Mark Giannotto|Memphis Commercial Appeal
On Nov. 12, 2008, University of Memphis Athletic Director R.C. Johnson held a press conference to announce a new five-year, $11.3 million exclusive contract with Nike to provide shoes, apparel and equipment for all Tigers athletic teams.
Memphis was coming off an appearance in the men’s basketball national championship game under former coach John Calipari, and Johnson declared the agreement symbolized a“historic” and “very prestigious day for Memphis athletics.” Until then, there was no apparel deal for the entire athletic department.
Almost 10years later to the day, and months before Memphis made a splash by hiring Penny Hardaway as its new men’s basketball coach, university President M. David Rudd quietly signed a five-year extension uniting Memphis athletics with Nike through June 30, 2023, according to documents obtained by The Commercial Appeal through an open records request.
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Why Memphis stayed with Nike?
Apparel deals help athletic departments offset budgetary needs and have beenparticularly lucrative for Power 5 conference schools.
At Memphis, this was the second five-year extension signed with Nike since the original agreement a decade ago. But unlike nearby schools such as Tennessee or Louisville, which have seen money from Nike, Adidas or Under Armourskyrocket in recent years, the value of these deals has remained largely stagnant for the Tigers.
According to the terms of the latest contractMemphis signed Nov. 13, which wasapproved by the Tennessee Board of Regents in December, the university’s athletic department will receive $11.25 million in products from Nike over five years.
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The university’s annual product allotment will start at $2.05 million during the 2018-19 school yearand increase to $2.25 million by 2022-23. It’s an improvement from the contract extension Memphis signed with Nike in 2013, when the school received only $1.5 million annually in products from the Beaverton, Oregon-based apparel giant.
The new agreement is comparabletothe six-year, $12.16 million deal Boise State recently reached with Nike that begins in July 2019. The Memphis contract is also worth more than what other American Athletic Conference schools such as Houston ($1.3 million annually, according to the Portland Business Journal) receivefrom Nike.
"Our decision to continue our agreement with Nike is first and foremost the fact that our student-athletes and our coaching staff want to be a Nike program," Memphis Athletic Director Tom Bowen said in a statement. "Their innovations, designs and superior customer service have been truly incredible. This new 5-year agreement is a very strong statement on the relationship we are building together and the future for Tiger athletics. We are honored to remain a part of the Nike family."
But the Tigers’ deal still falls short of whatseveral other AAC public institutions receive under terms of their apparel agreements.
Last year, for instance, theUniversity of Connecticut signed a six-year contract with Nike that is reportedly worth $32.45 million. In 2015, Temple University agreed to a 10-year deal with Under Armour worth $30 million, according to the Philadelphia Inquirer.
Also in 2015, the University of Cincinnati increased its annual financial windfall by more than $2 million when it switched from Adidas to Under Armour and signed a 10-year, $47 million contract.
Last December, around the same time Memphis came to terms on its new deal with Nike, the University of South Florida agreed to switch from Under Armour to Adidas. Its new eight-year contract is reportedly worth at least $24 million and could be as much as $30 million with incentives.
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But Memphis never considered leaving Nike and didn’t take any bids from competing apparel companies. According to the five-year contract extension the school signed in 2013 —which expires on June 30 —Nike held exclusive negotiating rights with the university until Jan. 1, 2018.
The university also filed a request with the TBRfor noncompetitive negotiations as part of its contract extension proposal with Nike, according to a document obtained in an open records request.
Nike’s ties to the city of Memphis extend beyond simply the university’s apparel agreement. The company has more than 2,600 local employees, and its largest worldwide distribution center is also located here.
In addition, the University of Memphis Board of Trustees chairman, FedEx CFO Alan Graf, is a member of Nike’s Board of Directors.
How Penny Hardaway could affect new deal
More significantly moving forward, Nike has a partnership with Hardaway dating to his time as an NBA star, and his shoe line remains popular today. The financial terms of Hardaway’s agreement with Nike are unknown, but he was allowed to keep his individual sponsorship with Nike after Memphis hired him in March.
If Memphis had signed an apparel contract with a company other than Nike, Hardaway said last week “that would’ve been interesting because I can only wear Nike.”
Hardaway said in numerous interviews since March that he met with Nike officials at this year’s Final Four to discuss how his relationship with the apparel giant could help Memphis now that he’s the company’s first signature athlete to become a college head coach. A Nike spokesperson wrote in an email that the company could not comment on any potential benefits Hardaway’s hiring might have for the university.
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But the power of a famous coach is evident in the university’s original 2008 agreement with Nike. According to the contract, the school would receive $660,000 in annual contributions from Nike as long as Calipari remained coach of the men’s basketball team. But a stipulation in the deal stated that figure would drop to $400,000 if Calipari left.
Since Calipari became the head coach at Kentucky one year into the original Nike contract, what was announced as an $11.3 million deal in 2008 ended up being worth $10.31 million.
In the 2013 contract extension, Nike replaced those annual contributions to the university with monetary bonuses tied to the performance of the football, men’s basketball and women’s basketball programs. There is also a 12 percent royalty rate for domestic sales of authentic competition apparel and jerseys of the football and men’s basketball teams.
The men’s basketball team could earn up to $45,000 if it won a national championship, and the football and women’s basketball programs could earn $35,000 and $20,000, respectively, for a similar accomplishment. During the five-year contract that ends on June 30, Memphis athletics will have earned $35,000 in bonus money.
Both the bonus structure and the 12 percent royalty rate remain unchanged in the new five-year contract that iseffective July 1.
“It is Nike’s policy and practice not to comment on the terms of our college and university partnerships, even when these are part of the public record,” a Nike spokesperson wrote in an email. “This said, we are especially proud of our relationship with the University of Memphis, providing the school’s student-athletes, teams, coaches, and programs with Nike footwear, apparel, and equipment.”
