Is It Time For Texas Tech To End Under Armor Partnership?

Texas Tech has had a partnership with Under Armour as the official outfitter of its athletic programs since 2009 but the company’s recent financial struggles are reason to question if that relationship should continue.

The world of college sports is now, more than ever, revolving around how much money universities can pour into their athletic budgets.  One source of revenue that has started to cause a chasm to develop between the haves and the have-nots is apparel sponsorship.

Texas Tech has one of the lowest paying sponsorship deals of any Power 5 school, a fact brought to light earlier this week by a series of tweets from basketball writer Mich Thomas.  Thomas started the discussion by implying that Texas Tech’s leverage in negotiating a new contract with UA next summer could be greatly impacted by whether or not Zhaire Smith returns to school for his sophomore season.

Thomas later Tweeted that Tech is the second-lowest paid school in the Under Armour camp.  More concerning is the fact that Tech is being paid far less than most of its Big 12 rivals in terms of apparel sponsorships.

The Portland Business Journal reports that Tech received $2.5 million from Under Armour in 2016-17, less than every Big 12 public university but two (Iowa State and Kansas State).  This is a concerning fact for a university that is as financially strapped as Texas Tech.

Thus, ahead of the period when negotiations between Tech and UA are likely to begin (the current contract expires in the summer of 2020), it is fair to question if it makes sense for Texas Tech to continue its relationship with the most struggling major sports apparel company in the marketplace.

A December article from CNN chronicled the awful year UA had in 2017 when the company saw its stock prices drop 50%.  Last year was the second-consecutive down year for the company following a 2016 that resulted in a 30% drop in stock prices.

Meanwhile, the other main athletic apparel providers, Nike and Adidas are in a much better place.

"“Adidas continues to thrive. Nike, the worst performing Dow stock in 2016, has enjoyed a renaissance this year, with shares rising nearly 25%.” CNN reports."

Another factor to consider is that Under Armour is already committed to some massive sponsorship deals with other schools making it hard to fathom the company will have a large pool of cash to offer Texas Tech.  UCLA entered a 15-year, $280 million deal in May of 2017 which dwarfed the $90 million, 10-year deal UA game Notre Dame in 2014.

Thus, it is hard to imagine UA showing a willingness to open up its ever-shrinking coffers when negotiating with Texas Tech.  Especially with analysts predicting the company will be facing cutbacks and restructuring moves this year.

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"“Under Armour could go private or be sold to another company. That will keep a floor on the stock price. But 2018 will still be a tough year,” the CNN article concludes."

One reason UA may want to pony up more cash to stay with Texas Tech is that the company has no other deal with any team in the Big 12, and more importantly, no other deal with any other Power 5 schools in Texas, one of the most populated states in the nation and home to arguably the most bountiful youth sports culture on the map.

"According to Thomas Barrabi of Fox Business, “By partnering with college athletic programs, brands gain access to a built-in network of customers via current students and alumni networks – customers that will buy a Jordan brand Nike football jersey or an Under Armour-made UCLA hat regardless of whether the team just won a national championship.”"

Texas Tech is one of the fastest growing universities in the country, soon its enrollment will near 40,000 and has one of the larges and most loyal alumni bases of any team in Texas.  That is a consumer base Under Armour shouldn’t want to lose.

Still, Texas Tech must seriously consider its options and negotiate from a position of strength.  Schools of a similar profile are receiving far more from their apparel companies.  Arizona State signed a 2015 deal with Adidas to receive $4.2 million through 2023 while Maryland (alma mater of UA founder Kevin Plank) gets $4.3 million from UA and Louisville receives $5.9 million from Adidas.

Just as recently as two years ago, Texas Tech faced an $111 million athletic department debt and with numerous facility upgrades in the works, Tech must explore every avenue to increase its revenue streams.

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For mid-tier programs like Texas Tech, cash is never something that can be taken for granted and athletics director Kirby Hocutt’s most important job is not hiring coaches but is in his ability to put Texas Tech in a more advantageous financial position.  If that means moving on from the struggling Under Armour brand, then that is what needs to happen.