Good morning, and thanks for spending part of your day with Extra Points.
A few quick housekeeping notes before the main event for today….
1) Our next scheduled Extra Points Community Interview is Andrew Gemmell, who swam for UGA and Team USA. He’ll be happy to answer anything about college swimming, being a D-1 athlete, the state of college swimming and the Olympic model, Gov. Kirby Smart’s terrible FOIA law, and anything else on your mind. Please submit questions via email (MattBrownOhio@Gmail.com) or via the Extra Points Discord channel. We’ll publish Andrew’s responses next week.
2) My big goals for the end of 2020 were to hit 600 paid subscribers and 4,000 free subscribers. Hitting both of these benchmarks is important, as it can open up other partnerships or tools to make Extra Points better and more sustainable. As of right this second, Extra Points has 585 paid subscriptions, so one big week may very well be enough to push it over 600.
To help with that, I’m putting Extra Points subscriptions on sale! All this week, you can get a paid sub for 20% off. That’s just a little over five bucks a month.
A paid subscription gets you four newsletters a week, plus access to the Extra Points Discord server, hosted by my buddies over at The Moon Crew. It also helps support this newsletter. That’s a win-win, in my humble opinion.
3) I’m taking the rest of this week off. I figure folks won’t be deep in their email inboxes over Thanksgiving, and quite frankly, I could use a little breather. Thank you for your patience and your support. Extra Points will return to a regular publishing schedule next week.
Okay! Enough of all that. Let’s talk about shoes.
We already knew Under Armour was trying to get out of some expensive P5 deals. But now they’re reworking their contract with Cincinnati
Last week, the Baltimore Business Journal reported that Under Armour negotiated an early end to their apparel contract with the University of Cincinnati. Via BBJ:
Under Armour Inc. has reached a deal to get out of a $50 million sponsorship with the University of Cincinnati, according to documents obtained by the Baltimore Business Journal.
A "buy-out agreement" between Baltimore-based Under Armour and Cincinnati terminates a prior apparel deal five years before it was set to expire. The agreement, effective July 1, requires Under Armour to pay a $9.75 million exit fee to Cincinnati and provide $3.65 million worth of product through June of 2021.
I obtained a copy of Cincinnati’s contract earlier in the summer via an open records request. If my math is correct, and it very well may not be, Under Armour would have owed Cincinnati a little over $6.5 million in rights fees, and a little over $18.5 million in product, over the length of their original deal, which ran until 2025.
Cincinnati would be the third high profile college contract that UA has sought to extricate themselves from, following UCLA and Cal. But both of the west coast programs were for substantially more money than Cincinnati. If UA is trying to buy itself out of deals like Cincinnati, does that mean the company is in even worse financial shape than we thought? Should schools like Utah or South Carolina, also UA partners, be concerned? What does this mean?
I reached out to three different individuals who work in the collegiate apparel industry, and all three had pretty similar opinions about what this move means, and doesn’t mean, not just for UA and Cincinnati, but for everybody else.
Nobody believes this means Under Armour is actually super duper broke
The consensus among folks I spoke to was that this move was similar to UA’s strategy with UCLA and Cal, just executed more amicably. Under Armour is trying to get out of previous contracts that were signed above market rate, and while the company didn’t overpay for Cincinnati nearly as badly as they did for UCLA or Cal, an annual cash rights fee of over $1 million is still more than plenty of other P5 programs, let alone G5s.
Cincinnati benefits here as well, since they have the ability to negotiate with other potential partners, while also having the ability to continue to buy UA gear for the next few years as a fallback. I wouldn’t expect Cincinnati to turn around and announce a new deal with Nike tomorrow or anything, (they may very well stick with UA until their modified agreement expires), but having additional flexibility is never a bad thing. Plus, unlike with the California schools, nobody has to go to court!
Does this mean Under Armour is trying to get out of college athletics entirely? Not exactly. But it does show that their strategy is changing.
One of my sources described what’s happening here as what an NBA GM might do as they prepared for a major free agency season a few years in advance. If you think you might be able to lure a huge name, you start trying to get out of bad contracts and free up salary cap room, so you can have as much flexibility as possible.
The bulk of Under Armour’s current deals expire in the next few years, even agreements that they have no intention of altering. But several other major apparel contracts across college athletics are also set to hit the market in the 2022-2024 range, schools like Penn State, LSU, Texas A&M, and Under Armour’s Notre Dame.
Based on what I was told, don’t be shocked if Under Armour makes an aggressive play to keep some of their largest properties, and/or goes after some major potential free agents in the coming years. The company isn’t dead by any means.
That shift speaks to a larger potential shift in the apparel contract game. What stands to benefit, and who could feel the pinch?
Thanks to the global pandemic and accompanying recession, virtually every aspect of the college athletics business stands to face substantial headwinds in the near future.
But everybody I spoke to believes that for the largest collegiate brands, they don’t have anything to worry about on the apparel side. Nike, Adidas, etc will pay whatever they need to pay to keep Ohio State, Michigan, Texas, Alabama, etc happy and under contract. Any school just under that benchmark that hits the market will still find plenty of suitors. Hell, there’s a chance that somebody outside of Nike/Adidas/UA will want to bid for those contracts.
But for the programs outside that top 20 or so, and especially programs outside of the top 50ish, their next contract could be much more challenging. Two of the three folks I talked to believed that it will be very hard for lower-level P5 programs to secure any sort of cash rights fee in their next deal, and that discounting terms could become less generous, especially if the biggest brands soak up even more potentially available marketplace cash.
At the bottom of D-1? Things may not be so bad, in part because those apparel contracts aren’t worth a whole lot of money anyway. Nobody is handing over a massive check to secure the rights to a Big South or WAC school right now, so ADs at those institutions are used to being a bit more creative with their options.
But it isn’t all doom and gloom. Some smaller schools could still see their fortunes rise in the near future.
One of the three folks I talked to kept hammering home the importance of “storytelling” to a college brand. The examples that he gave were with the potential of HBCUs to punch above their weight in future apparel deals, especially as they may link their athletic brands to social justice activism, or with service academies, and the military. If a school is able to reach a group of people for reasons beyond “we are good at sports”, they’ll be much better prepared not just for future apparel contracts, but for coming changes in NIL, multimedia rights, and more.
There are also potential tweaks schools may look to in the future to generate additional revenue or gain flexibility. Two individuals told me they could see a world where a school decides to partner with a distributor, like a BSN, rather than a specific apparel company. That doesn’t make for as sexy a press conference, but it may allow schools to use different companies for different sports, or give them the wiggle room to work with hyperlocal companies to provide additional customization options that a big company may not offer for a smaller brand.
And hey, they’re always more revenue to be found outside of direct cash payments or incentive bonuses from the apparel company. Plenty of small schools have started to license their vintage iconography out to other companies, like with my good buddies at Homefield. I suspect a whole lot of people now own Colorado School of Mines gear that they probably wouldn’t have purchased from the ol’ university bookstore now. Like me, for example. Other schools may have untapped revenue potential from apparel sales at events, or online distribution, or elsewhere.
The old ways are changing. But that doesn’t necessarily have to be bad
If you aren’t a blue-blood, and you’re expecting a seven-figure annual cash payout, you might want to talk with your staff, since there’s a good chance that isn’t happening in your next deal. If Under Armour’s inventory is popping up at Kohls or other discount retailers, and they haven’t found ways to monetize every school the same way that Nike or Adidas has, then it won’t make sense for them to fork over cash the way they used to. Everybody will have to adapt.
But not all changes have to be bad. There’s a real chance New Balance grows into a more substantial player over the next few years, giving schools an additional option. There is a chance other companies, including more local, niche brands, move into the athletic apparel space. And there may be pathways for schools to rethink their relationship with their apparel company in ways that can improve their revenue, their brand story, and in athlete outcomes.
That may require more work, work that takes man and brainpower that can be in short supply at already overworked and understaffed athletic departments. But there may be rewards out there as well.
TL;DR, I don’t think the sky is falling for anybody now that UA and Cincinnati appear to be heading towards a breakup.
If the TV rights market crashes? That’s a different story. But for shoes, socks, and hoodies? I think it’s going to be okay.
Thanks again for supporting Extra Points. If you enjoyed this newsletter, please consider sharing it with your friends. Better yet, please consider a subscription, which you can get for 20% off this week, just by clicking this link.
Questions, comments, article ideas, business inquiries and more can be sent to:
Or, if you want to mail me a cache of open records, or a vintage college pennant, or your manifesto or something, you can do that at:
Good Spot Publishing LLC
C/O Matt Brown
PO Box 411023
Chicago, IL 60641