In an ongoing effort to both maximize revenue and reduce the costs of managing sprawling licensing programs, several major colleges and universities are increasing the number of category exclusive agreements they’re signing. While most of the exclusives so far have been in apparel, it also is beginning to move into other areas.

For example, The Northwest Co. has exclusives with the University of Southern California and the University of Texas for bedding, and says it has other deals in the works. And Logo Brands is expected to have exclusive agreements for its tailgating gear in place by the end of next year with at least seven major universities.

With exclusivity come high royalty rates and guarantees. While royalties for major colleges and universities typically are in the 10%-12% range, some recent exclusive deals have moved into the 18-20% range for some high-end jewelry and watches.

The licensees that pay those higher royalties expect their status as exclusives to yield greater sales volume and higher profits since they can concentrate on servicing the market rather than competing for shelf space within their category. It lets them invest in the business with a high degree of confidence that there will be a return. For example, Top of the World – the apparel and headwear supplier that has an exclusive with Ohio State — increased the amount of Ohio State inventory it carries to $5 million from $3.5 million in anticipation of increased sales, says President Scott Shuler.

Say Ross Auerbach of Northwest Co.: “By asking for a high minimum, but well within the area that licensees can attain, the universities are saying ‘You are making a commitment to us where we know you are going to be working hard to service and protect our brand.’”

One factor driving this momentum is that schools’ licensing departments are under increasing pressure to maximize revenue in an age when university funding and budgets are under sever pressure. “Everyone is trying to figure out where the limits are, because we all are being looked at as additional revenue streams for our schools and [we need to] maximize what we are doing,” says Ohio State’s Rick Van Brimmer, whose program generates about $15 million in annual revenue.

“Short of doubling your sales — which is generally something that is out of your control because there are other brand influences that are driving that part of your business,” Van Brimmer said,  licensing departments are looking to the higher rates and lower administrative costs of large exclusives, as well as trimming the overall number of licensees. “The collegiate industry has been behind some of the professional leagues and entertainment properties” in terms of royalty rates and guarantees “so maybe we are just catching up.”

The exclusives also are coming with longer contracts, with five-year deals rather than 2-3 years for a non-exclusive pact. “If you are granting exclusivity, a licensee is going to want assurances that the investment is going to pay off and that may take a few years,” says USC’s Matt Curran, which signed an deal with 289c Apparel several years ago that shrunk its licensee roster to a “handful” from 30-40. “We want to make sure we have a partner that will invest and do a longer term deal.”

The deals also provide a wider range of apparel styles, some of which my be sublicensed, says Shuler of Top of the World. In the case of Ohio State, there are 15-20 apparel sub-licensees including Peter Millar (golf shirts) and Tommy Bahama (sportswear) and Victoria Secret’s Pink brand, says Shuler, whose company manages the sub-licensees.

In many ways the push among larger schools to greater exclusivity is an outgrowth on an on-going effort to narrow the number of companies licensed for its products, say industry executives.

“It allows schools to focus their energy and rather than juggle 37 different sweatshirt suppliers they can focus on one,” says Fermata Partners’ Derek Eiler. “You give something up in doing that because you might not have coverage in every nook and cranny of the marketplace, but you will have more time to build your brand and go-to-market strategies rather than have licensees dictate that.”

Yet not all schools and agents are swinging behind the exclusive deals. The University of Iowa’s Dale Arens says the school wants to work with a broad range of licensees, including some local suppliers. The latter can often be a factor with state universities, who may see the encouragement of local businesses as part of their broader mission.

And while Michigan State has been “going through the apparel categories pretty methodically in the past year, and streamlined our licensee list to those that made the most sense for Michigan State in each category and distribution channel,” it has so far not done any exclusives, says that school’s Samantha Stevens.

Some schools represented by IMG College Licensing are considering exclusive agreements, and the agency promotes a strategic brand management strategy that involves “taking a deeper dive” into a licensing program to determine the number of licensees that is appropriate for a given category, says IMG’s Joseph Hutchinson. The use of sub-licensees also “gives up a little bit of management of your brand” since the exclusive supplier assumes part of that role, says Hutchinson.

“We don’t believe that any one company can do everything,” says Hutchinson.  “We certainly believe you take a holistic approach and deep dive into your business to form deeper partnerships with the best licensees within every segment of the business by product category and distribution channel.”

Exclusives can also make it difficult for retailers to carry the multiple schools needed to build “a cohesive college assortment,” says Learfield Licensing’s Chad Phillips, whose firm represents many smaller schools. “We have strong relationships with ecommerce and brick and mortar retailers and work with our partners to determine the best national and local licensees to meet their needs.”

As a result of the exclusive deals there has been recent spate of licensee mergers and influx of venture capital as companies seek the funding and manufacturing capacities needed for these agreements. Blue Point Capital acquired Top of the World earlier this year and combined it with J. America, a company in which it bought a stake in in March 2016. The merger combined Top of the World’s 500 collegiate licenses with J. America’s 50 and added the latter’s screen-printing facility in Michigan. (Top of the World will be the sole brand surviving the merger, says Shuler. The first Top of the World apparel and headwear from the combined company will be available in fall 2018.)

Also, in June Logo Brands acquired licensed collegiate inflatable ball supplier GameMaster. It dropped GameMaster’s brand in adding new category to its roster of tailgating products, says Talley.

“I think you will continue to see pretty significant mergers and acquisitions occurring in this space because you have private equity coming into play.” says Eiler. “As the exclusivity continues to grow, the cost of entrance keeps rising and the rights are being locked up for longer terms. You either have to step up and play at a capital level that is pretty significant or figure out how to exit the business.”

Contacts:

Fermata Partners, Derek Eiler, Managing Partner, 404-374-2279, derek.eiler@fermatapartners.com

IMG College Licensing, Joseph Hutchinson, SVP Licensing,770-956-0520 joseph.hutchinson@img.com

University of Iowa, Dale Arens, Trademark Licensing Dir., 319- 384-2000, uilicensing@hawkeyelicensing.com

Learfield Licensing, Chad Philips, VP Omnichannel  Commerce, 331-444-3248, Cphillips@learfieldlicensing.com

Logo Brands, Kris Talley, Senior VP Sales, 615-261-9206, kris@logobrands.com

Michigan State University, Samantha Stevens, Dir. Of Licensing, 517-355-3434, sstevens@msu.edu

Ohio State University, Rick Van Brimmer, 614-292-7299, vanbrimmer.1@osu.edu

Top of the World, Scott Shuler, Pres., 405-360-9856, sshuler@towlicensed.com

University of Southern California, Matt Curran, Dir. of Trademarks and Contract Compliance, 213-740-1800, mwcurran@usc.edu