January 10, 2014
After licensing dozens of companies for years to make T-shirts and other logo-emblazoned apparel, Ohio State has been on a different track in recent times.
The university now grants licenses to just a few companies in a bid to increase revenue and streamline production.
Even so, a $97 million apparel deal announced more than a year ago as part of this effort is only partly completed, and one of the winning bids is very much up in the air.
Millions of dollars are at stake under the agreements, with the university expecting to more than double the take compared with its old deals.
University officials said in November 2012 that the team of apparel producer J. America Sportswear and sports merchandise retailer Fanatics Inc. had won the bidding to produce OSU-licensed apparel and to sell it online and in campus retail outlets.
But the agreement with J. America became effective only a few days ago, on Jan. 1. And the deal with Fanatics hasn’t yet been finalized, said OSU spokesman Gary Lewis.
In fact, the deal with Fanatics is so up in the air, Lewis said, that “other vendors have been considered to fill this role, and it remains pending.”
The university will not divulge the names of the other vendors until a final agreement has been signed, Lewis said.
The combined bid by J. America and Fanatics was originally selected because the two companies offered the best revenue stream to the university, revenue that is to be used to fund scholarships and improve student and alumni services, said Jeff Kaplan, OSU senior vice president and executive officer to the president.
The contract with J. America, a Webberville, Mich., producer of collegiate, high-school and corporate apparel, is worth $85 million over 10 years, with $20 million guaranteed up front — more than double the university’s previous annual royalty income of about $4 million.
The contract with Fanatics, a Jacksonville, Fla., online retailer of sports merchandise, guaranteed the university a minimum of $1.2 million a year from retail sales at campus outlets such as the team shop at Schottenstein Center and Ohio Stadium, and from the official website.
That also is well above the university’s previous yearly revenue from those sales of about $250,000.
While J. America has a signed contract and has been working with retailers since 2012, the role that Fanatics was expected to play has been taken over by LIDS Sports Group of Indianapolis.
LIDS is owner of Buckeye Corner stores, Lids, HatWorld and Sports Fan-Attic. It took over management of the stadium concession stands and team shop in July and of the online store in September, Ohio State officials said.
“Discussion continues but we aren’t at liberty to discuss further until there is a contract,” Lewis said.
“With no models or precedents to look at, it simply took that long to work through all the details with something that had never been done before,” Lewis said. “A deal of this magnitude and term includes a lot of moving parts.”
Sporting-goods analysts speculated that the delay with Fanatics probably comes down to two issues: money and control.
“It might be because they’re negotiating over percentage points; they’re trying to figure it out,” said Jordan Schlachter, executive vice president at New York sports-marketing firm the Marketing Arm.
But it was easy to see why Fanatics was originally chosen, Schlachter said. “Fanatics is the biggest college retailer right now. It’s becoming a one-horse race in online distribution. Harvard just put their entire merchandise store on Fanatics. So I get why OSU would choose to be with Fanatics.”
Control over the brand image also might have contributed to the delay, said Pete Fantine, account director at SBC Advertising.
“The fact that there were dozens of purveyors selling Ohio State merchandise and Ohio State wasn’t getting their cut probably led them to take greater control,” Fantine said. “It’s always been a really protected brand.”
Fanatics officials could not be reached to comment.
Fanatics has a strong area presence. In October, the company opened a 500,000-square-foot distribution center in Frazeysburg that employs 300 full-time workers and hundreds more on a seasonal basis.
While J. America’s contract was officially signed only recently, the company has been working since the 2012 announcement with Buckeye-themed retailers such as College Traditions and Conrads College Gifts.
College Traditions had been wary of going to a single source for its merchandise, but things have “gone better than what I anticipated,” owner Kelly Dawes said. “There have been a couple of bumps, but not like I thought there would be. They have tried very hard. They’ve been very responsive.”
Conrads College Gifts has had a similar experience, said co-owner Rob Cohen.
“J. America has the master license now,” Cohen said.
“J. America recently told us they’re gearing up and bringing in more and more things.”
When Ohio State announced the winning bids in 2012, the university said that there had been more than 40 bids and that the list had been whittled down to three companies — and that J. America and Fanatics beat out a bid by Silver Star Merchandising, the licensing arm of the Dallas Cowboys.
A spokesman for Silver Star said this week that the company has not been contacted by Ohio State.
Silver Star became the center of controversy when groups including the OSU branch of United Students Against Sweatshops accused Silver Star of using sweatshop labor overseas and complained to OSU officials.