Education

The Nike swoosh is everywhere at UK. Here’s what the school gets in return.

A display of Nike equipment at the University of Kentucky’s football practice facility on Friday, July 22, 2016 in Lexington, Ky.
A display of Nike equipment at the University of Kentucky’s football practice facility on Friday, July 22, 2016 in Lexington, Ky. mcornelison@herald-leader.com

Last week, 10 people were arrested amid a federal investigation of whether Adidas paid bribes to lure top recruits to elite basketball programs sponsored by the apparel company. The University of Louisville, which only months before had signed a $160 million deal with Adidas, is one of several schools where federal prosecutors alleged corruption, leading university officials to begin the dismissal process for men’s basketball coach Rick Pitino and place Athletics Director Tom Jurich on paid leave.

The investigation continues around the country, putting new scrutiny on universities’ multimillion-dollar apparel contracts.

At the University of Kentucky, the school’s $47 million apparel contract with Nike pales in comparison to Louisville’s latest deal with Adidas, but it contains many of the same components, including annual payments; millions of dollars worth of clothes, shoes and equipment; and lots of cautions.

UK has a long relationship with Nike, dating back to at least 1997, according to documents obtained by the Herald-Leader under the state’s open records law. UK re-upped with Nike in 2006 and again in 2013, when Nike agreed to provide $47 million in cash and clothes through the 2024-25 school year.

Men’s basketball Coach John Calipari also has a long relationship with Nike; he has a separate personal contract with Nike that gives him $45,000 worth of apparel for his basketball camps and the coaches who work at them. As part of that contract, he also received a one-time bonus of $100,000 from Nike for winning the 2012 NCAA championship. That contract is reviewed by UK annually as part of Calipari’s outside income report, said UK spokesman Jay Blanton.

The huge difference between UK and U of L’s contracts comes down to timing, said Andrew Zimbalist, a sports economist at Smith College. UK’s contract is four years old, while U of L’s isn’t scheduled to take effect until next summer.

“The value of these contracts has gone up a lot over the past four or five years,” Zimbalist said.

It’s also worth noting that Nike was a pioneer in college apparel contracts, and has a lot more of them. In a 2016 listing of the 65 most valuable sports apparel contracts in the country compiled by Forbes Magazine, Nike had 45 and Adidas had 10.

“Nike already has a lot more exposure than Adidas does,” Zimbalist said. “Adidas is trying to be more aggressive for that reason.”

Nike’s strong leadership position in the industry has historically meant it doesn’t have to offer colleges as much to wear its swoosh logo, said Clare Duffy, who covers sports apparel for the Portland Business Journal in Oregon, where Nike and several other sports companies are based.

“Up until recently, Nike hasn’t had to make really big contracts because they were that much more of a leader,” said Duffy, who noted that Nike’s most recent deals with Texas and Michigan were among the most expensive in the country.

Last spring, UCLA set an all-time record when it partnered with Under Armour in a 15-year, $280 million deal.

Duffy published a database last month of the biggest apparel deals in college sports, working with Jonathan Jensen from the University of North Carolina’s Center for Research in Intercollegiate Athletics.

Jensen found that the value of sponsorship deals generally correlates with student enrollment, the number of times a basketball team has appeared in the NCAA tournament, the size of a football stadium and attendance at sporting events.

Using those parameters, Jensen determined that UK should be getting $6,680,324 in cash and apparel from Nike this school year, though it’s actually getting $3,725,000, Duffy said.

Blanton said UK’s goal in partnering with Nike was to have apparel that was consistent for all 22 varsity sports teams on campus.

“The idea has always been to provide our student athletes with the highest-quality and most technologically advanced apparel, equipment and uniforms and to align with a top sports apparel brand,” he said. “For UK, the best match to those principles has been Nike.”

The contract with Nike is separate from UK’s 15-year, $210 million contract with JMI Sports for multimedia rights to sporting events. That means JMI controls coaches’ endorsements and radio shows.

“The question of media rights is completely separate from who outfits a team in terms of equipment,” Blanton said. “Both contracts ultimately are with the university.”

The terms

Under that most recent contract, Nike pays UK $1.8 million a year in base compensation, totaling $21.6 million over 12 years. Nike also gives UK up to $2 million a year in uniforms and other products. The value of those products — shoes, uniforms, workout clothes and some equipment — is scheduled to rise from $1,725,000 in 2013 to $2,125,000 in 2024. Nike also paid UK a signing bonus of $2.4 million in 2013.

The contract also guarantees royalty payments to UK on Nike’s sales of products that feature the school’s logo. Nike pays 12 percent on the sales of such licensed products, with a guaranteed minimum of $35,000.

In addition:

▪ All coaches have to guarantee one personal appearance on behalf of Nike, while the football, men’s basketball and women’s basketball coaches have to guarantee four.

▪ Once every three years, the women’s basketball team and/or soccer team have to be available to play in a Nike-sponsored tournament.

▪ Nike gets tickets and coveted VIP parking spots. Nike officials get eight tickets to every home football and basketball game, along with two VIP parking passes at each, plus 12 tickets to bowl games and eight tickets to post-season basketball tournaments. They also get passes to the athletics director’s hospitality room at each venue.

▪ Every summer, Nike pays about $10,000 for one intern selected by UK Athletics to work at Nike headquarters.

▪ The contract includes requirements for electronic messaging about Nike, full color ads in every game program, and product placement in campus stores. Also, all sports teams and coaches must wear Nike clothes at almost all official events.

▪ If UK wants to redesign a logo or symbol, it must consult with Nike first. If Nike gets chosen to create the design, as happened last year, they do so for free.

▪ UK’s contract with Nike does not offer any incentives for winning national championships. In comparison, U of L’s contract with Adidas offers up to $300,000 if either the football team or basketball team wins a national championship.

Termination clauses

In its contract with UK, Nike says the “principal inducements” for the company are the “wide-spread national television and other media exposure that the men’s basketball program annually receives.”

If the NCAA were to ban UK basketball or football from television, Nike could dramatically cut its support of the school. If the basketball team isn’t on TV, Nike can cut its base compensation 70 percent. For football, the cut would be 30 percent.

Nike can also terminate the agreement completely if UK is put on NCAA probation or if UK “disparages” the Nike brand in any way.

The contract also contains numerous references to “spatting,” whereby a logo might be covered up by tape. Covering up the swoosh logo is considered a “material breach” of the contract.

Separate contracts

The Nike contract also bans UK from entering into any agreements with Adidas, Reebok, Puma or Under Armour. UK, though, does have separate contracts with Rawlings Sporting Goods of St. Louis, Mo., and Wilson Sporting Goods of Chicago, Ill.

UK has two contracts with Rawlings to provide products for the UK baseball team and any baseball camps run by Coach Nick Mingione. The first contract provides bats, gloves and helmets for the team, plus incentive bonuses of up to $30,000 for winning the College World Series. It also requires Mingione to make up to three appearances each year on behalf of Rawlings. Under the second contract, Rawlings pays $20,000 to UK to sponsor Mingione’s baseball camp.

UK’s agreement with Wilson provides bats, gloves, helmets and bags for the softball team. Wilson pays UK $5,000 a year through 2019, along with a potential bonus of $15,000 for winning the NCAA College World Series Championship.

Nike has a separate contract with UK Track and Field Coach Edrick Floreal, which is scheduled to pay UK on Floreal’s behalf a total of $75,000 from 2016 to 2018. In return, Floreal must make four appearances each year on behalf of Nike. The contract pays bonuses to Floreal of up to $6,000 for first place in the NCAA track championships.

Linda Blackford: 859-231-1359, @lbblackford

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