Nike Is Shelling Out MAJOR Bucks To Stay On Top Of College Apparel World
ByTravis Pulveron January 30, 2016inArticles›Sports News
Every year, college sports fans around the country spend billions on team apparel and merchandise to show their support for their favorite team. With schools pumping out graduates every year that want to remain attached to their alma mater in some way, shape, or form long after they leave the market is likely going to expand in years to come.
It is already a pretty lucrative industry. For the last few years, merchandise sales have generated around $4.6 billion in revenue each year. That’s a lot of T-shirts, hats, sweatshirts, bandannas, and garden gnomes!
So, it clearly pays for an apparel company to handle the merchandising needs of a university, especially the popular ones. Currently, Adidas, Nike, and Under Armour pay schools around $250 million a year for the right to be their provider – a small price to pay to get a piece of a $4.6 billion pie.
Photo by Getty Images
Nike is far and away the leader in the industry, which has allowed them to offer less than the competition, but still make the deal happen. Colleges choose to stay with the proven leader rather than be swayed by money.
Going forward, Nike has decided to take a unique plan of attack in order to stay there. Rather than just work with as many colleges as they can, they are opting to lock down the most popular teams. Quality over quantity.
They are certainly making some significant commitments in order to make the deals happen.
Nike recently made the most lucrative deal in college apparel with Ohio State. The Buckeyes agreed to stay with Nike for the next 15 years, and in exchange will get $252 million ($112 million in product, $116 million in cash, $15 million in marketing, and $8 million in estimated value through earnings and other benefits of upfront payments).
The deal will take effect in August 2018 when the current deal runs out.
This deal comes on the heels of a couple other mega deals. In July, Michigan’s deal with Adidas expired, but rather than extend it Michigan decided to sign with Nike on a $169 million deal that will run through 2027 ($80.2 million in cash, $76.8 in apparel, and a $12 million signing bonus).
At the time, the deal was the largest in college football, but Nike surpassed the deal when the resigned Texas in November. To keep the top school in merchandise sales Nike signed the Longhorns to a 15-year, $250 million deal that included a $20 million signing bonus.
Nike also recently signed Illinois to a 10-year extension worth $44.5 million, approximately three times the value of their previous deal. Michigan State signed a 10-year deal worth $34 million in July.
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- Next Season Kevin Durant Will Make WAY More Money Wearing Shoes Than Playing Basketball…
Next Season Kevin Durant Will Make WAY More Money Wearing Shoes Than Playing Basketball…
ByBrian Warneron August 20, 2014inArticles›Celebrity News
When Kevin Durant was a rookie, he had two competing companies desperately vying to sign the future super star to a shoe contract. As you might have guessed, those two companies were Nike and Adidas . Amazingly, Kevin opted to go with Nike despite the fact that their contract would pay $22 million LESS than than the one offered by Adidas. He must have been a big Nike fan! Even after you take out $22 million, Kevin’s rookie deal was still very lucrative. Nike paid him $60 million over seven seasons, roughly $8.5 million per year. That Nike deal is about to expire, so Kevin once again finds himself accepting offers as a shoe free agent. So, is Adidas gonna pony up the dough to finally get their man? Or is Nike gonna cough up a truck-load of cash to keep one of the league’s most popular and talented players? Actually, believe it or not, neither of these sportswear giants are even in the running for Kevin Durant this time around…
Kevin Durant / Ronald Martinez/Getty Images
If the reports are true, Kevin Durant is on the verge of signing an absolutely ginormous shoe deal with… Under Armour . Under Armour will reportedly pay Durant $30 million per year for the entire length of the contract, which is believed to be seven years. That’s $210 million , by the way. As you may have guessed from the title of this article, $30 million is WAY more money than Kevin will earn on the court next season. During the 2014-2015 season, the Oklahoma City Thunder are on track to pay Kevin $19 million . During the 2015-2016 season, he will earn $20 million . At that point, Kevin becomes a free agent. Oh, and by the way, Adidas did make a run at trying to sign Kevin this time around, but once the bidding got up to $20 million per year, they bowed out.
Under Armour may seem like an odd choice considering the fact that the company isn’t really known at all for their basketball shoes. In fact, out of Under Armour’s $683 million total 2013 revenues, only around $6 million came from selling basketball shoes. That’s a little bit less than 1% . It may also interest you to know that Under Armour’s annual marketing budget is roughly $300 million , so by the power of math, if this deal goes through, 10% of their 2014 budget will be spent on this one deal. Kind of a big gamble.
If Lebron’s rookie shoe deal with Nike was worth $90 million and Durant’s was worth $60 million (and could have been $82 million if he had gone with Adidas), surely today’s rookies must be raking in the cash, right? I mean, even John Wall made $25 million over five years with Reebok, when signed with them four years ago. Well, for whatever reason, the value of rookie shoe contracts has plummeted over the last few years. Maybe Nike and Adidas have been burned a few too many times by top heavy contracts with players who don’t end up panning out.
Andrew Wiggins was the #1 draft pick this year. He recently signed a contract with Adidas that will pay him… $2 million per year over five years. That’s $10 million for those of you who are bad at math. LeBron made more off Nike in his first year, when you include his signing bonus.
It’s a trend happening around the league. Many companies just aren’t willing to risk throwing so much money at an unproven rookie nowadays. As a lot of the athletes coming out now only play one year in college, there isn’t even really a lot of collegiate footage to rely on. Also keep in mind that Nike did not earn a profit off their deal with Lebron until 2012, almost a full decade into his NBA career. Nike has reportedly not broken even yet on their deal with Durant, so they probably wont ever at this point.
It’s unclear yet whether or not this deal with Kevin Durant will payoff for Under Armour. Let me remind everyone that back in 2012, Dwyane Wade ditched his $10 million Nike contract to sign with a Chinese shoe company called Li-Ning . No one in the US had ever heard of Li-Ning back then, and I dont think much has changed in the last two years. So this is clearly a very risky move for Under Armour. Only time will tell how this will turn out.
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