In July 2015, Indiana University signed an extension through 2024 with apparel giant Adidas for a total of $53.6 million, or about $6.7 million per year. At the time, this was one of the top five largest college apparel and shoe deals ever. The lucrative extension affirmed the power of IU’s brand and their legacy as a blueblood in the world of college athletics.
Indiana’s contract was also the result of great timing. IU’s previous deal was up on the heels of Adidas losing powerhouse contracts with Tennessee and Michigan, as both jumped to Nike. As a result, Adidas was heavily incentivized to keep up in the college apparel arms race by not losing another major brand. Thus, Indiana was the beneficiary of what at the time was considered a dream deal. While other apparel and footwear deals in recent years have since eclipsed Indiana’s contract, the Hoosiers agreement with Adidas still remains one of the most lucrative in the country.
Beyond the eye-catching compensation numbers, most aren’t aware of the quirky and interesting clauses that can make up a college apparel deal. So, let’s strip away the legal-ese and take a closer look at Indiana University’s contract with Adidas.
IndianaHQ obtained the deal as a result of a public records request.
1. Different Types of Compensation
While the total value of the contract is widely disseminated to the public, the actual breakdown of the compensation is often overlooked. Typically, in apparel deals like Indiana’s, compensation will come in a variety of forms, including (1) base compensation payments, (2) actual product and merchandise, (3) marketing support, and (4) incentives.
In the deal, Adidas pays Indiana a base compensation payment each year, ranging from between $1.425 million to $1.65 million. Then, Adidas additionally provides a hefty amount of the company’s products for university student-athletes and coaches/staff. Under the agreement, Adidas supplies between $3.6 million to $3.95 million per year in Adidas products. These are supplied at no cost to the University and delivered free of charge. Accompanying the apparel, Adidas provides a $200,000 additional merchandise allotment per year. Along with the merchandise comes a stipulation that Indiana must wear its alternate basketball and alternate football uniform at least once per season. The third form of payment comes as marketing support. Adidas pays Indiana $300,000 per year that is earmarked for “mutually agreed upon” marketing activities that are intended to boost game attendance and increase ticket sales. However, Indiana does have the option to reclassify this payment to be used for products/merchandise, if the University so chooses.
Finally, the agreement also includes several performance incentives that Indiana can meet to increase their compensation. These incentives cover both men’s and women’s sports.
Incentives include:
– $500,000 for winning the College Football National Championship
– $250,000 for winning the College Basketball National Championship
– $50,000 for winning the Women’s College Basketball National Championship
– $50,000 for winning a National Championship in the Olympic sports
– $50,000 for winning the Big Ten conference in football or basketball
– $150,000 for being named College Football Coach of the Year and $75,000 for being named Big Ten Football Coach of the Year
– $100,000 for being named College Basketball Coach of the Year and $50,000 for being named Big Ten Basketball Coach of the Year
– $50,000 per being named Women’s College Basketball Coach of the Year and $35,000 for being named Big Ten Women’s College Basketball Coach of the Year
2. Severe Penalties for NCAA Infractions
Under the contract, if IU is placed on probation by the NCAA and that probation results in a loss of televised basketball or football games, Adidas has the right to reduce their base compensation by one half. Thus, this would be a loss of between $700,000 and $825,000 per year during the probation.
There is also a bit of an odd clause that says that if Indiana is “no longer part of the Power 5 (or its successor)” then Adidas has the right to “equitably reduce” the base compensation payments for loss of exposure. This line in the agreement may seem very peculiar from an outsiders’ perspective and, I’m sure as you are reading this, you are probably thinking why would Indiana ever leave the Big Ten? And, if the Big Ten ever broke off from the NCAA to form a new collegiate sports platform, this reduction likely would not apply because that new platform would be considered a “successor” to the Big Ten.
So, what’s the point? Why is that clause in the contract? Well, the world of college sports was very different when this agreement was signed in 2015. Between 2010 and 2014, there was a substantial realignment happening in college basketball. In 2012, the so-called “Catholic 7” announced they were breaking away from the old Big East conference in search of a more lucrative television deal than the one they would receive if they were still linked with their former conference “football schools.” This eventually led to the formation of the new Big East and the reorganization of the rest of the schools into the American Athletic Conference (a.k.a. the old Big East). Thus, to make a long story short, this clause likely was included to provide cover for Adidas in case of further conference realignments.
3. Product Replacement and Logo Visibility
Remember when Zion Williamson busted through his Nike sneaker at Duke? Apparel and shoe agreements actually have clauses for this very situation. In IU’s deal with Adidas, it notes that if any significant uncomfortability or medical condition is directly related to Adidas products (whether by product failure or design) that Adidas must have the right to remedy the problem before pursuing alternative options. This way Adidas can prevent any bad PR or any homemade alterations that could cover up logo or distort the shoe’s appearance.
Alongside common-sense language that IU athletic programs are required to only wear Adidas gear, the contract lays out specific wording related to the Adidas brand and logo visibility. The agreement states that “spatting”, meaning taping, or otherwise “covering of any portions of any Adidas logo or trademark on athletic footwear” is not permitted unless medically necessary and Adidas has been advised of the necessity. There is no breach if the covering of the logo is required due to an in-game injury where there is no time to inform Adidas. Afterward, IU must promptly advise the three stripes if spatting is required moving forward due to medical necessity. Under the contract, IU agrees to use its best efforts to eliminate “the need for unauthorized spatting.”
However, if the University is unwilling or unable to discontinue the practice of spatting, Adidas has the right to either (1) terminate the apparel contract or (2) reduce base compensation if the pattern of spatting involves a member of the football team, men’s or women’s basketball team, or baseball team. Interestingly, the reduction of compensation is directly tied to the significance of the player and the significance of the game. For example, a “material spatting” occurs if the unauthorized spatting occurs during a bowl or tournament game. Similarly, no matter the game, it’s considered a material spatting if it involves a “key player” in football, which is defined as a QB, WR, RB, or “any media star” on the line or special teams, or alternatively if it involves several non-key players. The first violation of a material spatting is a warning, a second violation is a base compensation reduction of 10%, a third violation is a 15% reduction, and a fourth is a 25% reduction. To put it simply, IU cannot cover up Adidas logos and trademarks unless medically necessary or they risk extensive compensation reductions or, in a worst-case scenario, contract termination.
4. Adidas Gets a Share of Perks Also
In return for providing compensation and merchandise to Indiana, Adidas receives several perks. These contractual benefits help leverage Indiana’s powerful brand for Adidas to create a symbiotic relationship that provides value for both sides. Most of these clauses are directly linked to spreading brand awareness and assisting Adidas in marketing initiatives.
However, the contract also provides specific negotiation perks for Adidas, known as the rights of “first dealing” and “first refusal.” The right of first dealing specifies that the University must not engage in any negotiations related to apparel deals except with Adidas during the “first dealing period,” which begins 180 days before the last year of the contract and extends for six months. This gives Adidas a head-start to negotiate a new deal with Indiana before the Hoosiers can talk with another brand. Then, the right of “first refusal” means that, after the initial dealing period up until the end of the current Adidas contract, Indiana must present Adidas with any offer they receive from another apparel brand. Adidas will have 30 days to decide whether they want to match or better the offer. If not, Indiana can accept a deal with another brand.
Other Adidas perks, include:
– Using IU marks and logos on Adidas products
– Having Adidas promotions in game-day programs for football and basketball, as well as at least two 30 second radio advertisements per regular-season game (football only)
– Two minutes of customized LED graphics displayed on the south end zone scoreboard of Memorial Stadium for each home game
– Multiple season tickets for all sports, parking passes when appropriate, and tickets to games at neutral sites, tournaments, and/or postseason games
– A 50 person private hospitality tent for football games, where IU must provide food and drink (although Adidas pays for alcohol)
– Private use of Assembly Hall for private Adidas functions (direct costs paid by Adidas)
5. Termination of the agreement
As with any contract, there are actions that could result in one of the parties terminating the contract. This language provides protection in case the other party breaches the deal to the point that the agreement no longer benefits both sides.
Adidas can terminate, if:
– Members of IU’s teams fail to wear or use Adidas products
– There is unauthorized spatting, covering, or altering of Adidas marks/logos
– Any coach fails to meet any material obligations
– The NCAA, or any governing body of collegiate athletics, prohibits any team from wearing Adidas footwear/products or displaying Adidas logos
– Any coach or any team is subjected to major disciplinary action by the NCAA
– The football or basketball coach “attracts publicity which, based on objective evidence, in the reasonable judgment of Adidas, has an adverse effect upon the status or reputation of Adidas, University, Coach or the value of University to Adidas”
IU can terminate, if:
– Adidas becomes insolvent or declares bankruptcy
– Adidas breaches any material term of the agreement
– Adidas fails to make payment to the University of any sum within 30 days of Adidas receiving written notice from Indiana that payment is due
Featured Photo: Indiana University Athletics
