NCAA's Penn State Punishment Likely to Further Cripple School's Marketability

For Now, Pepsi Stands Firm, Nike Keeps Mum and GM Reconsiders Sponsorship

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Penn State University was hit with severe National Collegiate Athletic Association and Big Ten Conference fines today totaling $73 million as well as other costly sanctions for its role in the horrific child-abuse scandal that engulfed the football program, further damaging the school's previously pristine brand and likely crippling its ability to forge new corporate sponsorships.

"The marketing ship has sailed, as it were, for anything related to Penn State football for the immediate and extended future," said Kevin Adler, president of Chicago-based sports-marketing firm Engage Marketing.

The sanctions announced by the NCAA and Big Ten this morning cap an extraordinarily shocking and sad chapter in intercollegiate athletics. In November of 2011, former Penn State football defensive coordinator Jerry Sandusky was charged with more than 40 counts of child molestation dating back to at least 1998. He was convicted in June of sexually abusing 10 boys. Earlier this month, an independent investigation commissioned by Penn State and led by former FBI director Louis Freeh found the football program (including legendary coach Joe Paterno), the athletic department and other school officials complicit in covering up Mr. Sandusky's crimes for fear of negative publicity.

The NCAA fined Penn State a whopping $60 million, banned the football program from lucrative postseason bowl games for four years, and reduced yearly scholarships from 85 to 65 for a period of four years. The Big Ten, of which Penn State is a member, announced that the school would not be allowed to share in the conference bowl revenue for four years, an amount estimated to be about $13 million.

Penn State did not respond to calls by press time.

Penn State's football program was valued at $100 million in 2011 by Forbes, putting it behind only the University of Texas and Notre Dame. Penn State football made a whopping $53 million in profit in 2010-11.

The sanctions announced this morning all but devastate the football program, the marquee sport that draws virtually all of Penn State's corporate sponsorship dollars -- something that was very much on the mind of former school president Graham Spanier. Penn State is among a group of four colleges in the state that are exempt from Pennsylvania's Right to Know Law. Mr. Spanier, who along with Mr. Paterno and two other Penn State officials, lost their jobs over the scandal, testified in 2007 before the state legislature arguing to keep Penn State exempt from the Right to Know Law. At the time, he said, "Right to Know will severely limit the University's opportunity to enter into contracts with outside entities that do not permit the terms of their agreements to become public due to competitive concerns (examples include our lucrative partnerships with Nike , Highmark, Pepsi, Barnes and Noble and others)."

It's been difficult to determine the relationship between sponsors and the school at this point. Sherwin-Williams, for instance, had its name and logo on the banner that was placed behind players and coaches who did TV interviews. When Mr. Sandusky was arrested last November, Sherwin-Williams' logo was removed from the backdrop. Contacted today, the paint company said it had "no comment."

Pepsi this morning reiterated a statement it made two weeks ago in the wake of the Freeh Report, saying "We are deeply disturbed by the findings of the investigation and the conduct of certain individuals at Penn State University, but will continue to honor our longstanding contract as a campus provider."

Nike announced two weeks ago that it was removing Mr. Paterno's name from the company's Joe Paterno Child Development Center at Nike campus headquarters in Beaverton, Ore.

Nike did not respond by press time as to whether it was still associated with Penn State as the provider of team uniforms. Other sponsors, including Pittsburgh-based insurance company Highmark Inc., and Chesapeake Energy, did not respond to requests for comment by press time.

A General Motors spokesman said its sponsorship of the school is under review.

Penn State removed the names of its sponsors on the corporate partners page on the school website shortly after the scandal broke in November. The page now simply says "Penn State Athletics would like to thank its Corporate Partners for their support."

While the school might have been able to keep many of its current corporate sponsors, signing new ones will be difficult.

"You'd like to think that the business partner is supporting the university and not the sports program, or supporting the sports program and not just the football team," said Ed Horne, a former marketing executive with the National Hockey League and now chief operating officer of New York-based Madison Ave Sports and Entertainment. "But we all know that 's not the perception. I would guess it takes a while to draw in new business, and I would expect current sponsors to be extremely cautious in their activations."

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E.J. Schultz contributed to this story.

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