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Sep 7, 2009
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College sports license market tackled by recession

Sep 7, 2009

By Ben Klayman

CHICAGO (Reuters) - College sports fans may love their alma maters, but even the market for gear emblazoned with universities' logos has been tackled by the recession.

The North American college sports licensing market, which hit $4.3 billion last year, could see retail revenue fall 7 percent this year, as consumers dial back purchases of such items as clothes, video games and even baby pacifiers with college logos on them, said Derek Eiler, senior vice president and managing director of Collegiate Licensing Co.

"Obviously, the recession puts a damper on everything from a retail sales perspective," Eiler said in a telephone interview. "All the leagues, no different than the rest of the free world, have definitely seen declines this year."

Such a decline would take the college segment back to $4 billion, ending a string of roughly 8 percent annual growth over the last five years.

CLC, a unit of sports, entertainment and media company IMG Worldwide, takes a keen interest in the market because it boasts a monstrous 80 percent share of the revenue, up from 50 percent 15 years ago as more schools have consolidated their trademark rights with the Atlanta-based company.

"They realize that to go compete for retail shelf space, you have to get beyond the college community if you're going to grow your licensing brand," Eiler said. "You're really competing with the NFL, Disney, other licensors out there."

CLC acts as the deal broker for such well-known schools as the University of Texas, which led the nation last year with $8.8 million in royalty revenue, and the University of Michigan as well as smaller ones like Texas State University, he said.

Manufacturers like Nike Inc and Adidas AG as well as the T-shirt shop on campus pay a royalty of 8 to 10 percent on the wholesale price of an item to CLC, which takes a cut of 15 to 40 percent depending on the school's size and sales, before sending the rest to the client school, Eiler said. Contracts typically run eight to 15 years, he said.

Last year CLC, which IMG purchased for an undisclosed amount in 2007, handled approvals for about 200,000 items with college logos on them, Eiler said. Most colleges have between 200 and 600 companies producing items on license.

"Coffee cups, mugs, dog collars, coffins, baby pacifiers, fishing lures -- if you can put a college logo on it, somebody's probably figured out how to do it," he said.

The North American college sports segment remains healthy despite the recession, with last year's $4.3 billion in retail revenue trailing only Major League Baseball's $5.1 billion.

Eiler thinks the college market, with more than 177 million fans and a constant influx of new students looking to buy school gear, may soon surpass baseball.

Opportunities include more lucrative exclusive deals like the one it signed with Electronic Arts Inc's sports game unit for a football video game that was introduced this year, as well as markets overseas, he said.

And Eiler is hopeful the worst may be over.

Since college football kicks off in the fall, much of the market's business was already done by the time the financial crisis intensified last year, he said. Now, with the economy slowly recovering, he hopes this season will not be as bad as it might have been.

And while apparel is still the big seller, accounting for 60 percent of the market, demand is growing faster for nonclothing items like video games, tailgate tents and even college-branded Snuggie blankets with sleeves.

(Reporting by Ben Klayman, editing by Matthew Lewis)

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