Renegotiating a deal with adidas

The three stripes are everywhere on this campus. Stitched across backpacks and T-shirts, printed on signboards and programs, and, most importantly, sewn into the uniforms of all 22 UCLA athletic teams, the adidas logo stands as one of the most prominent marks in Westwood.

But adidas’ future at UCLA is uncertain.

The UCLA athletic department’s multimillion-dollar sponsorship agreement with the German shoe and apparel manufacturer expires in June 2011, and administrators at UCLA say they need to complete a new long-term deal by the end of this summer. The two sides plan to meet in the next few weeks to begin formally renegotiating a new deal, UCLA administrators said.

At this point, UCLA athletics can only negotiate with adidas. The current agreement gives adidas a 90-day “exclusivity period” during which it can work to renew the deal. The exclusivity period ends April 1.

If the two sides do not reach a deal by that date, and do not agree to extend the period, UCLA will have the option to engage in talks with other apparel companies, namely Nike, which sponsors prominent Pac-10 programs like USC, Oregon and Cal, or Under Armour, a newer company that recently agreed to deals with the University of Maryland and Boston College.

UCLA senior associate athletic director Glenn Toth discussed the current situation in an interview with the Daily Bruin last week. He acknowledged that UCLA would gain leverage after April 1, when it could listen to more offers.

“It would be advantageous for adidas to close a deal in this period so that we don’t talk to anyone else,” Toth said.

Attempts to reach executives at adidas and Under Armour were unsuccessful. Nike spokeswoman Jacie Prieto wrote in an e-mail that the company “does not comment on speculation.”

Neither Toth nor senior associate athletic director Ross Bjork would comment on the possibility of UCLA switching sponsors. Toth and Bjork are both part of the committee handling the negotiations process for UCLA.

At this point, they said, they are concentrating only on the upcoming negotiations with adidas.

“Adidas has been a very fine partner,” Toth said. “Our coaches have been very pleased.”

In a separate interview conducted Tuesday, UCLA athletic director Dan Guerrero echoed that sentiment.

“We’ve had an excellent relationship with adidas, and we’re doing our due diligence now,” Guerrero said.

Under the current agreement, UCLA athletics receives about $2.5 million in cash and $1.575 million worth of equipment each year. The deal makes adidas the exclusive outfitter of UCLA athletics and grants the company exclusive rights to certain UCLA marks, like the cursive script on UCLA football helmets.

The adidas deal also includes a licensing agreement with ASUCLA and provides an equipment allotment for UCLA Recreation.

Adidas and UCLA began their partnership in 1999, and renewed their original agreement in 2004.

Adidas outfits far fewer universities than Nike, but it has historically sponsored highly visible programs like UCLA, Notre Dame and, most recently, the University of Michigan.

In many ways the 2007 Michigan-adidas deal altered the landscape of university apparel agreements. It ended a 14-year partnership between Michigan and Nike.

The Michigan-adidas contract itself also includes new features. In addition to an average annual payout of $6.85 million (in cash and equipment), adidas agreed to pay a $6.5 million signing bonus, reportedly the first-ever signing bonus in a sponsorship agreement of this kind. The Michigan contract is also noteworthy for its “most favored university” clause, which stipulates that if adidas signs a more lucrative agreement with a separate school it must revise the Michigan deal so that Michigan receives the same amount.

Toth said UCLA is aware of that agreement but that it is more of a factor for adidas than it is a concern for UCLA. He also pointed out that Michigan is a special case because its athletic department owns all rights to the Michigan marks and logos.

Toth and Bjork both said that it is very difficult to compare UCLA to any other university brand because of the myriad factors that determine each brand’s worth and prestige.

“UCLA is considered by some to be the most well-recognized school in the world,” Toth said.

UCLA athletics seems content with the way adidas has promoted the Bruin brand throughout the past decade. Bjork said that in that period, adidas has improved its retail visibility and bolstered its standing among consumers.

The UCLA administrators also said they have consulted with coaches and players and are generally pleased with the quality of adidas products.

“We listen to everything our coaches have to say,” Bjork said.

UCLA basketball coach Ben Howland has a long-standing relationship with adidas. His three head coaching positions have all come from schools sponsored by adidas: Northern Arizona, Pittsburgh (which has since switched to Nike) and UCLA.

“I think adidas has been great (to UCLA basketball),” Howland said. “They have done an outstanding job for our program … I have a lot of good friends that are in the adidas family.”

When he first coached at Pittsburgh, Howland had his own deal with adidas. Pittsburgh later switched to a type of “all-school” deal like the one UCLA has now, where coaches do not sign individual contracts.

This will be the fourth major apparel agreement that UCLA athletics has signed. The department’s first “all-sports” deal came with Reebok in 1993. That deal was unique because it came through a request for proposal procedure, rather than a formal negotiation. Toth said that throughout the entire deal UCLA worked with just one Reebok executive, Chester Wheeler.

Times have changed. The negotiations process is now more intense and more personal, and the deals are more complex. Toth and Bjork said they prefer face-to-face interaction because they can get a better feel for the people with whom they are negotiating and a clearer understanding of the company’s culture.

This latest round of negotiations could become especially intense if UCLA and adidas do not reach a new deal by April 1. UCLA would become a free agent and could be in a position to consider offers from not only adidas, but also Under Armour and Nike.

A clearer picture of the future of the UCLA-adidas partnership should emerge soon, but for now it’s a real mystery. Silence and secrecy are a part of negotiation strategy and technique; Toth said that even when UCLA does meet with adidas, he’s not sure which side will make the first gesture.

With reports from Matt Stevens, Bruin Sports senior staff.