Ohio State $85M apparel deal costing local business

Kristen Mitchell
Tue, 18 Feb 2014 03:55:04 +0000
Campus, apparel, ohio state, osu, privatization

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More than a year after Ohio State announced it had agreed to enter an exclusive apparel deal with two companies, it has finalized a contract with one. While the deal is making OSU $85 million in addition to royalties, one local store owner said her business is hurting.

“Prices have definitely gone up, mainly because royalties have gone up,” said Kelly Dawes, owner of College Traditions, located at 286 W. Lane Ave. “Because the money J. America has spent with OSU, they have to get that back somehow.”

When she had more vendors to choose from, the prices were lower for herself and the customers, Dawes said.

“Where we could normally offer a T-shirt at $12.99, we can’t really do that anymore … the lowest we can get is $14.99,” she said.

The contract with J. America Sportswear Inc., based in Webberville, Mich., was released to The Lantern Thursday, more than a year after an initial records request was placed.

The 10-year contract dictates OSU will receive 18 percent of net sales from licensed products and a $20 million upfront payment. However, it also has stipulations in the event of negative publicity of certain university officials.

An “adverse reputational effect” on sales that could “reasonably be viewed as attributable to public awareness” of any action or perceived wrongdoing by the university president, athletic director, coaches or staff associated with the football or men’s basketball teams or any student-athlete in those programs, could result in an adjustment to the agreement terms.

Former OSU President E. Gordon Gee announced his decision to retire from OSU days after controversial comments he made at a Dec. 5, 2012, OSU Athletic Council meeting came under public scrutiny. Remarks about Notre Dame and the Southeastern Conference in particular brought national attention.

The adverse reputation stipulation, however, explicitly excludes poor performance by athletic teams.

In case that OSU’s football or men’s basketball team is handed down a “death penalty” sanction by the NCAA — meaning the team is banned from play for at least one season — adjustments are set to be made between OSU and J. America in “good faith,” according to the contract. An example for a potential adjustment would be adjusting the minimum royalty OSU receives on net sales.

The contract states that OSU is still able to enter apparel agreements with other companies, and specifically mentions Nike’s $46 million agreement, which supplies athletic gear for varsity teams. It also specifically outlines J. America’s right to produce and sell items for the Limited Brands Inc., founded by Wexner Medical Center Board of Trustees Chairman Les Wexner, and to co-brand OSU apparel with the PINK trademark for Victoria’s Secret Stores Brand Management Inc., which began selling OSU apparel in December 2012.

If the agreement is terminated or expires, the contract says OSU has the right to purchase any branded J. America inventory. If OSU chooses not to purchase “any or all” of the items, J. America is set to provide proof of destruction of the inventory in question, according to the contract.

OSU must have “reasonable satisfaction” with all branded items before they are sold, and if an item cannot be brought to compliance, the contract dictates it must be pulled from the market and destroyed.

The contract also stipulates that J. America will “open and maintain” a Columbus-based sales showroom and will “provide no fewer than three student internship positions each contract year,” two of which are expected to be paid. The locations for these are specified as either the Columbus office or its home office in Michigan.

The contract, set to expire in December 2023, is only one of the two OSU initially announced in November 2012. The university announced a $97 million deal with J. America Sportswear and Fanatics Inc. to exclusively produce and sell university apparel. No agreement, however, has been finalized with Fanatics Inc.

J. America has not returned multiple requests for comment over the past year.

Other vendors have been considered to fill the role Fanatics was originally set to play, and in January, OSU spokesman Gary Lewis said apparel company LIDS Sports Group, based in Indianapolis, took over online apparel in September and the stadium and store apparel in July.

“The university is exploring options in regard to merchandising operations, but Lids has been serving in that capacity since September,” Lewis said in an email Thursday. “No longer-term contract has been signed at this point, but it is anticipated that a long-term contract will be signed with an operator in the near future.”

The? J. America deal accounts for nearly two-thirds of OSU’s trademark licensing revenue, and Dawes said the cost is being passed down.

“Ultimately, the consumer is going to end up spending more,” she said.