Iowa State would pay big penalty if marketing contract appealed

Iowa State University would have to pay a $3.85 million penalty this year if anyone successfully appealed its decision to award a no-bid contract to a company to exclusively manage its sports marketing rights through 2023, documents show.

Iowa State signed a 13-year deal with Learfield Communications, Inc. last year, guaranteeing the school's athletic department $53 million in payments from the Missouri firm, according to the contract obtained under Iowa's public records law. In exchange, the school gave Learfield the exclusive rights to broadcast its athletic events, produce coaches' shows and sell advertising on everything from the Cyclones' website to signs at Jack Trice Stadium.

The school also promised Learfield a significant termination payment should the university administration, the Iowa Board of Regents or the courts decide the contract should have been competitively bid or was "in excess of the number of years" Iowa State could sell its marketing rights. If Learfield's contract is terminated as a result of such actions, Iowa State agreed to pay $4.2 million for the budget year that ended June 30 and a $350,000 reduction every year after.

The University of Iowa and the University of Northern Iowa also have long-term agreements with Learfield to manage their sports marketing rights, but neither school would have to pay termination penalties, records show.

While the penalties sound like big money, Cory Harms, Iowa State's associate director of purchasing and one of two school officials who signed last year's extension with Learfield, said Iowa State was taking a conservative approach. The language would allow Iowa State to cancel the contract should the regents ever decide it should be put out for bid while avoiding litigation with Learfield, which might have reached its own long-term contracts with advertisers, he said.

"We're a lot more careful than they are and usually put in any kind of contingency that is possible," Harms said of Iowa State's approach compared to the other Iowa schools. "If the board would limit the number of years we could contract with somebody, we'd have to have the ability to cancel a contract."

The language also reflects the somewhat unusual way in which Learfield obtained Iowa State's marketing rights.

Following a competitive bidding process, Iowa State awarded its athletic marketing rights in 2002 to a joint venture of Clear Channel Sports and ESPN Regional Television for five years with the option of extending for three more. That deal stipulated the joint company would be given the first opportunity to negotiate a longer agreement.

The companies agreed to transfer the contract to Learfield in 2006 with the university's blessing. Three months later, the university agreed to extend Learfield's contract through 2013 and pay a termination penalty of $250,000 plus interest if anyone challenged the validity of that extension. That paved the way for last year's extension through 2023, which features more significant penalties "in recognition of the fact that Learfield will have paid" more than the company would have agreed to for a shorter deal.

Unlike Iowa's agreement with Learfield, Iowa State has not given the company the ability to sell the naming rights to the university's basketball court or other facilities. Iowa has since renamed its basketball court "Mediacom Court" under an agreement with the cable television and Internet provider. The terms of that deal haven't been released.

Learfield Vice Chairman Roger L. Gardner, who signed the contract on the company's behalf, did not immediately return a phone message Monday.