Oregon's 11-year, $88-million deal with Nike last fall could influence a new deal for the Huskies. One industry source estimated UW could command $8 million to $10 million annually.
After years of saving pennies and trimming expenses, the University of Washington is about to cash in on a new apparel deal that is expected to provide a significant boost to the athletic department budget for the next decade.
But which outfitter will the Huskies wear? And what might financial terms of the deal look like?
The Huskies are down to two major players: Nike and Adidas. (Under Armour, which in May 2016 made a stunning deal with UCLA worth $280 million over 15 years, is not currently bidding on college apparel rights, according to one industry source.)
The Huskies have been outfitted by Nike since 1997 and UW athletic director Jennifer Cohen said Nike has been “a great partner” for the school. UW and Nike have discussed an extension.
Nike’s biggest competitor has made a strong pitch to UW too.
Adidas has been making an effort to expand its marketing footprint in college athletics, particularly on the West Coast. Arizona State is the only Pac-12 Conference school affiliated with Adidas — they agreed to an eight-year, $33.8 million deal in 2014 — and as part of its February presentation to UW officials Adidas decorated much of its Portland campus purple and gold.
Adidas sponsors about a dozen major-college athletic programs, compared to the 56 that Nike endorses.
Over the past decade, Nike has paid UW athletics roughly $3.5 million year in product and cash compensation.
UW’s current contract with Nike expires in June 2019, but an agreement on a new deal could be done within the next few weeks, Cohen said.
When the Huskies agreed to an extension with Nike in 2007, UW was bargaining from a position of relative weakness, largely because the UW football program at that point was in shambles.
The Huskies are negotiating from a position of strength now, thanks to a football program that is again expected to contend for a national playoff berth this fall and a men’s basketball program that’s on the rise after a successful bounce-back season under new coach Mike Hopkins.
“We’re in such a competitive industry, and we are building a lot of momentum in Husky athletics right now,” Cohen said. “What we’re looking for in any partnership is an edge. How do we differentiate ourselves? That edge can come in a variety of different forms. And obviously a financial commitment from a partner is critical right now for us. We have a budget that we need to balance long-term and we need it healthy so we can support all 22 of our teams and do that at the highest level.”
When Cohen took charge of the athletic department two years ago, she ordered strict restrictions on spending while the department was in “triage mode” with its budget. UW athletics ran a deficit of about $7.6 million in 2016, and Cohen has been bracing for potential smaller deficits over the next two years.
Which is part of the reason why the department needs to maximize its apparel contract. One industry source estimated UW could command $8 million to $10 million annually with its new deal.
Nike has first right of refusal on any offer the Huskies receive but historically has not paid top-of-the-market money to retain schools it sponsors.
“Nike has a set model, and they don’t waver from it,” an industry source said.
Oklahoma, for example, signed an extension with Nike in 2014 worth a reported $5.2 million annually.
“UW has history with Nike, and that often is a significant factor in these negotiations,” said Clare Duffy, who covers the apparel industry for the Portland Business Journal. “Nike for the last couple of years has been able to pay below market rates for these deals because they were always the industry leader. It’s Nike. It’s always been the big company you wanted to be associated with.”
And yet the Huskies — with their rising success in the two traditional revenue sports and an affluent fan base in a major metropolis — seem to fit the profile of exactly what Adidas has been looking for.
“Adidas has done so well the last couple of years, and they have put a lot of effort into finding more of these college deals as part of their comeback plan,” she said. “They have wanted to find a deal with a prominent school in every area of the country, so this would be a good opportunity for them.”
There are two recent deals, one with Nike and one with Adidas, that could influence UW’s new contract:
1. Most recently, Oregon signed an 11-year, $88-million extension with Nike last fall, more than doubling the Ducks’ previous apparel deal. According to The Oregonian, the new deal pays Oregon $2 million to $2.5 million per year in cash and provides $5 million to $6 million worth of apparel and other gear annually.
It seems unlikely that Nike, given its deep ties to the Ducks, would be willing to offer Washington more than what it offered Oregon on an extension.
The Huskies and Ducks are, of course, bitter rivals, and Cohen has heard the growing sentiment from a faction of UW fans that wants the Huskies to break away from Nike. Phil Knight, an Oregon alumnus and Nike co-founder, has donated hundreds of millions of dollars to Oregon over the years.
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“From a fan perspective, that’s something people feel passionately about,” Cohen said. “We’re going to look at the whole picture. We’re not going to emotionally react to anything.”
2. The Huskies have studied closely the deal the University of Miami struck with Adidas in 2015. Like UW, Miami was a longtime partner of Nike’s — the Hurricanes, in fact, were the first college program to sign an all-sports sponsorship deal with Nike, in 1987 — before switching to Adidas for a bigger payday. As a private school, Miami did not disclose financial details of its Adidas deal, but it was reportedly in the neighborhood of $8 million per year.
Cohen has hired the consulting firm Bevilacqua Helfant Ventures to assist in UW’s negotiations of a new apparel contract. The firm’s two founders, Chris Bevilacqua and Adam Helfant, are both former Nike executives. According to UW’s contract with BHV, the firm’s compensation from UW could total several million dollars, or more, depending on the final terms of the apparel deal.
“Any time you’re going into a deal that’s long-term in a market that has been really unpredictable and ever-changing, I just felt like it was best practice to get a third party to help negotiate some of that and provide some context,” Cohen said. “They’ve got a great reputation and they’ve worked with a lot of schools. …
“Because of the magnitude of the total deal — not just cash but total product and potential marketing dollars and royalties and all of that — it just felt like it was in the best interest of the university to get someone with more expertise in that area.”
Beyond a financial commitment from the new apparel outfitter, Cohen said she wants to align with a company that shares her “holistic” goals for UW athletics.
“We want to be with a partner that has an exciting brand, that resonates with students and with fans. That’s critical too,” she said. “We also want a partner that’s willing to invest in our success — someone that wants to see Washington win championships in all of our sports and is willing to support that vision and market that vision and go arm in arm with us. That’s the kind of edge we’re looking for, and those are the kinds of factors we’re evaluating when we make our final decision.”