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Colleges win when fans wear out their welcome

Sports – March 2005

Colleges win when fans wear out their welcome
By Chris Roush

In a couple of weeks, UNC Chapel Hill, Duke, N.C. State and Wake Forest, among others, will square off at the Atlantic Coast Conference basketball tournament. Television announcers will blather on about what’s at stake: better seeding in the National Collegiate Athletic Association tournament for the Heels, Devils and Deacons, an invitation to postseason play and similar riches for the Pack.

That’s all true. But there will be more on the line. The next Chris Paul assist or Rashad McCants three-pointer or Shelden Williams rebound or Julius Hodge pout could trigger a different source of university income — royalties from items sold with college logos.

These contests take place not on the court but in places like the Deacon Shop, nestled between Belk and Kay Jewelers in Hanes Mall in Winston-Salem. A joint venture between Wake Forest University’s bookstore and its athletic department, the 2,400-square-foot store opened in June 2004.

Thanks to the team’s fast start, which included a brief No. 1 ranking and the defeat of high-flying UNC, the store’s performance has exceeded expectations. Sales of black-and-gold T-shirts, sweatshirts, hats and even rocking chairs have been double the university’s projections. “It is just killing our expectations,” says Craig Keilitz, associate athletic director for marketing. “The nongraduates aren’t going to come on campus to get gear, and a lot of the alumni won’t either.”

The store is one of the strategies employed by colleges to boost revenue from royalties. Proceeds are used for academic and athletic purposes. Licensing dozens of products is one way these schools are finding additional funding. N.C. State’s net royalties were $583,000 in the 2003-04 academic year, up 42% from the year before. Wake Forest’s royalties were $138,000, a 23% gain. Duke’s royalties for the same year were about $1 million, up from $850,000 a year earlier.

But all three, and maybe every other school in the country, are in Carolina’s rearview mirror. The school pulled in about $3.7 million in royalties on about $90 million in sales in 2003-04. Though the royalties were down about $140,000 from the previous year, they were enough to make it No. 1 for the fourth straight year, according to Atlanta-based Collegiate Licensing Co., which handles licensing for more than 180 colleges and universities. A few schools, including the University of Southern California, handle their own licensing. UNC’s general fund gets 75% of the money, with the rest going to the athletic department.

All told, sports licensing is a $12.7 billion-a-year industry, according to The Licensing Letter, an industry publication, with collegiate-licensed products totaling $2.6 billion. That market has been fueled in recent years by an expansion into collectibles such as Christmas ornaments and other nonapparel lines.

N.C. State, for example, licensed two children’s books this past year: Hello Mr. Wolf and Running with the Wolfpack. In April, a licensee will introduce an animated Mr. Wolf doll that can walk and play the school’s fight song. “The younger we can get them, the better getting them to know about the school,” says Cindy Sears, director of trademark licensing at State.

UNC’s sales have been helped by a new line of women’s apparel, including shirts and sweatshirts that use pink and chocolate brown as the primary colors rather than the school’s trademark light blue. Derek Lochbaum, the school’s licensing director, believes that Carolina’s strength in selling items with its name or logo lies in the development of the university as a brand, much like Coca-Cola or Starbucks. “It’s able to reach all areas of the country, all socioeconomic backgrounds, suburban markets, urban markets, East Coast, West Coast.”

UNC also has been helped, Collegiate Licensing’s Tammy Purves says, by high-visibility professional athletes who attended the school such as Michael Jordan and Julius Peppers. And while university officials may not embrace the connection, rapper Nelly occasionally wears Tar Heel gear. All those keep the spotlight on the school despite poor seasons in football and basketball (by its standards) during the 2003-04 academic year.

The only other North Carolina school in Collegiate Licensing’s top 50 is Duke, which ranked No. 27 in 2003-04. Despite a hugely successful basketball season in which the Blue Devils made it to the Final Four and increased licensing revenue, the school actually dropped nine spots from the previous year.

Oddly enough, royalty revenue is one thing that can bring rivals UNC and Duke together. They are partners with Collegiate Licensing in a program called “Choose Your Blue,” which includes a Web site — — that hawks items from both schools. Nike offers apparel for both on the site and at stores throughout the state to allow the schools to promote their rivalry and boost sales.

The Collegiate Licensing rankings don’t include all North Carolina universities. The Licensing Resource Group Inc., which has an office in Winston-Salem, has State, Wake Forest, East Carolina, High Point, Campbell, UNC Asheville, UNC Wilmington and Western Carolina as clients. State switched from Collegiate Licensing two years ago, Sears says, “to get a better presence in the local market.”

At Mojo Sportwear in Greenville, East Carolina gear is featured. Best sellers include T-shirts with the school’s football schedule and golf shirts and hats with embroidered Pirate logos. Owner Perry Swain says he sells about $400,000 of ECU merchandise a year, and he pays the school an 8% royalty fee.

For many schools, sales of clothing and other logo items are driven by the success of their teams. Winning national championships can dramatically boost sales. Louisiana State University jumped from No. 21 to No. 5 in Collegiate Licensing’s rankings after its football team won the 2003-04 national championship, and sales of University of Connecticut clothing and memorabilia rose after its men’s and women’s basketball teams won national titles in 2004.

At Carolina, “a national championship would be great, and we would see an increase in revenue,” Lochbaum says. “But when you’re dealing with Michigan, UNC, Notre Dame, Texas, you will not see big swings on wins and losses.”

Back at the Deacon Shop, Buz Moser, director of Wake Forest University stores, works to handle the demand, which has generated expenses as well as revenue. The mall store had to add workers, and they have spent more time than expected restocking. “Those are good problems to have. Next year, our sales objectives will be more realistic.”

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