?

    Not saying you are wrong, I honestly just don't get this. Allan, can you please clarify this for all of us?

    • David

      I think the point he made about the current arrangement was made to refute the point suggesting it was a sweetheart deal that was costing the University 400k dollars. Once the point was made to the media analyst about the production costs, satellite distrubution and etc, the analyst agreed that there was roughly 400k dollars of benefit given to the University. I don't think it would be a lot different with an IMG deal, but it wasn't comparing the radio rights deal to the IMG deal. The biggest difference with the IMG deal and the current deal is the tier 3 rights WVU now has to sell and the production of some basketball and a couple football games as well as digital media and other things IMG can offer to the school. Much of that was not available to WVU prior to joining the Big 12 because the Big East owned our tier 3 rights.

  • I like you Alan

    I typically read a lot of your stuff Alan, but how can I trust this article when you stated at the beginning of the article you, and your employer, and COMPLETELY biased on this topic. It is interesting there may be more information on this topic but I would trust any reporter not associated with WVRC over this any day. Sorry but I see too many media outlets spin stuff to how they want it seen rather than reporting facts and I can't tell which this article is doing.

    On another topic, I had read that if the IMG deal gets delayed beyond a certain date, the deal becomes void. If Oliver Luck, whom I trust rightly or wrongly, picked that deal I believe it was the best deal for the athletic department. It certainly looks like WVRC is trying to delay the acceptance of the bid until it becomes void possibly resulting in a lower bid from IMG if the process begins again.

  • Robert Melphis

    Now Raese owned Metronews attempting to get the boss off the hot seat. Hey Hoppy remember your article on too much provincialism in West Virginia? Now look who's calling the kettle black.

  • JimJim

    "WVU has every right to maximize the revenue from its sports inventory, so long as that’s accomplished in an ethical, and preferably, transparent manner." You thought Mr. Lucky would do this, you got to be joking. Ethical is not Mr. Lucky's thing.

    • Grant

      What has Luck done that is unethical? You people who don't like him don't have a clue on how to run a business. Most of you would prefer that we staid in the collapsing Big East.

    • Big Skinny

      I challenge you to provide one FACTUAL example of unethical behavior by Oliver Luck.

      You cant. You appear stuck in a cloud of perception created by your narrow-mindedness and hatred for change and progress.

    • Kevin

      Please, with explicit specificity, enlighten us on just one thing that Oliver Luck has done that is "unethical." I will be anxiously awaiting you uninformed, completely biased, opinionated response.

  • Michael Walker

    I understand your viewpoint, Mr. Taylor. But the details are enough to make the average person dizzy.

    If unlawful activity occurred on anyone's part, they should be prosecuted. If unethical activity as defined by law occurred, someone should be booted out.

    But any investigation should be swift as well as thorough. If the bidding is found to have been unlawful, the third tier rights should be rebid ASAP.

    If the bidding is found to be within the law and required ethics, let it stand. IMG is on the hook for approx. $9.1 mil to WVU per year as the deal has been reported. How they recoup that fee and make a profit is their problem.

  • Rugger

    WCRC has to make $540k to net $400k (assume 35% tax bracket) needed to pay WVU. Why not give them a bucket of goods and services in lieu of cash, value it as high as possible, take the write-off and save $200k more in taxes per anum. You own the equipment thus can take the annual depreciation, control the personnel expenses and can spare the advertising time. Let's face it, it would be much cleaner had WVRC just paid an annual fee and dispensed with the bartering. No doubt the valuation and tax issues will be scrutinized at minimum. The lawyers love this stuff.

  • cutty77

    I have watched this Very Bad Deal for WVU for many Years.Mike Garrison told Metro-News is was going to be over when he was WVU President,and you saw what this station did to him and his family.WVU Football,and Basketball Coaches have left because of this set up,and you know there names.Its all about Control,now they have lost control and there mad about it.As for Advertising Dollors,who knows whats that is worth.It depends on which side the people are on.I know this WVU has been taken advantage of for over 20 years.Alan your a Good Reporter,but you no clue on this story brother.

    • Will

      Cutty77,
      You have absolutely no idea what you are talking about! Mike Garrison was not a college President, he was a political appointee who failed miserably. Don't give WV Radio so much credit. Garrison was his own worst enemy. Please explain how WV Radio has had "control" of anything at WVU. The University has always had complete control of their rights and the revenue generated from those rights. WV Radio simply provided a service to the university, and did it at their own expense. I don't see any other company stepping up to do that. You spout things like "football and basketball coaches have left because of this set up", please explain. Rich Rod left because the Atheletic Dept. would not let him break NCAA rules.....which was proven after his departure. Belein left for a better job. And he will tell you that. Most people do their research before posting....you should too

      • cutty77

        @will,
        You must work for WV Metro News.One question to you to see if your smart enough to answer it.If WV Metro News didn't have complete Control why are they screaming so loud and So Often about this.I guess you beleive in Santa too.I know they want to help WVU in This process,because they have WVU best intrests at Heart.They are losing there Golden Goose.

  • Matt

    Chris, I'm afraid your right.

  • Matt

    Chris, I afraid your right.

  • Woodchuck0

    Very nice to see the information. Hopefully everyone will take the high road. Your turn WVU...

    Score Raese 1. WVU 0.

  • WestBGV

    I'm all for getting the factual details of both the new Tier-3 process and the soon-to-expire existing contract out in the public eye, including the process of how both were established.

    • chris

      Hey! Lets all just look forward to the mountaineer nation winning a total of 15 combined basketball and football wins next year..

  • SKEPTICAL

    typical for you to take the company line meanwhile raese cries and cries about the fact he was outbid for wvu rights. whatever happened to raese believing in free enterprise and making money or is it convenient only when he is making the money.

    • Allan Taylor

      I don't think anyone has a problem with free enterprise. But when the previous article drastically misstated the value WVU was receiving from its radio deal, should we not clarify? And how can someone with the screen name "Skeptical" not welcome a bid review to make sure there were no shady dealings? If the process was performed ethically, it should hold up to scrutiny.

      • Luke

        I appreciate your article and the explanation of the current arrangement between WVU and WV Radio. What I don't understand is how the hand picked committee, could accept the IMG bid as being the best, when it had no idea who will provide either the TV or Radio broadcasting capabilities to IMG or the ability of those entities to provide statewide coverage of WVU sports? As I read the RFP, it was incumbent upon the bidders, if they were bidding on all of the various contract components, to apply jointly with their partners. IMG does not appear to have done that. without that information, there is no way to judge whether IMG can deliver the services in a manner superior to that of other bidders. The bidding process appears to have been fatally flawed from the beginning, irrespective of any alleged unethical conduct. And finally, will someone explain to the public why the BOG has delegated all of its authority to enter into contracts, both short and long term, to the University President, without any limitation? What function does the BOG serve if it delegates all of its authority to act on behalf of the University?

        • Mike

          You do realize IMG is the gold standard in this country for these types of deals with collegiate athletic departments, right?

          This statement by you is laughable... "there is no way to judge whether IMG can deliver the services in a manner superior to that of other bidders"

          • Luke

            And how many radio and television stations does the gold standard IMG own? ZERO. Did they contract with a television network or radio network in WV prior to submitting their bid? NO. Is there a network of radio stations other than WV Radio that can provide quality broadcast coverage of WV sports in all 55 counties of WV? I DON'T THINK SO. Did the RFP require bidders to bid on all 8 components of the RFP? IT DOESN'T SAY SO. How many radio stations are in the network the gold standard IMG provides to Marshall University? THREE.
            It looks to me like you have some axe to grind against WV Radio. I don't. I'm just a WVU fan of 6 decades who appreciates the quality and professionalism with which WAJR and WV Radio has produced and broadcast WVU sports continuously since 1962. If you have ever watched any televised coverage of WVU sports by WV Media Holdings you would be concerned as well.