Ohio State Signs 15-year Nike deal

Submitted by Maizen on

[ED: Covered on the front page:

Funny money. OSU announced a huge Nike contract that was a ton more than Michigan in the same way that NFL contracts have a huge headline number but are actually something less remarkable under the hood. The OSU edge is in apparel awarded, which the Buckeyes padded out for the shiny number. The actual details:

  • Both schools have a 15-year deal; Michigan has an opt-out after 11.
  • Michigan gets 12 million upfront; OSU gets 20.
  • OSU gets 3.44 million for the first 11 years and 4.44 for the last four.
  • M gets 4.82 million for the first ten years, 5.32 in 11, and 5.82 for the last four.
  • Total dough: Michigan, 88.8 million. Ohio State, 75.6 million.

OSU gets more upfront but inflation isn't sufficient to make up the deficit, especially since Michigan has an opt-out four years earlier. So OSU's "biggest ever contract" actually delivers 13 million fewer dollars than Michigan's. But OSU gets more Nike volleyballs so they've got that going for them.

OSU's deal is not better. Those who'd like to argue Hackett was "fleeced" (including the OP) please contact seth for a great deal on a bridge.]

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2morrow

January 16th, 2016 at 10:26 AM ^

Michigan gets an average of $11.1M per year if the opt out at 11 years (11 years at $122M)

They would get an average of $11.3M per year if they keep the option for 15 years (15 years at $169M)

Ohio State gets $252M for 15 years or $16.8M pe year

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Maizen

January 14th, 2016 at 6:16 PM ^

Not really.

According to a term sheet dated July 6, Michigan would receive $169 million over the 15-year agreement, with $12 million in upfront money, $76.8 million in additional cash over the course of the deal and $80.2 million in apparel for the school's 31 teams. That is an average of $11.3 million per year.

Michigan has the ability to opt out of the contract after 11 years. The deal, which starts next August, would be worth a total of $122.3 million if U-M declines the option years (2027-31).

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Ray

January 14th, 2016 at 6:22 PM ^

Is an especially important point to make.  It can obviously make a big difference in the NPV to M.  

Comparing totals over some period of years is not terribly helpful because it doesn't  tell you much if anything about the relative value of the two deals. 

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TIMMMAAY

January 14th, 2016 at 6:36 PM ^

The up front money is included in the $169m. I feel like nobody in this thread has actually read anything about what they're hammering OP about. Read the details. OSU just got a much, much bigger contract than we did. 

Running from Aug. 1, 2016 through July 31, 2027, the deal comes with an option for Michigan to sign a four-year extension through 2031. Without the option years, U-M and Nike have agreed to an 11-year, $122.32 million deal, which includes $12 million upfront.

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Ray

January 14th, 2016 at 9:01 PM ^

and I'm not hammering the OP.  I'm just pointing out (as well as Everyone Murders, and a few others) that the amount and timing of cash flows matters.  You can't intelligently compare one deal to another without taking that into consideration.  @ 5%, $12M now is worth roughly half that (~6.07M) 13 years from now. 

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Maizen

January 14th, 2016 at 6:10 PM ^

Wrong.

According to a term sheet dated July 6, Michigan would receive $169 million over the 15-year agreement, with $12 million in upfront money, $76.8 million in additional cash over the course of the deal and $80.2 million in apparel for the school's 31 teams. That is an average of $11.3 million per year.

Michigan has the ability to opt out of the contract after 11 years. The deal, which starts next August, would be worth a total of $122.3 million if U-M declines the option years (2027-31).

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snarling wolverine

January 14th, 2016 at 7:13 PM ^

I don't know if you saw this thread when it was first posted, but the OP attacked Hackett in it, saying he was "fleeced" in the negotiations.  That's where the hostility has come from.  

The headline was changed by Seth and the original post has been edited as well since then.

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Maizen

January 14th, 2016 at 7:49 PM ^

I never said we were locked in for 15 years. Why are you out here lying? I was correcting people who kept claiming Michigan was getting 169 over 11 years.

My post wasn't meant as flamebait. I'm sorry you took it that way. But after looking at the OSU deal there is no way in hell there should be any gap, let alone that big of a gap between OSU and Michigan monetarily. I think Nike took advantage of a first time AD and fleeced him. My respectful opinion.

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SBo

January 14th, 2016 at 6:03 PM ^

It's the apparel arms race. Once we're on the docket again we'll sing the highest deal. Then OSU/Bama/ND/Texas/USC/OK will. Comes with the territory.

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goblue224

January 14th, 2016 at 6:05 PM ^

Hackett didn't get fleeced, he made a smart business decision. Nike was the lowest of all the bidders, yet the move was still made to go with them. Partnering two of the most iconic logo's in sports together is worth much more than the face value of the 11 year deal with a 4 year option on the backend.

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Seth

January 14th, 2016 at 6:06 PM ^

I changed the header because the OP didn't know that shorter contracts are better for the schools and royalties and whatnot are going to push Michigan way over.

Michigan gets a preposterous 15% royalties, worth probably $2-$4 million/year.

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Maizen

January 14th, 2016 at 6:11 PM ^

Wrong again.

According to a term sheet dated July 6, Michigan would receive $169 million over the 15-year agreement, with $12 million in upfront money, $76.8 million in additional cash over the course of the deal and $80.2 million in apparel for the school's 31 teams. That is an average of $11.3 million per year.

Michigan has the ability to opt out of the contract after 11 years. The deal, which starts next August, would be worth a total of $122.3 million if U-M declines the option years (2027-31).

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Seth

January 15th, 2016 at 6:49 PM ^

Original thread title was, paraphrasing, "Let's admit Hackett got woodshedded" or something near it. I ain't no mod; i'm the guy who makes his living by selling the advertising around here, and that thread title sitting on our site like that caused me a world of problems.

Honestly if I he hadn't corrected me (on a thing I was self-correcting already but that doesn't discredit it) I would have dropped the hammer.

 

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Maizen

January 14th, 2016 at 7:23 PM ^

You nearly banned someone for a semi critical headline? Good lord.

I love the University of Michigan. I recieved my BA and MBA here. But that doesn't mean we're perfect, and it should be ok to discuss things that don't always portray us as such. Wasn't trying to incite anything with my headline, and I apoligze if it came across like I was.

 

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