UCLA x NIKE: What Happened to Under Armour?

Friends,

Despite signing the richest apparel sponsorship in college sports history just four years ago—a 15-year, $280 million deal—Under Armour terminated their agreement with UCLA in June.

Why?

Under Armour claimed COVID-19 triggered a “Force Majeure Event” clause in their contract, which relieved the footwear and apparel company from any further obligations under the historic agreement.

In simple terms, Under Armour believes COVID-19 was an event outside of their control and prevented them from not only receiving appropriate marketing value but also from performing their contractual obligations.

As you would expect, UCLA believes it has much more to do with the continuous financial struggles of Under Armour and has filed a lawsuit looking to recoup the $200 million still remaining on the deal.

The interesting part?

Rather than continuing to wear Under Armour gear by covering up the logos—like they have been doing since the agreement was terminated in June—UCLA announced a six-year sponsorship agreement with Nike yesterday.

Here are the details:

• The six-year agreement takes effect July 1.

• Nike will outfit 22 of UCLA’s sports programs, excluding football & basketball.

• UCLA’s football, men’s basketball and women’s basketball programs will wear Jordan Brand footwear & apparel.

• Officially licensed apparel will be available at retail next fall.

While the overall financial details of the deal are unknown, reports have suggested that UCLA will receive $7 million to $10 million in product annually (Source).

But the real question becomes…

What does this mean for UCLA, Under Armour, and even Nike?

For UCLA, it’s unlikely their contract with Nike will be anything close to the historic $280 million deal they signed with Under Armour in 2016 — but does it even matter?

Under Armour has already terminated the deal, but most legal experts assume UCLA will be able to recoup a significant portion of the remaining ~$200 million that they were owed — if not all of it.

For Under Armour, their best chance might be to offset their potential financial liability by the amount of Nike’s annual payment.

Keep in mind, this isn’t the only college sports contract that Under Armour has tried to renegotiate or terminate this year.

Just last month, Under Armour struck a deal with the University of Cincinnati to terminate their ten-year, $50 million sponsorship agreement early. Under Armour was forced to pay a $9.75 million exit fee and provide over $3.5 million in product for the next two years.

Point being — when it comes to UCLA, Under Armour will be writing an even larger check.

The real winner here?

Nike, who swept in to pick up one of the most iconic brands in college sports history for pennies on the dollar — knowing full and well that UCLA is banking on offsetting costs through legal recourse with Under Armour.

Although we won’t know the full outcome of this deal for quite sometime, one thing is obvious…

In a college sports world where recruiting is dominated by location, sponsorships & media exposure, Los Angeles-based UCLA linking up with Nike & the Jordan Brand is a win.

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