Ohio State University ranks among the top in athletic revenue which is mostly generated by the football and basketball teams despite having 35 sports teams. Ohio State is also the only public university in Ohio that pays for sports without university subsidies or student fees and also operates on an annual budget surplus of millions of dollars. Matter of fact is that it has so much surplus after paying bills that it transfers money from the athletic side to the academic side; in 2013-14 it transferred $8.6 million, which was an increase of $300,000 from the previous year’s transfers. How does it manage to do that? Since Ohio State basketball team is among the major revenue contributions to the athletic department, let’s see how they do it.
1. Nike deal
Ohio State University and Nike signed a contract effective August 1, 2007, that was divided into three parts and set to expire on July 31, 2014. The university, however, had the option of extending the contract through July 31, 2017. One part of the agreement regarded equipment supply and Nike, the exclusive provider of apparel and footwear for Ohio State’s athletic program, provided $2.43 million per year on free products which translated to $16,405,000 over the seven years.
Additionally, the Department of Athletics received $1.188 million annually for Nike’s rights to be the sole provider as well as a bonus payment to the football and basketball teams based on national championships, in-season rankings and bowl appearance accordingly. The other part was about appearance and consultation agreement in which Nike paid $50,000 annually to the university divided as $28,000 for appearances by coaching staff and $22,000 for safety input and design from the coaches.
In 2016, the university announced a $252-million-dollar contract running for 15 years beginning the 2018-19 season through 2033. As per the terms of the agreement, the school will receive a base compensation of $3.44 million in cash from 2018-19 until 2028-29 after which the payment will increase to $4.44 million cash until 2032-33. As for the apparel agreement, the school will start with $5.6 million in 2018-19, and the amount will increase by $100,000 every year to the end of the contract when it will receive $7 million. Further, it earned $20 million in cash upfront upon the signing of the deal.
Other terms of the contract include $2.5 million to the general scholarship fund which the school can use at its discretion. It also received $41 million to use outside of athletics while Nike will continue making $1 million contributions to the Student Life Endowment Fund on or before 1st January of each contract year.
2. Trademark licensing
When the Buckeyes went home with the national title in 2002, the merchandise revenue doubled to $5 million in 2003. The university’s royalty revenue has gone up, and in 2014, it generated $14 million, and by 2015, they were expecting it to go up to $17 million. Its revenue from trademark licensing is from:
J. America Sportswear apparel deal – J. America Sportswear agreement with Ohio State University accounted for nearly two-thirds of the school’s trademark licensing revenue in 2014. The deal was finalized a year after the announcement, and it set to make Ohio State University $85 million, not counting the royalties. According to the terms of the 10-year contract with J. America Sportswear, the school would receive $20 million upfront payment and 18% of net sales from the licensed products.
Nike’s license agreement – Another part of the contract with Nike that was set to expire in 2014 was about royalties such that the university would receive 12.5% from Nike on the net sales of items for which Nike is the exclusive licensee to sell such products. For all other Nike products, the university received 11% royalty with a minimum guarantee of $200,000 per year for the first seven years and $300,000 per year for the four extended years.
The standard license agreement was to gross the university a minimum of $2.6 million over the 11 years, but the amount exceeded that figure. For instance in 2007 through 2012, Nike had an average of $8.8 million from the sale of the university’s merchandise. Therefore they paid the school $1.1 million per year.
3. TV rights
The Big Ten Network reached a new agreement with Fox, ESPN and CBS worth a total payout of $2.64 billion over six years. Ohio State University, being among the Big Ten members, therefore, shares in the $440 million per year. The schools receive at least $40 million per year and by the time the contract ends; the amount will have increased to over $50 million.