Published on Thursday, September 14, 2000 in the Philadelphia Inquirer
What Was Sacred Is Now Up For Sale
Forget tradition. Sponsorship is the thing.
by Gilbert M. Gaul and Frank Fitzpatrick
GAINESVILLE, Fla. - Nike executive Chris Bevilacqua was in Denver two years ago for baseball's All-Star Game when his cell phone rang. Jeremy Foley, the athletic director at the University of Florida, was on the other end.
For the better part of two years, Foley and Bevilacqua had been haggling over the details of a new contract that would keep Florida athletes in uniforms bearing the ubiquitous Nike swoosh. The deal was critical to each party for different reasons.
Nike wanted to keep Florida's high-profile football program under its corporate wing. Florida would get substantial cash and equipment for an athletic department that, with a $50 million budget, was one of the nation's largest.
"What if I get on an airplane?" Bevilacqua said.
Soon, he and Foley were together at Atlanta's Hartsfield International Airport, and after nine hours of negotiation, they had agreed on a five-year deal worth $9 million covering football along with men's and women's basketball.
As athletic-department costs soar, big-name colleges are turning to corporate America to plug the financial holes. In return for millions from Nike and other sponsors, they are putting their names, their logos, and their storied traditions on the block.
"Everything we have is for sale," said Joe Dean, the athletic director at Louisiana State. "I don't mean that literally, but I have to have corporate dollars. I can't make it without that."
The inflow of cash opens the door to potential conflicts over money and access, creates an additional income gap between large and small colleges, reinforces the entertainment culture that now pervades college sports, and leaves schools dependent on a highly volatile source of income.
When sales of athletic shoes fell sharply at the end of the last decade, shoe companies became more selective about spending their sponsorship money. Negotiations with schools became more difficult.
Foley said that he and Bevilacqua had worked from 8 a.m. until 5 p.m. at the airport, without breaking for lunch.
"All of those millions of dollars on the table and we couldn't even buy a hamburger," he said.
Under the terms of its contract with Nike, Florida receives more than $1.2 million a year in cash, $400,000 worth of Nike products, and an additional $150,000 in cash and products. That makes their agreement one of the most lucrative sponsorship deals in college sports, worth seven times what Florida received from Nike in 1990.
Nike, for its part, gains prized marketing opportunities and access to Florida's coaches and facilities.
"You gladly pay those kinds of dollars to get that kind of exposure," said Bevilacqua, who last year left Nike, which is based in Beaverton, Ore., to become a consultant.
Florida isn't the only school benefiting from corporate dollars. Louisiana State gets $3 million annually from sponsors - nearly 10 percent of its athletic budget.
"We got criticized at first for commercializing," Dean said. "They said we were ruining amateur athletics. Now everybody's doing it."
Nationally, more than a dozen schools have sold naming rights to new athletic facilities for fees ranging from $25 million at the University of Maryland to $300,000 at Wichita State.
The University of Nebraska touts its scoreboard in the north end zone of Memorial Stadium as an ideal vehicle for corporate messages. "A 5x26-foot sponsorship panel is prominently displayed at the base of this scoreboard," a marketing document reads. "This package includes one 15-second electronic message per quarter and will become available for the 2002 football season for a term of five years at a rate of $40,000 net per year."
Meanwhile, scores of schools have entered the athletic retail business, selling everything from jerseys to paint.
A shopper at Nebraska's Husker Authentic mini-malls can pick up an adidas sports bra for $26. A red Cornhuskers football jersey goes for $200. For $20, you can buy a slice of the AstroTurf once used at Memorial Stadium. It comes in a zipped poly bag that also contains a list of football statistics. For $15, Nebraska offers Christmas ornaments made from the artificial turf.
Royalties from licensing school logos are another source of money.
After it won the 1996 national championship in football, Florida collected about $2.2 million in licensing royalties from the sale of sweatshirts, jackets and other gear. The amount has dropped by about one-third from that peak year, but the royalties still bring in about $700,000 annually to the athletic department. The university's general fund gets the rest of the money.
"I foresee the future of corporate America coming into college sports just like they did professional sports," said George Smith, director of the Ole Miss Loyalty Foundation, a booster organization that raises $7 million a year for University of Mississippi sports. "I think that is the future."
In such a world, Stanford University stands out.
After protests by some faculty members and administrators, Stanford decided in June to do away with all commercial signs at its football and basketball facilities.
University president Gerhard Casper explained that the signs were creating commercial clutter and detracting from the events.
"It's one thing to have a logo," he said. "It's quite another thing to have these big signs all around."
Athletic officials at Stanford said that losing the corporate money would have a serious impact on their budget, but with a $170 million athletic endowment, the school may be rich enough to absorb the loss.
A $1.6 million shoe and apparel deal with Nike wasn't affected by the June decision.
Don't expect many other large schools to follow Stanford's example.
"You can't have it both ways," LSU's Dean said. "You can't add sports for women, pay these coaches' salaries, and offer top-of-the-line facilities and not reach out to business. It doesn't work that way anymore."
The larger and more competitive a program becomes, the more money it takes to maintain. As a result, expenditures for administrative overhead, support services for athletes, and capital projects have all grown sharply in the last decade.
When Foley started at Florida in 1976, the athletic budget was $7.5 million. Now, it is $50 million - more than double the 1976 figure, after adjusting for inflation.
"We're lucky to be in a league that has the ability to generate significant dollars through television and bowls," Foley said.
Florida receives more than $5 million annually as a member of the Southeastern Conference.
"We also have an extremely committed and loyal fan base," Foley said. "They are willing to accept higher ticket prices at various points of time."
Still, Florida, like other schools, is constantly "looking for opportunities for new revenues," Foley said.
The school received about $4.5 million in corporate money last year. And Florida officials expect the number to grow.
"As new technologies advance, like the Internet, they present us with other opportunities," said Mike Hill, director of marketing and promotions. "We will be very aggressive in tying in corporate sponsorships in those new realms."
At present, Florida offers a variety of deals for its business partners. They range from underwriting television and radio broadcasts in return for commercial air time to splashing a company logo on the giant Gator Vision instant-replay screen at 83,000-seat Ben Hill Griffin Stadium. The fees run from $10,000 to $50,000.
One of the largest contracts - about $400,000 a year - is with the 120 Florida Dodge dealers. During home football games, the Dodge logo appears on scoreboards and on Gator Vision. Dodge also helps to pay for a halftime feature, appears in the game program, and sponsors the Gator Radio Network. And that's just in football. The dealers are visible at numerous other facilities.
"It kind of allows you to reach some different people - qualified people, people who can afford to buy a car," said Chris Smith, a Gainesville-area dealer active on the state board of Dodge dealers.
The dealers bought their first sign at Florida in the early '90s for $20,000. After the Gators won their national title in football in 1996, their investment grew dramatically.
"It kind of escalated," Smith said. "It's kind of gotten where we can pretty much tell the [athletic] department what we want. You give them enough money and they've got to listen."
But even Smith worries that there may be too many signs at games.
"We also have a deal with Florida State," he said. "We had to tell them to quit putting up so many. Sometimes it gets obnoxious."
In the beginning, before the towering video screens, the rotating scoreboards, and the McDonald's logos painted at center court, before what has become a full-fledged corporate invasion of college sports - there was Nike and its not-yet-famous swoosh.
This was in the '70s, and in some ways, it was still a relatively innocent time in college sports. Nike discovered that if it paid coaches a few thousand dollars, it could get its shoes on the athletes performing in college arenas and stadiums, where the shoes would be in full view of the fans.
The corporate foray into college sports began.
In 1993, Nike paid Mike Krzyzewski, basketball coach at Duke, a $1 million signing bonus and $350,000 a year for 15 years to put Nikes on his players. John Thompson, the former men's basketball coach at Georgetown, got options to buy $4 million of Nike stock and joined Nike's board.
Later, as Florida's football program rose to national prominence, Nike negotiated its new deal with the school - an arrangement that nets Steve Spurrier, the Gators' coach, $950,000 annually.
Bevilacqua, the former director of global negotiations for Nike, described the company's college strategy in simple terms: Sign up as many prominent programs as possible and get the Nike logo in front of fans. The more often a school appears on television, the better.
"The strategy was that college sports was essential to Nike," Bevilacqua said. "It really hits in the sweet spot of the Nike consumer. It gets them at a time in their lives when they are starting to get their disposable income and they start spending money on those types of products."
Nike is careful not to include the word advertising in its contracts, so the schools will not have to pay taxes on the revenue, but the company's intent is clear.
"UNIVERSITY acknowledges that one of the principal inducements for NIKE'S entrance into this agreement is: the accompanying brand exposure . . . and that such continued exposure is of the essence of this agreement," Florida's contract with the company reads.
The contract goes on to say that Nike may slash its payment if the size, color or location of its logo on athletes' uniforms is changed. For example, a reduction of the logo on the football jersey could result in a 60-percent cut. In men's basketball, it could result in a 15-percent cut, in women's basketball a 10-percent cut.
If an athlete tapes over the Nike logo on his shoes, it could result in a 10-percent cut (about $120,000) of the total base compensation for the first occurrence and a 15-percent reduction ($180,000) for the second.
While negotiating the contract, one problem Foley encountered was Nike's insistence on a right of first refusal if a competitor made a higher offer. That meant Nike would be free to match any offer.
"It was critical to protecting our interests," Bevilacqua said.
Foley hesitated. He wanted to let the apparel and shoe companies battle it out at an auction. Nike already had a long-standing contract to supply the football program with shoes, and it threatened to use that as a wedge to keep away other companies. Over the course of two years, both sides compromised until the new contract was signed in 1999. It included the right-of-first-refusal clause sought by Nike. The men's basketball team, which had been with Reebok, switched to Nike, and that paid off when the Gators made it to the national championship game this spring.
"The simple formula is, you're renting these programs for the value you get in football and basketball," Bevilacqua said. "It's three-quarters football, one-quarter basketball. Exposure in football is more prominent because of the way the game is exposed. The presence of the marquee [Nike logo] is more prominent."
Of the $1.2 million in cash that Nike annually pays to Florida, Spurrier gets about 80 percent. The $400,000 in products is spread among the three major programs. It includes: 500 pairs of football shoes; 300 home football jerseys and 300 travel jerseys; 52 coaches' visors; 260 pairs of fleece pants; 170 team warm-ups; and 200 pairs of men's basketball shoes.
As part of the contract, the university agreed to "require the coaches to exercise best efforts to wear NIKE Products while appearing on any television broadcast, show or special relating to their activities."
The school also agreed to sample and field-test Nike footballs and basketballs. If the teams decided against using them, school officials agreed, they would purchase balls from a sporting-goods manufacturer, and not from a competing athletic outfitter, and then only for one year.
At about the time Florida sought an auction for the right to outfit its teams, the market for athletic shoes and apparel was taking a turn south. After decades of steady and sometimes dramatic growth, sales flattened in the late '90s, then dropped sharply.
"The business has cratered," Bevilacqua said.
There are many reasons. Manufacturers built too many retail stores in the '80s, oversaturating the market. Consumers' interest wavered. Inventories backed up. Companies responded by discounting their products, cutting into profit margins.
For athletic departments struggling to keep ahead of spiraling budgets, the downturn is potentially ominous. With the industry shrinking, there is less money for marketing - and, by extension, for sports programs.
The economic ripples are already working their way into athletic departments across the college landscape.
"The whole market is going to hell in a handbasket," said Katie Hill, assistant athletic director at the University of Arkansas. The school has a contract worth $1.1 million annually with Reebok to outfit its teams. It expires next year.
"Generally speaking, we don't have the same expectation at the end of this contract that we did when we entered into it four years ago," Hill said. "Am I scared? Yes."
Arkansas' program is successful enough that it should be able to negotiate a new contract, but not necessarily as rich as its current deal.
"It's hard, especially since we've all been spoiled to death," Hill said. "We get new uniforms every year. The kids expect it. They want to know, 'What do you mean we have to wear the same uniform as last year?' "
Large programs, such as Florida's, should continue to collect big corporate dollars from athletic outfitters. At least, Florida's will as long as the Gators continue to win at a national level and employ high-profile coaches, such as Spurrier and Billy Donovan, their men's basketball coach.
In short, the rich will get richer.
"I think you're going to see the Floridas and the Notre Dames and the UCLAs keep their value because somebody out there will be willing to compensate them for their value," Bevilacqua said. "The smaller guys that are more regional and have less presence won't be part of the picture anymore."
Even among big schools, relationships with corporate sponsors have grown complicated.
This year, Nike severed its ties with Michigan after the university joined a group pushing the company to improve working conditions at its offshore manufacturing plants. Nike declined to renew its six-year, $84 million deal with the school.
Michigan is now paying Nike $760,000 for shoes and equipment that it had been receiving for free.
Michigan State, the Wolverines' big in-state rival, took advantage of the rupture to sign its own deal with Nike. Assistant athletic director Mark Hollis said that Nike would outfit the Spartans' football, basketball and hockey teams and pay the school an undisclosed sum.
Michigan State's previous deal was with Reebok. That company's insignia got wide exposure on national TV last spring as the Spartans advanced in the Final Four basketball tournament.
The Spartans won the national championship April 3, defeating Florida. It was the last time the team wore Reebok.
A few weeks later, Michigan State athletes joined the Gators in sporting the Nike swoosh.
Inquirer news researcher Frank Donahue contributed to this report.
Copyright 2000 Philadelphia Newspapers Inc