Saturday, December 09, 2006

Tech makes deal with Nike worth $9.7 million

Starting next July, Nike will provide all Virginia Tech teams with free shoes, apparel and equipment.

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Here's the deal

Virginia Tech’s eight-year contract with Nike calls for the company to provide free shoes, apparel and equipment to all Tech teams.
Total value: $9.7 million
Nike will pay Tech $2.1 million. Nike will pay Tech $250,000 a year for the first four years of the deal and $275,000 for the other four years of the deal.
Free products
$7.6 million value. Tech can order $900,000 worth of free products each year for first four years of deal and $1 million worth of free stuff for the other four years of the deal.
The importance of keeping Frank
If Frank Beamer leaves as football coach, Nike will pay $75,000 less each year.
The importance of playing on TV
If Tech football is banned from TV, payment goes down 50 percent in that year.
Logo visibility
No taping or polishing over of the Nike swoosh on the shoes is allowed. If it happens, payment decreases 10 percent that year for the first incident, 15 percent for the second incident and 25 percent for the third.

Covering the Hokies in swooshes is going to mean millions to Virginia Tech's athletic department.

The Tech athletic department will reap $9.7 million in money and free products from its eight-year contract with Nike.

Tech athletic director Jim Weaver said in October that Tech had agreed to a deal with Nike in which the company will provide free shoes, apparel and equipment to all Tech teams. The contract was obtained this week by The Roanoke Times under the Freedom of Information Act.

Nike will pay the Tech athletic department $2.1 million over the length of the contract, which begins in July and runs through June 2015. Tech will reap $250,000 per year for the first four years of the deal, with the payment increased to $275,000 a year for the final four years of the deal.

Weaver said Friday that about $200,000 of that money will go each year to football coach Frank Beamer, men's basketball coach Seth Greenberg and women's basketball coach Beth Dunkenberger because their individual shoe-company deals are being absorbed into this contract. The rest of the money will go to the other head coaches.

Nike also put a monetary value on what Beamer is worth to the athletic program. If Beamer leaves the Hokies, Nike will reduce the monetary payment by $75,000 that year and for every subsequent year of the contract.

Tech can order $7.6 million worth of free products during the length of the contract. Tech will reap $900,000 worth of free products each year during the first four years of the contract, and $1 million worth of free products each year for the final four years.

"This is going to help all the sports," Tech equipment manager Lester Karlin said. "And the athletes ... really like Nike. Having that swoosh on there means a lot to them."

The contract explains that Nike's motivation for striking the deal is the "widespread national television and other media exposure that the football program annually receives," as well as the "prominent brand exposure" that Nike receives from its logo being on Tech apparel and shoes.

So the contract contains financial penalties for Tech if that exposure is ever harmed.

The deal forbids the Nike logo on shoes to be taped or polished over. If that happens, Nike can reduce its payment for that year by 10 percent. A second infraction would result in the payment being reduced by 15 percent, and a third infraction would reduce the payment by 25 percent.

If the Tech football team is ever banned from television for a year for running afoul of the NCAA, the payment for that year would be reduced by 50 percent.

If the women's basketball team is banned from TV, the payment would be reduced by 25 percent. There is no reduction specified if men's basketball ever is hit with a TV ban.

Benefits for both sides

The deal has plenty of advantages for Virginia Tech.

Products: The Hokies will receive a wide range of free products, such as caps, uniforms, golf shirts, sweat suits and sunglasses. Nike will also make "celebration apparel" for Tech athletes to don after winning a bowl game or tournament. If Tech needs more than the $900,000 or $1 million worth of free products it can have in a year, it can buy them wholesale from Nike.

Karlin said there are things Nike doesn't make that Tech will still have to order from someone else, such as football helmets and shoulder pads.

The new contract gives Tech the right to use non-Nike golf balls, golf clubs, softball equipment and wrestling singlets, as long as the department doesn't turn to a Nike competitor.

New logo: Nike will design a new logo for Tech athletics if the school ever wants one. No new logo is planned, said Weaver.

Performance bonuses: Tech will receive bonuses if its men's or women's basketball team advances deep into the NCAA tournament. A Sweet 16 appearance for either team is worth $5,000. Nike will pay Tech $25,000 if the men's team makes the Final Four and $10,000 if the women's team gets that far.

Nike will get more out of the deal than just TV exposure.

Free tickets: Nike will receive four football season tickets; six tickets to every bowl Tech makes; two sideline passes for football; eight season tickets for men's and women's basketball; 12 tickets to the ACC men's and women's basketball tournaments; and 12 tickets if either basketball team makes the NCAA tournament or NIT.

The company will also get four "VIP" parking passes for football and basketball games.

Marketing at Tech: Nike will be able to sell its wares at Tech games, and will get to display its logo on arena and stadium signs. Nike will also be recognized in public-address announcements, game programs, media guides and on the athletic department's Web site.

Models for new goods: Nike can require the Hokies to use certain types of products from time to time as a way to provide "broad and prominent exposure" to particular models and styles.

Coaches will have to give Nike written or oral reports on whether they like all the products their teams use.

Personal appearances: The contract requires Tech's football coach to make two personal appearances for Nike, such as a TV commercial, speaking engagement or a photo shoot for a poster. All other Tech coaches are required to make three appearances if asked.

Tournaments: The deal requires the women's basketball and soccer teams to play in Nike-sponsored tournaments.

1st time for Tech

This is the first time Tech has had a departmentwide deal with a sporting-goods company, rather than having its high-profile teams strike individual deals and the rest buy what they need from Nike or other companies.

Weaver has said only about 30 colleges nationwide have all-sports deals with Nike.

Weaver said Friday the free products will result in "significant savings" for Tech and enable it to help the nonrevenue teams. Those teams will be able to keep the money they have been spending on equipment, apparel and shoes and use it any way they wish, such as for travel or recruiting.

The football team already has a deal with Nike. Like Beamer's Nike deal, it will be absorbed into the overall contract.

The women's basketball team has a deal with Nike in which only some of its product needs are met free of charge. The men's basketball team had a deal with Adidas that expired after last season. The men's basketball team began using Nike products this season.

The university already has a licensing deal with Nike that allows the company to sell Tech apparel to the public. Tech gets royalties of 8 percent in that deal, which isn't part of the new contract.

Selling to the public has made Nike plenty of money. Under the part of the new contract dealing with liability issues, the net worth of Nike is listed as more than $2 billion.

By comparison

Ohio State has a departmentwide deal with Nike with a total value of $11.9 million from 2001-07, including $9.2 million in free products.

Under its departmentwide deal with Nike, Florida this year will be paid $1.3 million and get $625,000 in free products.

Under its departmentwide deal with Nike, Kentucky will be paid $1.6 million annually and will get $1 million annually in free products.

Under Georgia's departmentwide deal with Nike, the total value is $1.3 million per year.

Tennessee has a five-year, departmentwide deal with Adidas with a total value of $19.3 million.

There are no special nonathletic stipulations to the Tech contract, unlike in some schools' contracts.

Deals with Florida State and Ohio State, for example, require Nike to give internships to those schools' students. The FSU deal requires Nike to make a $1 million donation to help build a Human Performance Center building. The UNC deal requires independent monitoring of the labor standards at all manufacturing plants making Nike's UNC merchandise.

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