Four years ago the total operating expenses of UNC were $83.5 million, and they rose in 2016-17 to reach $96.5 million. The university has had to deal with the rising costs including costs of coaches’ salaries and sports facilities. The fact that it has 28 sports does not help since it also offers student-athlete scholarships which have been increasing every year. With that kind of pressure to continue raising money amidst so many expenses, UNC has to be proactive and think of ways to make revenue.
Consequently, the athletic department took the initiative to make more money for the school and thankfully, their efforts have not gone to waste. In 2017-18, the athletics department’s revenue rose for the eighth consecutive year leading to an 8.3% percent revenue growth. The increase was mostly due to the royalties, licensing and sponsorship deals that the university currently has. Among the goldmines that the school takes pride in is the UNC basketball team. In 2018, the men’s basketball had total operating revenue of $25.2 million and left the school with a surplus of $15.4 million after deducting operating expenses of $9.8 million. So, how did they manage to get that much per year? Let’s see.
UNC and Nike have been in partnership since 1993 when they signed the first contract worth $4.5 million spread out over five years. The next one was in 1997 worth $11.6 million, also for five years. In 2002, the agreement was for $28.3 million, spread over eight years.
In 2009, the University of North Carolina entered a 10-year contract with Nike in which the sneaker giant would be the exclusive supplier of apparel, accessory products and athletic footwear to the Tar Heels. The deal, valued at $37.7 million though signed in late May 2009, was retroactively effective from July 1, 2008. It was not just for the basketball team but also supported the 28 varsity sports and contributed millions to the academic and scholarships at the University. This deal netted the basketball team $1.83 million per year and only $250,000 in cash allotments
In 2018, the contract received an extension which also changed the terms to be more lucrative for UNC. In the renewed agreement, UNC gets $6.27 million annually divided into $2.87 million in wholesale product allotment while the remaining $3.4 million is in cash. The total worth of the contract is worth more than $95 million, the highest amount since their partnership started.
The deal with Nike also includes royalties for their merchandise and currently, UNC rakes in about $3.3 million per year. Nike is UNC’s top licensee of retail merchandise, and the university receives a premium royalty on the merchandise sold bearing the Carolina logos. It is a premium because it is more than the standard royalty rate charged by the university, which ranges between 7.5%-8% of the net wholesale merchandise revenue.
Since the university and Nike recognize the demand for a variety of merchandise by fans, they decided to make it worth their while. Nike, therefore, has the exclusive right to make Carolina jerseys for all the school’s sports teams; the jerseys are vintage, fashion, authentic and replica. However, Nike does not have the right to manufacture toddler and infant jerseys. Further, Knight Apparel has the rights to produce UNC jerseys and sell them in retail channels that Nike does not cover.
During the 2016-2017 fiscal year, UNC’s Trademarks and Licensing office had revenue of $3,524,316 which they transferred to the Office of Scholarship and Financial Aid. The move is because all the net income from the trademark and licensing program goes to support merit and need-based scholarships. Besides the $3.5 million, the school had royalties from the Men’s basketball team amounting to $1,398,586.
Multi-media rights with Learfield
In 2002, UNC entered a contract with Learfield Sports to manage all their communication needs including radio broadcasts and coaches’ shows. The agreement was to run through 2011, but in 2008, they extended it through to 2021. The contract extension in 2008 had an average guaranteed worth of $7.5 million per year in goods and services, cash and tickets purchased. UNC also received a revenue share if the adjusted gross revenue was more than the guaranteed amount.
In December 2018, UNC announced an extension of the 2008 contract, which will run through June 2029. In this new contract, the school has an average guaranteed value of $12.6 every year. The IMG Learfied agreement includes a ticket sales force which saw the ticket sales grow from $23.3 million to $26.3 million in 2016-17. The men’s basketball tickets had revenue of $12.8 million, up from $11.8 million.