January 12, 2012
OXFORD, Miss. -- Ole Miss announced on Jan. 6 that it had extended its athletic partnership with Nike through 2019.
The current deal, which is set to expire June 30, 2012, is worth $750,000 annually. The new deal will be for $1.6 million the first year and $2.05 million each year during the rest of the contract. In short, the deal is worth approximately $1.2 million more than the current contract each year.
Nike will continue to supply game uniforms, warmups, shoes and/or other equipment for all 18 of the Rebels' men's and women's varsity teams.
With fans and supporters curious about the new deal, I recently submitted a list of questions to Ole Miss senior associate athletic director Michael Thompson. The following questions and answers are from an email exchange and also a phone conversation in order to get more clarity. Thompson's replies in bold.
Were there talks or bids with other apparel companies (Adidas, Under Armour) before renewing this contract? If not, why not?
MT: It's very common in agreements like this to have a "Rights of First Dealing" followed by a "Rights of First Refusal." To put it simply: there is considerable risk in letting the offer expire and begin negotiating. If another offer (higher OR LOWER) is presented, Nike has the right to match it. That gives "money left on the table" a whole new meaning. Especially given the fact that research of other agreements showed our Nike offer was solid and fair.
In other words, Ole Miss didn't put the contract up for bid because had Ole Miss declined the current agreement with Nike, the deal goes off the table. At that point, other companies could bid but wouldn't know Nike's latest offer. If it was lower than what Nike had offered, Nike could match it and keep Ole Miss as a partner for a lower total than it had offered.
Here's the contract language for this:
"Prior to January 1, 2012, UNIVERSITY shall not engage in discussions or negotiations with any third party with respect to the exclusive sponsorship rights that are the subject of this agreement.
"Throughout the Term, and for a period of one hundred eighty (180) days following its expiration or termination, NIKE shall have the right of first refusal for the renewal of the rights granted to NIKE by UNIVERSITY herein in connection with the exclusive sponsor and supplier of Products, as follows. If UNIVERSITY receives any bona fide third-party offer with respect to any Product Supply/Sponsorship Rights, UNIVERSITY shall submit to NIKE in writing the specific terms of such bona fide third-party offer in the form of a true copy which shall be on the offeror's letterhead or other identifiable stationery or imprint readily authenticatable by NIKE as having originated with such third-party offeror. NIKE shall have fifteen (15) business days from the date of its receipt of such true copy of the third-party offer to notify UNIVERSITY in writing if it will enter into a new contract with UNIVERSITY on terms no less favorable to UNIVERSITY than the material, measurable and matchable terms of such third-party offer. If NIKE so notifies UNIVERSITY within such 15-day period, UNIVERSITY shall enter into a contract with NIKE on the terms of NIKE's offer. If NIKE fails or declines to match or better the material, measurable and matchable terms of such third-party offer within such 15-day period, UNIVERSITY may thereafter consummate an agreement with such third-party on the terms of the offer made to UNIVERSITY. Prior to March 1, 2012, UNIVERSITY shall not solicit, consider or present to NIKE, and NIKE shall not be obligated to respond to, any third-party offer for any Product Supply/Sponsorship Rights."
Why seven years for the contract length considering a new athletics director will take over at some point this calendar year?
MT: That is what Nike currently offers. We proposed a short-term solution because of the circumstances, but that was not an option.
Did Ole Miss head coach Hugh Freeze have an opinion or vote regarding the deal?
MT: Most of the discussions happened before he was here. He's very pleased with the decision though.
Have there been in any talks with Nike about occasional uniform changes for football? Is that something that Nike has a say in, or does Ole Miss present a suggestion if it has one?
MT: We try to work together on stuff like this. I hope to be even more collaborative in the future. They aren't just drawing things up at random, but we can go to them with a good idea or approach, and we'll work together.
Also, Ole Miss' royalty rate under this contract is eight percent — meaning Nike will pay Ole Miss a fixed rate of eight percent on all retail sales.
Alabama has the most lucrative SEC Nike contract at nearly 30 million over eight years with a royalty rate of at least 12 percent. Auburn's Under Armour contract is worth 27.45 million over seven years. Citing a competitive advantage exemption, many schools don't release contract numbers.