Let’s Make a Deal

August 7, 2017

This article first appeared in the August/September 2017 issue of Athletic Management.

Apparel companies are upping their game to get schools under contract. Now, more than ever, is the time to fashion a deal.

By Michael Popke

 

Michael Popke is a Madison, Wis.-based freelance writer and former magazine editor who has covered the athletic, fitness, and recreation industries for more than 15 years. He also owns Two Lakes Media Group, which provides professional writing and editing services. He can be reached at: michael@twolakesmedia.com.

 

Last May, UCLA signed a 15-year, $280 million deal with Under Armour—the largest shoe and apparel sponsorship in college sports history. The Bruins will receive $15 million up front, and then about $11 million annually, as well as more than $7 million per year in apparel and equipment. Under Armour will also provide funding to help with facility renovations.

Six months prior, Ohio State landed what was then the biggest contract, a 15-year, $252 million deal with Nike. In 2015, The University of Michigan’s agreement with Nike, worth $169 million over the same length of time, was larger than any before it.

“There is a major arms race going on,” San Diego State University Marketing Professor George Belch told the Los Angeles Times. “Nike has dominated the market for many years, and you also have adidas … now Under Armour has clearly become a major player.”

At the same time major programs are signing eye-popping deals, small colleges and high schools are joining the party. While the contracts they negotiate are much smaller in scale, they are just as significant to their operations as the big-dollar agreements.

At the U.S. Coast Guard Academy, an NCAA Division III school, Athletic Director Tim Fitzpatrick secured a five-year shoe and apparel agreement with adidas soon after his arrival on campus. It doesn’t bring in much straight cash, but has helped unify teams and given USCGA athletes extra pride.

“These arrangements help the budget, but they’re more of a branding thing,” says Fitzpatrick, who negotiated a six-year, $21 million shoe and apparel agreement with adidas earlier in his career while at Indiana University.

Adam Bright, Athletics and Activities Director at Durango (Colo.) High School, brought in a two-year sponsorship with adidas that began in the spring. “We’re sending the message to our student-athletes that here is a company they’re familiar with, and we want them to wear that company’s gear,” he says. “You can change school culture that way.”

Whether you are in a position to land the next big contract that tops UCLA’s or have never considered the idea before, apparel deals need to be on your radar. With three big players—adidas, Nike, and Under Armour —vying to be the outfitter of choice for colleges, universities and, increasingly, high schools, there’s never been a better time to negotiate a deal that will provide significantly discounted uniforms, shoes, and apparel, plus other perks.

 

EMERGING TRENDS

The magnitude of apparel deals made by schools in Power Five conferences are obviously very different than those at other levels. But the basics are similar. Generally speaking, when athletic departments enter into agreements with companies, they receive significant discounts on all uniforms, footwear, and apparel in return for outfitting their teams in the manufacturer’s brand.

In some cases, the school is allotted gear representing a specific dollar amount, and additional products are purchased at a discount. Such an arrangement can be combined with incentives for free merchandise based on how much money a school spends each year or whether teams win conference, league, state, or national championships. In some cases, the company will offer branding support, assisting the school in developing new logos and designs.

In return, apparel manufacturers are guaranteed consistent and repeat business. They also receive exposure in the case of successful, high-profile teams that are photographed wearing their uniforms. A retail component is often involved, too, as fans of the program will want to buy licensed products of their favorite teams.

Even at the high school level, athletic directors say apparel contracts impact purchasing habits of the general student body. After his school signed a deal with adidas, Bright began noticing more students wearing adidas t-shirts and shoes in the school’s corridors.

Every deal is different and negotiations should delve into what is important to a particular school as well as what that school can offer a company. Right now, athletic departments are in the driver’s seat, with Under Armour pushing the market.

As BusinessInsider.com noted last year, “For the first time since the peak of Reebok in the 1990s and early 2000s, Nike has a legitimate rival in Under Armour. As the Maryland-based upstart puts its own mark on the sporting world, Nike must pay more to keep its dominance, and more money is being thrown at schools.”

A recent Under Armour partner is the University of California, which kicked off a 10-year deal worth $86 million on June 1. Previously, Cal was receiving $2 million in product and $150,000 in cash annually from Nike. With Under Armour, it will reportedly enjoy $3.5 million in cash and $4.76 million in apparel and equipment per year, along with a $3 million signing bonus.

“We were at a good point to take an advantageous position in the market,” says Ashwin Puri, Senior Associate Athletic Director and Chief Revenue Officer at Cal, who negotiated the Under Armour contract. “We looked at deals at comparable institutions in the Power Five conferences and realized that we were undervalued in terms of our brand, location, and market.”

Puri gave a lot of thought to the length of the contract. Cal could have opted for a term longer or shorter than 10 years, but he believed a decade would give the university the most leverage when it came time to renew.

“We’re betting on ourselves because we expect that in 10 years, we will have an even stronger value proposition for Under Armour,” says Puri. (For more on determining a good contract length, see “Five Tips,” below.)

Along with the dollar figures rising, so is the focus on partnerships, specifically what each entity can offer the other, and increasingly, this extends beyond athletics to the entire institution. Puri teamed with Solly Fulp, Cal’s Executive Director of University Business Partnerships and Services, to help ensure that the deal met the needs of the whole university. Not only will Under Armour design and supply shoes, apparel, and equipment for all men’s and women’s sports, but will do so for participants in Cal’s recreational sports club programs and the school band.

In addition, the deal includes opportunities for student internships and employment opportunities with Under Armour for Cal graduates, plus nutrition and fitness support, collaboration on charitable and philanthropic programs, and exclusive product discounts for departments campus-wide. And Cal will be the site of the Future Show, Under Armour’s annual open innovation challenge, as well as the companion Cupid’s Cup, an annual nationwide competition for students to showcase their inventions.

“We presented Under Armour with opportunities that other schools may not have offered, and that’s because we’re pretty bullish on campus-wide deals,” says Puri.

These types of beyond-sports arrangements are becoming more and more creative and far-reaching. Nike’s deal with Ohio State includes internships for both students and student-athletes as well as products to enhance the student experience. Arizona State University and adidas announced in June the creation of the Global Sport Alliance, which teams ASU faculty and students with researchers and engineers to explore such topics as diversity, race, sustainability, and human potential through the lens of athletics.

These innovative ideas are starting to trickle down to other levels. In 2016, Texas A&M-Commerce announced a four-year deal with Under Armour that was the first of its kind at the Division II level. The company provides the usual apparel and footwear discounts for all 14 sports teams, along with branding assistance. But it also allows soccer players and track and field athletes access to prototypes of shoes in development and opens the door to new student-athlete education initiatives including training and nutrition.

Tim McMurray, Athletics Director at Texas A&M-Commerce, says he spent time prior to contract talks figuring out his school’s needs and what it has to offer. “You have to go into the process with a firm grasp on the reality of where you are,” he says. “Every campus has different nuances and different needs. I knew we needed a high level of service, responsiveness, and engagement with the brand. And I knew how I could best present our strengths.”

 

CASE STUDY

At the small college and high school levels, most athletic departments still partner with local sporting goods retailers for their apparel, and coaches often do the purchasing. Why did Fitzpatrick delve into a national deal for Coast Guard?

His main reason was to create a solid brand identity. “No matter how much coaches might like having their own freedom with uniforms, the greatest leverage for an athletic department comes from putting everything together,” Fitzpatrick says. “That has really enabled us to expand our brand.”

He also believes the benefit for student-athletes is significant. “Previously, they had to buy their own sweats and travel warm-ups, and now we provide them,” Fitzpatrick says. “The items have to be returned at the end of the season, but they feel geared up like Division I players and enjoy getting them for free. The best thing about this is that our athletes like it. If the kids are happy, our coaches are happy.”

The five-year deal with adidas has provided USCGA with new logos, a retail component, and deep discounts on uniforms and shoes for the academy’s 600 athletes on 25 teams. The school also receives a specified amount of free merchandise based on how much it spends. In most cases, that complimentary apparel is used to outfit coaches.

Fitzpatrick began the process simply by issuing a Request for Proposals, and adidas, Nike, and Under Armour all indicated interest. “We didn’t know if any of them were going to bid,” Fitzpatrick says. “I felt good about our offer, though. I believed we had something they wanted, with the large number of athletes we have and being a military institution. And sure enough, all three parties were interested.”

Fitzpatrick interviewed the three companies and in the end, adidas offered the most attractive proposal. From there, the athletic director and his staff began developing a new brand and standardizing a collection of uniforms that had spiraled out of control over the years.

“I think many athletic directors are reluctant to bring their department together under one arrangement,” Fitzpatrick says. “Some coaches here certainly didn’t like the idea. But I told them, ‘I’m sorry. We’re not doing things separately anymore. It’s all or nothing.’”

Every player on every team at USCGA now wears the same warm-up, sweats, and T-shirt. (The only difference is the name of the sport emblazoned on the tees.) Warm-ups and sweats are turned in at the end of the season, but players are allowed to keep T-shirts, shorts, shoes, and hats.

The academy introduced its new brand at a press conference, emphasizing its primary logo featuring a fierce orange bear and the word “BEARS” with the USCGA racing stripe. Secondary marks include another version of the orange Bear, an interlocking “CGA” logo, and a paw with the racing stripe.

While some of his D-III peers feel branding is not significant at the non-scholarship level, Fitzpatrick believes it is. “It shouldn’t matter as much as it does, but it’s immensely attractive to the kids,” he says. “We are recruiting out of a much smaller funnel of students—ones who are interested in a career in the Coast Guard.”

Fitzpatrick won’t share financial details of the academy’s apparel deal, citing a confidentiality agreement with adidas. Even his coaches don’t even know the terms of the contract. “We wanted to reduce the temptation for coaches to explore other deals on their own,” Fitzpatrick says.

He also likes that coaches no longer spend time designing and choosing uniforms, so they have more hours for recruiting and game preparation. Most discussions with the company happen through Fitzpatrick’s office, where he has control over the brand and the look.

Despite early resistance from some coaches, Fitzpatrick believes the contract has been a success. “Coaches like control, and I understand that,” he says. “The hardest thing was telling my staff, ‘No, we’re not going to do things the way everybody wants to do them.’ In the end, this has certainly simplified operations, and it’s worked out well.”

 

HIGH SCHOOL NEGOTIATIONS

For apparel companies, the high school market is the next frontier. When Durango signed with adidas, it became one of the few schools in Colorado to have an apparel deal. However, Bright previously worked as an athletic director and football coach in Texas, where many schools already have apparel contracts with adidas, so he was a step ahead. When he arrived at small Middle Park High School in Granby, Colo., he made a deal with adidas and then brought the concept and his contacts to Durango.

The two-year agreement provides discounts of up to 50 percent off retail price for uniforms, shoes, warm-ups, travel suits, and other apparel. It also gives back to Durango 10 percent of what the school spends, which is used for coaches’ gear and polo shirts for administrative staff. And it provides free merchandise should teams win league or state titles.

“In the long run, we save money doing it this way,” Bright says, adding that the arrangement has also provided uniformity among teams. “We’d gotten to the point where nothing looked the same.”

He also believes the apparel provides a boost. “I want to make sure we give all of our student-athletes the best experience possible,” Bright says. “When they like the uniforms they are wearing, there’s a little more confidence.”

In Oregon, several school districts have agreements with Nike, in part due to the company being headquartered in the state. The Springfield School District signed on a year ago, with a contract that includes its two high schools, Springfield and Thurston, over a five-year period. But it didn’t happen without some reservations.

Justin Starck, Athletic Director at Thurston High School, explains that the agreement provides product rebates for uniforms and equipment of $15,000 per year for his school. But he also recognizes that it is not a panacea.

“Things are never quite as great as they seem,” Starck says. “It sounds like such an amazing deal, but when Nike gives us $15,000 in uniforms, that’s at retail price. It costs about $300 to outfit one football player, and we have 90 uniforms, home and away. We have to purchase the rest, although it is at a deep discount. It’s not a magical solution where, all of a sudden, all our teams have new uniforms. This is a business deal, not a gift from Nike.”

Starck devised a strategy based on the number of student-athletes and the cost of uniforms for each sport, that will provide all of Thurston’s teams with new uniforms over a five-year period. Track and field, basketball, tennis, and golf were up first during the 2016-17 academic year, followed by volleyball soccer, cross country, and cheer this year.

In the end, no two apparel contracts are the same—and athletic directors should enter negotiations with their needs in mind. “Every school is different, and it’s hard to truly compare and contrast,” Puri says. “There’s not ever going to be a specific approach to this.”

However, this means there are plenty of opportunities for schools at all levels to strike a great deal. “When you get right down to it,” Fitzpatrick says, “everybody has finite resources, and it’s a matter of using them in the most efficient way possible.”

 

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Five Tips

Like any new venture, apparel deals require discussion, thought, and more discussion. Here are five suggestions to help negotiations go smoothly:

1. Carefully consider length.

Apparel contracts can range from a couple of years to 15 years—or even longer. It’s important to fit the contract length to your circumstances.

For Tim McMurray, Athletics Director at Texas A&M-Commerce, who recently negotiated a deal with Under Armour, a four-year agreement was the right choice. “Because there were no precedents on the D-II level, we opted for a short-term contract,” he says. “We could have asked for a longer deal, but we wanted to see if this was going to work. And from Under Armour’s perspective, they will evaluate whether we spend enough to make it worth their while.”

A short contract length also allows for going back to the table sooner, an advantage that was important to U.S. Coast Guard Academy Athletic Director Tim Fitzpatrick when he was negotiating with adidas. “I wanted a five-year term because I felt it was the right amount of time to demonstrate we are a good partner, and then be in a good position to renegotiate,” Fitzpatrick says. “You have to prove your loyalty to the brand.”

Remember, however, that switching uniforms in all sports takes time. Three years might not be long enough to make that transition happen smoothly. That said, if you’re at a public institution, know what your state statutes allow for maximum contract lengths.

2. Take time to find the right deal

Don’t rush into anything, especially if you’re considering a long-term arrangement. Interview all interested companies, and speak to athletic administrators at schools that have contracts with those manufacturers.

If you already have a deal in place, begin the renegotiation process as early as possible. However, be careful not to violate any first-right-to-negotiate clause that allows your existing outfitter first dibs or the opportunity to match other offers.

3. Be flexible

According to athletic directors who’ve sat at the bargaining table, the best deals evolve when both parties participate in a little give and take. A willingness to be flexible when negotiating everything from discounts to campus-wide initiatives will show that your programs are more than just numbers to the manufacturer.

4. Prepare for dissenting public opinion

Not every fan, alum, donor, booster, or athlete will be happy with the decision you make, and you might need to justify it in both private and public settings. A five-year partnership with Nike, providing $150,000 of apparel to both high schools in the Springfield (Ore.) Public School District did not go over well with voters when it was announced in 2016. “They felt like we were selling our soul to Nike and taking away from local businesses,” remembers Justin Starck, Athletic Director and Head Football Coach at the district’s Thurston High School. “We had to explain that the school district does not provide funding for uniforms and this was a way to defray costs.”

5. Maintain relationships with local vendors

This is particularly crucial at the high school level, especially when teams have patronized the same local sporting goods business for decades. If you have a solid relationship with a local vendor, inquire about contract opportunities. Chances are good that the vendor has established contacts with at least one or two of the big three apparel manufacturers (adidas, Nike, and Under Armour) and can point you in the right direction. Even if you wind up in an arrangement that requires purchasing directly from a large national brand, assure the local vendor that the school will still send business its way in the form of class T-shirts, staff shirts, and other items that don’t fall under the apparel contract.

 

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Tough Questions

At the high school level, most apparel contracts need to be approved by the school board. And board members will often have tough questions for athletic directors to make sure the deal is right for their district.

Last year, Lakeland Union High School in Minocqua, Wis., was in negotiations to bring Under Armour apparel to its athletes. The deal would grant Kollege Town Sports, a retailer in Madison, exclusive rights to sell reduced price Under Armour gear to the school. All teams would be required to wear Under Armour products. Concerns raised by the school board were threefold:

• Will this significantly decrease the amount of business that the school does with local companies? If so, how will it affect our local economy?

• How will this impact our student-council run school store?

• Would teams and athletes be able to use products from other manufacturers?

In 2015, Naperville (Ill.) Central High School was looking at signing a five-year contract with Under Armour. It required all coaches and athletes to wear the company’s gear and two Under Armour banners to be placed at each court and field. No other sporting goods companies would be allowed to advertise at school facilities. In exchange, Naperville Central would receive discounts on clothing and footwear, 15 percent back on purchases to be used on coaches’ gear, and a stipend of $2,400.

Members of the school board posed the following questions:

• What specific products would the discounts be applied to?

• Where will the banners be placed? What if an outside team with other sponsors uses our facilities?

• Are all teams at all levels required to undergo this transition?

• Was the input of the coaching staff taken into consideration?

• What are the ethics of the company? Does it use sweatshop labor?

• Is there an opt-out clause in the contract?

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