NCAA can cancel contract with broadcaster that didn’t pay for 2020 licensing rights, COA rules

The Indianapolis-based NCAA again has prevailed in a contract dispute with radio broadcaster Westwood One, which had argued that because COVID-19 caused the cancellation of the 2020 March Madness tournament it didn’t have to pay for radio rights to the tournament.

Westwood One had been the exclusive radio broadcaster of the tournament since 2003. The parties entered into a contract in 2011 giving Westwood One the exclusive radio rights in exchange for a “rights fee” due in two installments each year. The amount of the contract was not disclosed, but the Indiana Court of Appeals wrote Wednesday that “(t)here is no dispute that Westwood One’s unpaid balance for the 2019-2020 contract year exceeds two million dollars.”

In 2020, Westwood One made its first payment in January, as scheduled, but declined to make its second payment in April because the tournament’s cancellation. The NCAA then canceled the contract, but Westwood One moved to enjoin that action.

The Marion Superior Court denied the injunction, finding Westwood One had “sufficient mechanisms to track and calculate any losses attributable to the termination of the Radio Agreement, including lost advertising and licensing fees, such that Westwood One could be made whole through a legal remedy.” Additionally, the court determined Westwood One had not shown irreparable harm to its goodwill or reputation through the cancellation of the contract, finding the broadcaster “has not shown it possesses a protectable goodwill interest in its relationship with March Madness … .”

On appeal, Westwood One returned to its reputational argument, contending that other organizations such as the NFL could follow the NCAA to a new broadcaster. Also, it argued that deals with clients could be negatively impacted if the broadcaster could no longer package the March Madness tournament with other events.

But the Court of Appeals affirmed the trial court, pointing to testimony from Bruce Gilbert, Westwood One’s head of sports programming.

“Gilbert indicated that while goodwill was an ‘intangible’ factor, Westwood One nonetheless took it into account, assigning a monetary value to it at least some of the time when assessing whether a particular licensing agreement is profitable. Although Gilbert testified that he was not aware of a ‘general formula’ for monetizing goodwill in use at Westwood, the fact that it did it some of the time supports an inference that it can do it in the case of the Radio Agreement,” Chief Judge Cale Bradford wrote in a Wednesday opinion.

“Gilbert also indicated that Westwood One’s goodwill helped it to sell advertising and when it was negotiating licensing agreements with companies like SiriusXM,” Bradford continued. “Taken as a whole, Gilbert’s testimony supports a reasonable inference that Westwood One is capable of ascertaining damages due to loss of goodwill with reasonable accuracy, even if it has not already done so in this particular circumstance. This, along with Westwood One’s over ten years of data on which it can rely to estimate its losses for 2020 and/or in the future, supports the trial court’s finding that preparing a reasonable estimate of its losses should be possible.”

Westwood One’s appeal pointed to the risk of future losses based on reputational damage. It also argued that factors such as the pandemic and the emergence of streaming made it impossible to estimate its losses.

But “(i)f Westwood One is capable of determining damages to loss of goodwill related to the Tournament, it follows that it is equally capable of calculating similar losses should it lose a client such as the NFL,” Bradford wrote. “As for Westwood One’s claim that changes in the marketplace will make future damages difficult to ascertain, internet streaming (as the NCAA points out) is not a new phenomenon, and Westwood One has had since at least 2011 … to evaluate its impact on its business.

“Finally, although Westwood One claims that the continuing effect of COVID-19 may cause future Tournaments to be played in a ‘bubble’ or in front of empty stands, it does not explain exactly how this would affect radio broadcasts,” the chief judge continued. “Indeed, it may be that ratings will go up if COVID-19 continues to restrict other entertainment options.

“In short,” Bradford concluded, “Westwood One has failed to establish that the evidence unerringly leads to a conclusion opposite to the one reached by the trial court.”

The case is Westwood One Radio Networks, LLC f/k/a Westwood One Radio Networks, Inc. v. The National Collegiate Athletic Association and NIT, LLC, 20A-CT-1965.