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Michigan State’s Nike deal worth $34M for 10 years

Rod Beard
The Detroit News

Despite its success in football and basketball, Michigan State is not reaping the benefits in its most recent apparel deal with Nike.

Last year, school officials extended their agreement with Nike for 10 years and $34 million — including $4.5 million in cash for the university and $26 million in equipment and apparel, according to the contract, obtained by The Detroit News through a Freedom of Information Act request.

The agreement, signed in July 2014, nets Michigan State a $2.5 million signing bonus, $400,000 in cash per year the first five years, then $500,000 per year through the final year (2024). The apparel figures start at $2,400,000 and escalate $100,000 every two years, peaking at $2.8 million in 2024.

The contract also includes a $100,000 annual cash payment to the head football coach from Nike. In 2014, Mark Dantonio reportedly made $5.6 million in salaries and bonuses, after leading the Spartans to a win in the Cotton Bowl and its third straight top-five final ranking.

Michigan State’s previous agreement with Nike began in 2008-09 and was set to expire in 2016. The terms included $100,000 in cash annually for the school, but was amended in 2010 to $25,000 in cash for the university and $100,000 for the football coach, along with $1.5 million per year in equipment and apparel.

The deal puts Michigan State second among Nike schools in the Big Ten for the 2015-16 year, with $400,000 in cash and $2.4 million in equipment and apparel. Overall, Michigan State is seventh among Big Ten schools, minus Northwestern and Penn State, which are not required to report their financial terms.

Michigan State's current deal with Nike runs through 2024.

This week, Michigan officials announced their deal with Nike — 11 years and $122.3 million — which begins in August 2016. Michigan has an option for an additional four years, which could push the total to $169 million.

Although Michigan State has outperformed Michigan in the two major sports, football and basketball, the agreement for the Wolverines could serve as the standard for apparel deals.

“Instead of saying Michigan is the standard, I’ll say Michigan is the standard for a top-20 program,” ESPN sports business reporter Darren Rovell said. “These deals are going to continue to be big. For the lower guys even in the Power Five (conferences), it doesn’t mean there’s going to be an all-out windfall.”

Notre Dame, which signed with Under Armour, reportedly had a 10-year, $90 million deal. Ohio State, the top-grossing Nike school in the Big Ten, is set to make more than $4.1 million in 2015-16, but those numbers could get larger since its contract is up in 2018.

Rovell said Michigan State has not reached the same status as some of the elite college brands, which explains the differences in contracts.

“Michigan is a top-five program internationally,” Rovell said. “If I’m walking in New York City and I see a Michigan State hat, I guarantee he or she went to Michigan State. If I’m walking in New York City and I see a Michigan hat, I’m not so sure — that’s the difference. Michigan is a brand that people buy because it’s Michigan or they know someone who went to Michigan. It’s not the same with Michigan State.”

With other competitors in the apparel marketplace, Nike built a strong enough relationship with Michigan State to maintain the relationship for the extension.

“We put a high value on our partnerships so when it came time to look at that deal, we were looking to renew with Nike because of the relationship we built with them through the years,” said associate athletic director Paul Schager, who manages Michigan State’s branding and marketing initiatives.

“It was really a function where the relationship was strong and we wanted to partner with Nike — that’s why we renewed our agreement with them.”

The relationship between Nike and Michigan State dates to 2001, when five teams were outfitted. But the parties moved to an agreement for all of Michigan State’s teams.

Michigan State’s contract also has other provisions, including a paid summer internship at Nike headquarters and cumulative performance bonuses for the football team: $10,000 for playing in a “Tier 1” bowl, $25,000 for a College Football Playoff semifinal, $50,000 for playing in the national championship and $100,000 for winning a national title.

Michigan State basketball coach Tom Izzo has a separate contract — extended in 2014 — with Nike through 2024 that netted him a $50,000 signing bonus, $400,000 in compensation, plus $95,000 per year in equipment and apparel for him, his assistants and the team. He also receives $35,000 each year for camps and clinics.

With a Final Four spot last season, Izzo received a $50,000 bonus from Nike.