Sports marketing company Playfly is suing college athletics multimedia-rights giant Learfield over a payment dispute that provides a window into the complicated relationship between the competing multimedia rights holders at the University of Florida.
The lawsuit, filed in Delaware this month, is connected to arbitration proceedings involving Learfield, Playfly and a company called National Advertising Partners (NAP), now a subsidiary of Playfly.
Playfly and NAP claim Learfield has committed “multiple breaches” of a six-year sponsorship agreement between NAP and Learfield concerning Florida’s athletic programs, alleging that Learfield has not made full royalty payments to NAP for Florida’s rights for the last two years.
The complaint says Learfield made a partial payment in 2021 but refused to pay the remaining balance, and has not paid any portion of the 2022 guaranteed payment. It also says Learfield, whose investors include Endeavor (NYSE: EDR) and private equity firms Atairos and Silver Lake, has justified the refusal to pay because of changed conditions brought on by the COVID-19 pandemic, but Playfly says Learfield has no authority to refuse payments.
Financial details are redacted within the complaint, but Playfly contends it is owed several million dollars between the two years, according to someone familiar with the filing who was granted anonymity due to the ongoing lawsuit.
The agreement contains a mandatory arbitration clause, though according to Playfly’s complaint, it also contains a provision that permits either party “interim equitable relief” as they await an arbitration decision. The plaintiffs have petitioned the Delaware Court of Chancery for an order that would compel Learfield to obtain a letter of credit from a bank. The letter of credit would, as Playfly argues in the filing, “secure Learfield’s obligation to pay NAP.”
Learfield has not yet answered Playfly’s filing, but the company disputes the claims. “Learfield manages the athletic multimedia rights for Playfly at the University of Florida,” Learfield said in a statement to Sportico. “This litigation is a simple contract dispute regarding the appropriate adjustment for COVID impairment to these rights. We believe we have acted appropriately and followed the terms of our agreement and we intend to defend our position aggressively.”
Playfly declined to comment. Florida’s athletic department—the University Athletic Association—told Sportico that “[it] is not a party to the disagreement,” and declined to comment further.
Different iterations of NAP have held the rights to a bundle of Florida’s television, radio, sponsorship, advertising and marketing rights since 2008. NAP sub-licensed much of the multimedia rights work to IMG College, which eventually merged into Learfield in late 2018.
When NAP extended its multimedia rights contract with the Gators on July 1, 2019, for an additional six years, it also extended its agreement with Learfield, according to the filing.
In the arrangement, NAP assigned Learfield many of its payment obligations for sponsorship rights, allowing “Learfield to build a relationship directly with UF,” according to the lawsuit, as the athletic department’s “exclusive third-party sponsorship sales and fulfillment agency in connection with the Sponsorship Rights.” The Gators are likely guaranteed a hefty payment from Learfield for the rights, based on agreements between Learfield and other Power Five schools. Nebraska’s guaranteed rights fee from Learfield was $12.55 million for 2018-19, while Florida’s SEC rival Georgia received $11.5 million the same year.
The agreement also outlined minimum guaranteed annual royalty payments from Learfield to NAP for the Florida inventory. The guaranteed sum increased with each year of the contract—a common MMR deal structure.
Then in 2021, Playfly acquired NAP through its purchase of Fox Sports College Properties and other Fox Sports subsidiaries. Playfly’s acquisitions have contributed to the growth of its college business, which now includes the multimedia rights for schools such as LSU, Auburn and Virginia, and the two-year-old company has started to chip away at Learfield’s market share.
Even after NAP was acquired by Playfly, Florida’s operations remained in Learfield’s hands, requiring continued royalty payments for the sublicensing rights. Those payments have not been made in full for the 2021 or 2022 fiscal years, the most recent of which ended on June 30, according to the lawsuit.
The lawsuit alludes to Learfield losses as laid out in Endeavor’s public SEC filings, which it argues indicate that Learfield’s losses in 2020 and beyond were not solely attributable to COVID-19. The documents outline hundreds of millions of dollars in “pre-tax losses” for Learfield for each year since 2019. Endeavor attributes the “weaker than anticipated” financial results to “lower than expected sales,” which were “further impacted in 2020 by COVID-19.”
Learfield takes issue with that accounting and said it would address those claims in its responsive filing.
“In the complaint, Playfly also makes false and misleading claims about Learfield’s financial performance, which we refute entirely,” Learfield’s statement said.
Learfield will now have an opportunity to answer the complaint, deny any wrongdoing and offer its own set of facts. A Learfield spokesperson told Sportico the company expects to file a motion to dismiss the case this week.
—With reporting by Eben Novy-Williams.