Total cost to Penn State: $46 million.
The coming $3 million hit to Penn State's bottom line caps a
nightmarish 17-months in "Happy Valley." The revelation that Mr.
Sandusky, coach Joe Paterno's defensive coordinator, molested at
least 10 boys over a 15-year period sent shock waves through the
school and its sponsors.
The NCAA levied an unprecedented $60 million, five-year fine and
four-year ban on postseason play. On the ad front, General Motors'
Chevrolet stopped sponsoring Nittany Lions football, although it
continued to sponsor other school athletic programs. Cars.com
pulled its TV spots from the school's ESPN football telecasts.
State Farm suspended radio ads.
Sherwin-Williams removed its logo from the banner serving as
backdrop for the team's football news conferences. And Nike pulled
the late Mr. Paterno's name off a child-care center at its world
headquarters.
During the crisis, Learfield Sports, which handles Penn State's
multimedia rights, held "town halls" with ad clients to address
their fears, said CEO Greg Brown. Still, the normal 20% annual
growth went out the window in 2012.
The good news: Although many sponsors/advertisers went dark in
2012, they didn't abandon Penn State football, said associate
Athletic Director Greg Myford. The program retained key partners
such as Nike, Pepsi and Highpoint. With new coach Bill
O'Brien leading the team to an 8-4 record last season, the school
is optimistic about 2013. "We were very fortunate that we didn't
have any fall-off," Mr. Myford said.
Besides existing clients going dark, or shifting inventory to
other properties, the scandal "created an environment where it was
difficult to approach any new clients," Mr. Brown said. "If there
was damage, that was the biggest impact we felt."
Now, though, with fans, donors and alumni excited about the new
coach, advertisers are coming around. Cars.com returned to Penn
State football telecasts in 2012 and will do so again in 2013. The
company pulled its ads in late 2011 "out of respect for those
involved," it said in a statement.
While Chevy passed on sponsoring Penn State football during the
2012-2013 academic year, "no decisions have been made" for
2013-20014, spokeswoman Ryndee Carney said. State Farm may also
return to radio after sitting out 2012, said spokeswoman Mia
Jazo-Harris.
Sherwin-Williams' logo is still missing from the banner. But the
company "never dropped" its sponsorship of Penn State, said
spokesman Mike Conway. "We still support football, basketball and
wrestling."
Even the disgraced Penn State brand is showing signs of life,
according to promo shop The Marketing Arm. In June 2011, Penn State
ranked as one of the top five most-trusted NCAA properties. By
January 2012, it had plummeted to dead last among 104 schools
measured nationally. But it rebounded in 2012, and is now No. 63.
at about the same level as Harvard (60), Stanford (68) and Michigan
(66).
The rise wasn't due to marketing. Cynthia Hall, Penn State's
acting chief marketing and communications officer, said Penn State
has not increased its overall marketing budget over the past 17
months to help deal with the fallout.
The school has, however, hired PulsePoint Group in
Austin, Texas, to help formulate its "vision" for the future,
according to Ms. Hall.
Lions' Share: Cost
Breakdown of Scandal's $46M Price Tag
Crisis PR: Penn State's Board of Trustees spent
$5.4 million on "communications," "consulting" and "legal services"
through Dec. 31, 2012, according to the university's special
website. Among agencies listed are:
Edelman,
Ketchum, TAI Group and
Kekst & Co., all in New York, and Domus
in Philadelphia. (Ketchum and Domus said they are no longer working
with Penn State.)
NCAA Fine/Freeh Report: The biggest chunk, $12
million, went to paying the first installment of the five-year $60
million NCAA fine. The second-largest, $8.2 million, went to former
FBI Director Louis Freeh's law firm, Freeh Sporkin & Sullivan. To try to
protect Penn State's squeaky-clean image, the Freeh Report
concluded that Mr. Paterno and three key administrators "failed to
protect against a child sexual predator harming children for over a
decade."
Advertising/sponsorships: Penn State Associate
Athletic Director Greg Myford said it's hard to specify how much
advertising/sponsorship support Penn State lost due to Jerry
Sandusky or other factors, such as the economic recession. But Jim
Andrews of IEG estimated 2012 losses as "north of $1 million."
Licensing: The school typically collects $3.5
million in royalties from annual sales of licensed merchandise,
according to Mr. Myford. Those royalties fell 20% from the first
quarter of 2012 through the first quarter of 2013, he said. That
would amount to around $700,000.
Penn State Donations
Rose While Enrollment Stayed Flat
The fallout from the Jerry Sandusky child-molestation scandal did
not send students fleeing to other schools or cause alumni
donations to dry up.
Average football-game attendance fell during the 2012 season.
But student enrollment remained steady, both overall and at the
main University Park campus in Happy Valley. Donations went up as
alumni rallied around their alma mater.
Penn State's average football attendance dropped 4.6% to 96,730
in 2012 vs. 101,427 the
year before. That was the fifth-straight year of falling
attendance, so it probably had as much to do with the economic
recession as disgust over Mr. Sandusky.
Yes, the Nittany Lions football program lost some blue-chip
football prospects. But the university's total student enrollment
stayed flat at 96,562 in 2012 vs. 96,519 in 2011, according to an
annual snapshot taken during the fall semester. That was helped by
a 16% growth of students signing up for online courses. Enrollment
at University Park rose slightly to 45,351 from 45,194.
With the school in crisis mode, Penn State received $208 million
in donations for the fiscal year ending July 2012, the
second-highest amount ever. Membership in the Penn State Alumni
Association (which bills itself as the world's largest), grew 2.4%
to 169,209 for the year ending June 30, 2012, according to
Executive Director Roger L. Williams.
