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SBJ/20090525/This Week's News
More colleges turn to sports retail pros
Published May 25, 2009
The small crew managing Ohio State’s sports retail still counts inventory by hand for football games at Ohio Stadium, and the 10-year-old point-of-sale system at Value City Arena’s team store makes it difficult to keep sales data consistent.
That will change starting in June, when the athletic department plans to turn over its merchandise operation to a sports specialist who will run the arena’s retail shop, eight permanent game-day souvenir stands at 102,329-seat Ohio Stadium and a team shop at the new student union.
Ohio State and other universities looking to boost on-campus and online merchandising revenue are turning to national vendors with extensive sports experience to expand their business, duties that in many cases had been handled in-house or by campus bookstore operators.
Interest in those college accounts has even moved marketer Learfield Sports, known more for multimedia deals, to make a stronger push into merchandise. Learfield has an agreement in principle to acquire Collegiate Marketing Services, an Overland Park, Kan., firm that has online retail deals with Texas, Oklahoma and Nebraska, and operates game-day merchandise for the Longhorns in Austin.
Universities with outdated retail outlets at aging facilities are relying on those vendors to pay for upgrades that will help increase sales. In Columbus, the new firm will be responsible for upgrading retail operations, including a computerized point-of-sale system at Ohio Stadium, with across-the-board improvements potentially reaching seven figures.
“As the economy has gone downhill, these institutions are looking to unload risk, and the old model — bookstores dabbling in event merchandise — is disappearing,” said Jeff Newman, co-owner of Denver-based XP Events, one of the four finalists for the Ohio State contract.
Ohio State faces a $1 million budget shortfall in athletics for the fiscal year ending June 30, so it’s imperative the school find a retail operator to increase business for its brand, one of the top sellers in college sports, said Ben Jay, senior associate athletic director for finance and operations.“We have a strong brand and we want to take advantage of that,” said Jay, who can see the Buckeyes eventually opening a chain of retail locations throughout the state. “Our general feeling is we are leaving money on the table.”
The Buckeyes’ in-house retail operation now generates between $3.2 million and $3.6 million annually in on-site and online retail sales, of which about $500,000 is profit, Jay said. Under the two-year deal with a two-year option that Ohio State is offering, the new retailer will pay Ohio State a minimum yearly guarantee of $300,000 in addition to a percentage of sales above an agreed-upon benchmark.
The finalists, which also include Sports Avenue, Collegiate Marketing Services and Barnes & Noble, the school’s bookstore operator, have proposed varying benchmarks, and those terms are negotiable after Ohio State selects the winning bid, he said.
The trend for outsourcing college sports retail falls in line with what’s been happening the last 10 years with schools hiring third parties such as Learfield Sports, Nelligan, ISP Sports, CBS Collegiate and IMG College for media rights deals, said Todd Stansbury, Oregon State’s executive associate athletic director.
“Merchandise is the next logical step that athletic departments are looking at to try to maximize that revenue stream,” Stansbury said.
Learfield’s deal for Collegiate Marketing Services was near completion last week, said Learfield Sports President Greg Brown. It would provide his company with the chance to pitch that piece of the business to the 50 schools for which Learfield owns the media rights. Learfield already owns the game-day merchandise rights at Alabama, where subcontractor Centerplate is the operator.
CMS leveraged the Learfield takeover in its proposal to Ohio State. Another Ohio State finalist, Rock Island, Ill.-based Sports Avenue, was recently selected by Arizona State to manage its sports retail business at Sun Devil Stadium and Wells Fargo Arena. The two parties were still negotiating terms of the five-year contract last week, said Steve Hank, associate athletic director for revenue.
Sports Avenue operates online sites and mall retail locations for five MLB and two NFL teams, and also has a roster of six colleges, including Kansas and Kentucky, and two bowl games at the Superdome in New Orleans.
The company logs $46 million in annual revenue. Sports Avenue owner Jeff Collins declined to provide revenue figures for individual schools, but did say his company spent $400,000 about four years ago to build a new team shop at KU’s 54-year-old Allen Fieldhouse.
Centerplate, one of the four biggest major league concessionaires, has its deal with Learfield at Alabama, and at Louisville, where the firm will run the team store at the new downtown arena opening in 2010.
XP Events, which has a client base primarily of MLB, NBA and NHL teams, signed Oregon State as well as California as its first two college accounts in the last two years, taking over for campus bookstores that had managed online and on-site merchandise operations.
XP took over Oregon State’s retail operations from the campus bookstore last fall, and developed a new line of exclusive athletic apparel, Beaver Authentics, that has been a big hit online and at Reser Stadium and Gill Coliseum, the school’s basketball arena.
In the last nine months, the athletic department has seen a 200 percent increase in sports retail income, primarily because of the concessionaire’s ability to select the right gear instead of purchasing a “bunch of T-shirts that nobody’s going to buy,” Stansbury said.
Bringing in specialists can allow a school to concentrate not only on the big-dollar teams but also on some sports further from the spotlight. At UC Santa Barbara, Athletic Director Mark Massari is negotiating final terms on a deal with XP Events, just as he helped bring in the firm at his former school, Oregon State. Santa Barbara does not have a football team, but fields a strong men’s soccer program that topped the NCAA in attendance the last two seasons.Massari’s plan is to expand retail in the school’s high-profile sport — which he said is negligible at this point — in a hybrid deal. XP Events will redesign the school’s sports logo and buy the merchandise, and UC Santa Barbara will provide the real estate, labor and warehouse space.
“I look at it from an administrative standpoint like a Major League Baseball CEO,” Massari said. “There are two ways a fan shows you passion — when they buy tickets and [when they] wear your gear, and you can’t cheapen the two. You need complete focus on retail to maximize revenue potential.”