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May 2, 2014

A look at FSU's 10-year NIKE contract

FSU's current NIKE Contract (pdf)

In June of 2013, Florida State renegotiated its apparel contract with NIKE, signing a deal worth roughly $50 million over 10 years. Warchant.com obtained that contract through an open records request, showing how FSU signed a good deal at the time - but it may quickly be outstripped by more lucrative contracts at other schools.

The extension, signed June 27 of last year, stipulates that NIKE will provide FSU an average of 1.45 million in cash each year and 2.9 million in supplied product each year for five years, with a potential extension through 2022-2023. It also came with a hefty $3 million signing bonus. As a total, FSU's apparel contract is valued at roughly $24.5 million over the first five years, with a slight increase to $25 million in the next five years if the extension is signed.

That contract puts FSU shy of the largest national apparel deals but still among the most well-compensated universities in college sports.

FSU's contract with NIKE has been renegotiated in 1998, 2005 and 2011 before the 2013 amendment. The past two amendments have both extended the term of the contract through 2022-2023 and significantly increased FSU's compensation from NIKE, from an original base compensation of $1 million per year to the current $1.45 million average.

The contract does give NIKE rights to consult and develop a new logo and uniforms for the university as its official apparel provider, but the university still has to approve the design.

An early release of a new Seminole head logo caused a backlash from fans unhappy with the new design. FSU officials say they and NIKE worked together on the redesign.

The most recent extension of FSU's NIKE contract was negotiated during former athletic director Randy Spetman's tenure, but was signed just weeks after he was removed from his position. Associate Athletic Director Monk Bonasorte, who was on staff at the time and part of the negotiations, said a wide number of parties were involved in the negotiation.

"The initial conversations were between Randy and NIKE, and then everyone gets involved in it from the CFO, to the president, but most of that is internally within athletics," Bonasorte said. "You're letting lawyers and president know so they're not surprised. Different parts of the contract have different people work with to work with."

Money from NIKE has had an undeniable effect on FSU as an institution. Since 1998, NIKE has paid for a scholarship in Bobby Bowden's name, two internships per year for FSU students at NIKE, and $1 million towards FSU's Track and Human Performance Center - and that's all outside of the base compensation and NIKE gear for all FSU's athletes.

The contract is only lightly incentivized, but FSU and NIKE have also removed strings attached to chunks of money in the contract. Specifically, FSU removed clauses outlining how much money from the contract was to go to head football and basketball coaches each year. Bonasorte said that allows FSU more freedom to use the money from NIKE.

FSU can also carry over some of its unused apparel allotment to the next year - something that doesn't show up in other NIKE contracts. The Seminoles can roll over up to $200,000 in apparel allotment to the following season.

But NIKE's money and influence come with a cost: contracts with NIKE are almost impossible to get out of.

FSU's current contract is for five years, through the 2017-2018 year, with an option for NIKE to extend the contract through 2022-2023. NIKE also retains the rights of first refusal to match any third-party offer that FSU might receive - and FSU's contract prohibits anyone from the university from negotiating with any other apparel provider during the term of the contract and for the following 90 days after the contract's conclusion. Other schools have contracts that extend that period to 180 days.

The contract also stipulates that FSU must place its apparel order by October of the previous year, meaning that even if FSU got a contract from a different apparel provider, the Seminoles would be hard-pressed to take advantage. NIKE's lengthy hold on right of first refusal also limits FSU's ability to negotiate in the future.

That type of agreement isn't specific to FSU - NIKE's right of first refusal shows up in almost identical language in all the other apparel contracts obtained by Warchant.com. But newer apparel deals are even more lucrative, outstripping FSU's contract, and the Seminoles will remain at their current level for the foreseeable future.

Take, for example, Florida State's BCS Title competition, Auburn. The Tigers have a contract with Under Armor, which offers more cash on hand ($1.75 million base compensation for Auburn compared to $1.4 for Florida State) and incentives.

What's more, Auburn's deal was signed in 2009, and the Tigers will get to renegotiate a more lucrative deal far sooner than Florida State, which will likely remain under contract for at least the next few years. NIKE routinely renegotiates contracts a year or two in advance of their expiration, but FSU's deal runs for the next five and NIKE can extend the contract another five as well.

NIKE, while compensating contracted schools well, typically doesn't shell out the lucrative numbers that Under Armor and Adidas have - Under Armor and Notre Dame reportedly signed a deal worth $90 million in recent months, and Michigan signed a deal with Adidas for $82 million last year.



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