Claims of ‘inequitable’ radio deal misrepresented

COMMENTARY

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 should more accurately represent what those terms actually are.





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