Cal, UCLA looks to Under Armor as athletic budgets falter

Over a 13-month period in the middle of the last decade, the UCLA and Cal athletics departments signed a series of independent but massive contracts with sportswear and marketing partners.

Each school partnered with Under Armor for shoes and gear and with Learfield / IMG College for multimedia sponsorship rights.

The four deals, signed between August 2015 and September 2016, were worth more than $ 500 million (combined) for the athletics departments in cash, products and brand opportunities.

Half a decade later, with the crater economy, the fury of coronaviruses, and shaky college football, the future of that association is bleak.

The ramifications for shaky budgets in Westwood and Berkeley could be devastating.

In the worst case scenario, the Bruins and Bears could lose tens of millions (each) in revenue.

How did they get from there to here? Through the combination of global pandemic, economic calamity, and expensive deals.

Last week, in a development first reported by the LA Times, Under Armor informed the Bruins that it intends to terminate the remaining portion of the massive, absurd $ 280 million deal after “paying the marketing benefits that it did not we have received for an extended period of time. “

The company is implementing a similar strategy with Cal, according to sources, and has removed both the Bears and Bruins from the list of partner schools on its “College Fan Gear” page.

Additionally, multiple sources told the hotline that Learfield / IMG College, the most influential marketing company in college sports, is expected to ask the Bears and Bruins to review, if not end, the multi-million dollar sponsorship deals.

Under Armor is a publicly-traded company whose share price has fallen from $ 43 a share at the time of the Cal and UCLA deals to $ 9 a share today. He has reportedly delayed payments to some of the professional athletes in his portfolio.

Learfield / IMG College is a private company that has instituted permits and pay cuts and is struggling to pay marketing fees to its clients.

Both companies have many years and hundreds of millions of dollars remaining on their contracts with Cal and UCLA.

(The cash numbers listed are approximate and based on previous reports from the hotline, ESPN, and the SportsBusiness Journal.)

*** Cal

Learfield / IMG agreement, annual cash payment: $ 8 million
Learfield / IMG agreement, remaining years: seven
Total cash at stake: $ 56 million

Under Armor Settlement, annual cash payment: $ 3.5 million
Under Armor deal, remaining years: seven
Total cash at stake: $ 24.5 million

*** UCLA

Learfield / IMG agreement, annual cash payment: $ 15 million
Learfield / IMG agreement, remaining years: seven
Total cash at stake: $ 75 million

Under Armor Settlement, annual cash payment: $ 9 million
Under the armor agreement, remaining years: 12
Total cash at stake: $ 108 million

The chances of both schools losing every dollar seem remote, as remote as their prospects of raising every dollar.

Let us first address the Under Armor situation.

Most likely, the Bears and Bruins will strike deals with the company and, if necessary, find new apparel partners (i.e., Nike or Adidas).

Outgoing UCLA athletic director Dan Guerrero said the school is “exploring all of our options to resist Under Armor’s actions.”

The company did not cite Force Majeure, a common contractual term meaning ‘Act of God’, as the reason for its decision to end the deal, but rather, unrealized marketing opportunities.

It remains to be seen if the coronavirus becomes part of the legal maneuvers, but it is worth noting the terms of the contract and the time of development:

“If an Force Majeure event continues for more than (100) days, either Party may terminate this Agreement with immediate effect by written notification.”

Under Amour informed UCLA of its intention to end the association on June 22, the first business day after the 100th day of the coronavirus closure.

(The Pac-12 suspended all sports competitions on March 12).

Meanwhile, the Bears, who are in the midst of a $ 86 million, 10-year deal with Under Armor, issued a comment on Saturday that read, in part:

“We are confident that we are abiding by the terms of our agreement and that Under Armor has no reason for termination.”

Note: The only other Under Armor customer on the Pac-12 is Utah, whose logo, unlike Cal and UCLA’s, remains on the company’s university equipment page.

Furthermore, Under Armor’s contract with the Utes requires an annual fee payment to the school of just $ 1.15 million, a third of its annual obligation to Cal and an order of magnitude less than what UCLA pays.

(The hotline has reached out to Utah for comment and will provide an update when available.)

Developments with Learfield / IMG College are not as hectic, nor as singularly focused on the Bears and Bruins.

The company has involved numerous schools in discussions about its financial situation and payment schedule, according to sources.

While revisions to the contract are considered possible, drastic measures would probably only come if the football season is canceled.

“There are no changes to the status of our Learfield association,” Cal said in a statement issued to the hotline. “We remain committed to the partnership and the terms of our long-term contract.”

But don’t be confused:

The Bears and Bruins are on fragile financial ground, to the point that any reduction in future Under Armor or Learfield / IMG College payments could have major consequences.

The Bruins reported a budget deficit of $ 18.9 million in fiscal year 2019, while Cal experienced a deficit of $ 24.5 million.

And each department was moving toward massive losses in fiscal year 20 before the coronavirus forced the cancellation of the Pac-12 and NCAA basketball tournaments.