Make Way, Nike: Oregon Ducks Clinch $23 Million Fanatics Deal

(Bloomberg) -- The University of Oregon, a school known as the “University of Nike” because of its close ties to the athletic brand, has a new apparel partner.

Fanatics Inc., the world’s largest seller of licensed sports gear, will become the college’s second big merchandise supplier -- besides Nike. The company plans to produce hundreds of Oregon products and manage the school’s relationship with dozens of other licensees.

The 10-year deal, which starts in January 2020, includes a $1.5 million signing bonus for the school, plus a guarantee of $21.5 million in royalties over the course of the partnership. That money is split evenly between the school’s general fund and its athletics department.

The agreement won’t push Nike to the margins. The brand retains exclusive rights to its Oregon-related intellectual property. Nothing Fanatics makes will use the popular O logo, nor the fighting duck design that often appears on the team’s jerseys.

But the Fanatics guarantee will help generate a more stable revenue stream in the face of shakier state funding. It also helps the school adapt to changes in retail that include shorter fashion cycles.

‘Uncertain World’

“It’s creating certainty in an uncertain world,” said Kyle Henley, a university spokesman. “A hedge against the volatility of the marketplace.”

Oregon is looking to avoid the major swings that come with the cyclical success of its sports teams. The school’s royalty revenue increased every year from 2009 to 2014, when the football team played for a national title and quarterback Marcus Mariota won the Heisman Trophy. Since then, however, the football team has hit a rough patch and royalty revenue has fallen 33 percent.

Previously, the university managed deals with about 300 licensees one by one, with no upfront guarantee on sales. Under this new model, Fanatics will handle all of that itself, combining its licensing, manufacturing, design and delivery capabilities into one service.

The closely held company, which already runs the school’s online shop and has some apparel rights, now has the ability to make almost anything with an Oregon logo, or sublicense those rights to other companies. It is Fanatics’ first major foray into college sports licensing -- an area that remains much more fractured, but just as lucrative as professional sports.

Looking Ahead

“The goal would be to replicate this model where it makes sense for universities that want to think progressively about their future, connecting them closer to their fans than they’ve ever been before,” said Derek Eiler, executive vice president of Fanatics’ college division. He co-founded Fermata Partners, which Fanatics bought last year to launch its university business.

Oregon also is an early client on Fantelligence, a new data-sharing product that Fanatics rolled out earlier this year. The company plans to share customer data with some of its college partners, helping schools like Oregon get a better sense of who Ducks fans are, where they live and what they like.

The university’s relationship with Columbia Sportswear, based nearby and also led by an Oregon alumnus, will remain unchanged. The school will work with Fanatics to protect its relationship with about 40 other local licensees.

To contact the reporter on this story: Eben Novy-Williams in New York at enovywilliam@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Rob Golum

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