As college athletics spending continues to increase, schools such as the University of Washington are constantly trying to identify new sources of revenue.
UW could have a significant one coming in 2019, when its current apparel contract with Nike expires.
That agreement – a 10-year deal due to expire June 30, 2019 – pays UW an average of roughly $3.5 million per year in product and cash compensation (the school is due a total of $3.842 million in product and cash in 2017-18).
UW can begin negotiating a new apparel contract Feb. 1, 2018, according to a copy of the deal obtained by the News Tribune, though its current agreement with Nike grants the corporation the right of first dealing and refusal – meaning Nike will have the opportunity to match any offer UW might receive from, say, Adidas or Under Armour, during the term of the current agreement or in the 180 days after it ends.
Indeed, those companies might seek to extend their geographical footprint to the Northwest – and if that is their desire, they might have no choice but to pursue UW.
If Adidas or Under Armour wants a school in the Northwest, it will need to bid on Washington.
Matthew Kish, reporter for the Portland Business Journal
Matthew Kish, a reporter who covers the college athletics apparel market for the Portland Business Journal, said UW is ideally positioned to cash in, considering the rise of its football program and the lack of other high-profile college programs in this part of the country.
(Like UW, Oregon’s deal with Nike is set to expire in 2019, but UO’s relationship with Nike co-founder Phil Knight would obviously preempt any offer it might receive from another company.)
“If Adidas or Under Armour wants a school in the Northwest, it will need to bid on Washington,” Kish wrote in an email. “Adidas has said it wants to sign a school in the Pacific Northwest for the same reasons it signed Arizona State and Miami (Florida) – it didn’t have signature schools in the South or Southwest.”
Kish noted that no other public Pac-12 school would be able to negotiate a new apparel contract before 2025. Longer contract terms nationwide, Kish said, mean apparel companies have fewer opportunities to bid on new schools.
So, what kind of deal could the Huskies reasonably expect? UCLA recently signed a 15-year, $280 million deal with Under Armour – the richest college athletics apparel contract in history. Ohio State and Texas both signed 15-year deals with Nike in the past two years for upwards of $250 million each.
Another Pac-12 school, Arizona State, announced in December 2014 that it was leaving Nike to sign an eight-year contract with Adidas worth a total of $33.8 million (or $4.225 million annually).
UW’s football brand isn’t as recognizable nationally as Ohio State or Texas, and its basketball reach isn’t on the level of UCLA’s. But the Huskies football program is coming off a College Football Playoff appearance, and new men’s basketball coach Mike Hopkins has two seasons to put some shine on a program that, despite its recent lack of success, has nevertheless put several players in the NBA – and could have the No. 1 draft pick this year in Markelle Fultz.
“I definitely think when you have football at the highest levels, obviously that has a huge impact on how a partner may be looking at your value,” UW athletic director Jennifer Cohen said.
“But also I think those partnerships are about what those guys are looking to achieve. Are they trying to grow their market in a certain area? Are they looking for retail opportunities that aren’t just about the partnership with the school?”
UW checks a few other boxes, too, Kish said: “It has elite football and basketball programs, a sizable and affluent alumni base, strong academic programs, and it’s in a major metropolitan area.”
UW’s updated financial projections note that a new apparel contract could net the school an additional $1 million in cash revenue per year, beginning in 2020, a number Kish said is “reasonable, (and) maybe even conservative.”
I definitely think when you have football at the highest levels, obviously that has a huge impact on how a partner may be looking at your value.
UW athletic director Jennifer Cohen
(For context: under its current deal with Nike, UW is due $2.8 million worth of product in both 2017-18 and 2018-19, based on suggested retail value. Its cash compensation in each of those two years will be a little less than $1 million. So if it were to negotiate a new deal that pays an additional $1 million per year in cash, it could reasonably expect its product compensation to at least double.)
“I think we were realistic in our assumptions as far as what we could see through that deal, in terms of increased product to the school and the cash that we could potentially get,” said Kate Cullen, UW’s chief financial officer. “What we’ve projected doesn’t have us at the highest level of what schools are getting, by any means, but it has a healthy increase.”
Kish said he expects both Adidas and Under Armour to compete with Nike to become UW’s exclusive apparel provider, though he noted that a “consumer shift away from performance product to more casual attire” – a trend that has benefited Adidas in recent years – could make Nike and Under Armour hesitant to “make overly aggressive offers.”
Cohen said “it’s a little early” for the school to begin forming its negotiation strategy, though she hopes the department will have a “better handle on how we’re going to be approaching that probably within the next six months.”