Under Armour Wants to Pull Plug at UCLA & Cal. Who's Got Next?
Under Armour wants to terminate its $280 million apparel endorsement deal with UCLA.
When I saw that headline over the weekend, a barrage of cliches went through my brain. . . none of them good.
What were they thinking? Tip of the iceberg. Sign of the times. Fashion statement. Clash of the titans. Trouble in River City. . . You get the idea.
And most of all, I remembered my mother’s advice to become a lawyer. Because this a guaranteed win for them.
Don’t be surprised if they are doing a lot of renegotiating on apparel deals—and other deals—with schools around the nation. Especially the ones with big contracts.
“Under Armour has recently made the difficult decision to discontinue our partnership with UCLA, as we have been paying for marketing benefits that we have not received for an extended time period,” the company said in a statement supplied to the Los Angeles Times, which broke the story. “The agreement allows us to terminate in such an event and we are exercising that right.”
Marketing benefits that have not been received? Those are either in the eye of the beholder—or in contract language. Lawyers, start your hourly billing.
Under Armour also is trying to opt out of its $86 million deal with Cal, the San Jose Mercury News reported, adding that Under Armour stock, which traded at $43 a share when the deals were made, has fallen to $9 a share.
UCLA and Cal gear no longer is shown on the Under Armour website, although I did find an ad for Cal gear during a search on Google, which apparently doesn’t read the results of its searches, even for nearby universities. Utah is Under Armour’s last remaining Pac-12 partner.
UCLA, which agreed in 2016 to the 15-year deal, the richest in college sports history, is not going to take this lying down. (Forgot to put that cliche into the above list.)
“We are exploring all of our options to resist Under Armour’s actions and will share more information as we can,” UCLA athletic director Dan Guerrero wrote in a letter to the UCLA community, the L.A. Times reported. “We want to reassure you that UCLA Athletics remains committed to providing our hard-working staff and student-athletes with the footwear, apparel and equipment needed to train and compete at the highest level.”
The image of Chip Kelly’s lads practicing barefoot on the gridiron, or worse yet, Mick Cronin’s players wrestling with Pauley Pavilion splinters, is hard to fathom. But that seems to be the image the AD was going for.
In a further complication for a school that has seen its reputation for athletic success plummet in recent years, Guerrero is retiring this week. So this kettle of fish lands on the desk of new AD Martin Jarmond, 40, who comes to UCLA from Boston College, another Under Armour school. Part of B.C.’s Under Armour deal included the Martin Jarmond Collection of sportswear.
Good luck on marketing that now.
But here’s the larger concern. During the COVID-19 crisis, the focus has been on everyone’s health, as it absolutely should be. And now the sports world is dealing ever-so-tentatively with trying to bring back America’s games.
What hasn’t really been addressed in detail is what's behind Door Number Three: The economic impact of all the shutdowns imposed by the pandemic. Under Armour isn't citing pandemic reasons for breaking its UCLA and Cal deals. But declining revenue is obviously huge, regardless of the cause.
Under Armour’s disputes with UCLA and Cal, as they play out, will shine a bright light on that. Both sides are dealing with unprecedented financial situations. Even before the Coronavirus crisis, Under Armour was in a cutthroat battle with Nike and Adidas in the lucrative, but fickle athletic-wear business.
Meanwhile, the UCLA athletic department faced a massive budget deficit even before the pandemic. It borrowed from the university to cover an $18.9 million shortfall for fiscal 2019. Cal experienced a $24.5 million shortfall. The COVID crisis makes the already- grim prospects for 2020 even more dismal.
UCLA, of course, is in a particularly bleak bind. The Under Armour dispute on top of a budget mess that existed even before the pandemic is the worst kind of nightmare scenario.
But there is also this to consider: With revenue slashed due to games not being played and merchandise not being bought, this kind of financial crisis is likely to play out at athletic departments across the nation.
In a way, the smaller schools might end up being better able to cope than the behemoths who are built on huge crowds, massive TV dollars and big apparel-endorsement deals. As my TMG colleague Mark Blaudschun noted, the Ivy League has drawn up scaled-back football plans. Historically black schools already are canceling some games.
The scariest part for bigger schools is that the prospects for the 2020 college football season remain precarious. Even if a season is salvaged with greatly reduced crowds and fewer games, how are athletic departments going to pay for everything?
UCLA will get a lot of attention because its situation is dire in a boggling way. But one way or another, widespread adjustments to apparel contracts seem likely. Plus widespread adjustments to salaries. And everything else that can be adjusted.
Virtually every school is likely to be hurting. And revising its budget in a painful and frightening way. The Alabamas and Ohio States may bring in the most dollars. But they also have the highest expenditures.
This is a system based on games being played. And right now, it’s looking like a house of cards. Everywhere.
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