I'm going to make this easy.
I don't think you understand what "the backend" is. You seem to think it's "the later years of the contract" when it is not.
Bruh, this is one of the dumbest things you've responded with yet. No that has literally not AT ALL been what I've referred to the backend as. You're lying your *** off to even imply that's what I have been saying. You honestly have been so untruthful regarding this entire debate it's been hilarious. You hop from misrepresenting me on one aspect to the next like its nothing. You were saying for the longest that I wasn't against the 12 year contract, when that was obviously false. Just like this line is obviously BS. Literally NOTHING in any of my replies should suggest that I think what you just implied. It's honestly retarded.
You compute sales on an annual basis. You usually have a clause that says something like "we will pay you $2M for the year, and after you hit $X million of sales in a year, you will then receive a 15% royalty on all additional sales."
What that means is the following. In the summer months, when the year begins (for a collegiate apparel deal), you get nothing beyond the guarantee. Now, the guarantee is not computed at a "15% royalty" rate. Thus, if your sales threshold was $13.333 million for the $2 million payout, that would mean that you'd be getting a 15% royalty for ALL of your sales, no matter what. Which ain't happening, it would render the guarantee nearly meaningless. So the threshold might be $20 million. Thus, you'd get $2 million for the first $20 million of sales, which is like a 10% "royalty", so to speak. And then for all your sales AFTER $20 million, you'd get a 15% royalty.
Now, there are two extremes.
The first extreme is that you get ZERO guarantee, and ONLY royalty. So if you got a 15% royalty, and "only" sold $10 million of merch, you'd get $1.5 million. Of course, if you sold $30 million of merch, you'd get $4.5 million.
The second extreme is that you get paid ONLY guarantee. So if your guarantee was $2 million, you'd get that, no matter if you sold $10 million or $30 million of merch.
The "in-between of the extremes" is a mixture of guaranteed-payment and royalty-sales. Thus, in my prior example, you'd get the $2 million guarantee on the first $20 million of sales, and then another $1.5 million royalty on the additional $10 million of sales, for a todal of $3.5 million.
Now, do not treat these numbers as some sort of Biblical fact. They are there to illustrate a point, not to prove a point. Without knowing the specifics of a contract, it is HARD to demonstrably prove which is better.
But what we CAN conclude is that the heavier you go towards royalties only WHEN YOU SELL A TON OF MERCH, the more you will be paid. That's just logic. And math.
I mean I have literally, and I mean LITERALLY, agreed with this the entire time. Obviously.... Thats the funniest part of this whole ******* debate. You keep trying to explain the thing I have always agreed with. I haven't questioned how these contract work. I question the calculations on the expected values of both contracts and which one nets the university of miami the most money (IN TOTAL VALUE... we'll get to that in a sec....)
What's hilarious about YOUR argument is that you constantly invent some sort of crazy number like $100 million per year. I've never denied that an INSANE and unrrealistic "guarantee" number could, in all likelihood, exceed almost any "royalty only" deal. But on my side, I give you industry standard numbers, such as a 15% royalty. I guess if I wanted to invent magical numbers too, I could talk about a "100% royalty", right?
Uh I use a crazy number to get you to at least take the very first step to finally admitting that it isn't crazy for a fully guaranteed contract to be better, A point you have been unwilling to cede for like over 2 years lol. It is an extreme - just like you how above you used an "extreme" (a lesser extreme than mine, but who gives a **** if the intention was to make an extreme point) to explain your point, I did it too.
The difference is I agree you can use a 100% royalty to show the extreme of what a fully backend contract could be worth. That would show the impact back-end upside could deliver. If you were asking me would I take a fully Back-End deal, the answer would be yes, and just ******* hope we sell a **** load lol. Except that is basically irrelevant because what ACTUALLY matters is a prediction to how much we would have made on the back-end of a Nike deal with an offer you ACTUALLY have in hand. The University of Miami would use whatever the royalty rate Nike was offering us combined with our expected sales (Maybe best case, Avg, then worst case to get a reasonable range), and determine the expected value on the back-end. Then you combine that with the guaranteed portion, bonuses, equipment, etc, etc. And then you say We expect to make $X with Nike, and hey maybe $X + $Y if everything went extremely well and we say top 5-10 in merch sales and actually winning to get bonus awards. Therefore, It would take CLOSE TO $X + $Y for us to accept a Fully guaranteed contract that removes the upside of a royalty-heavy contract (you remove the risk of getting less than $X+$Y but also lose the reward of getting more). This is the equilibrium point where both deals intersect in expected value.
And to show I 100% meant this, Literally I followed up my point using the $100M extreme by saying this:
so then just apply that same train of thought regarding up front money vs backend money until you find the point that is the least you would accept from Adidas to where you are confident the up front money will be more than Nike back end money. What is that amount? That's literally all I've been saying this entire time
Okay. So we have the extreme of $100M. Obviously that is extreme. We BOTH agree that is extreme. But is $50M extreme? $20M? What about $15M or $10M? Are we getting closer to reaching the equilibrium point where an HONEST prediction of the amount we are likely to net In TOTAL - ALL INCLUSIVE - is still worth it to go with one deal reliant on us selling well over a GUARANTEE?
Please do not confuse the eventual rise in contract (total) amounts that take place over a decade timeframe with the annual calculation of royalty payments. On this issue, I assure you that I know what I'm talking about, as most of NASCAR's revenues (when I worked there) arose from either the TV contracts or the ROYALTY payments. Now that NASCAR and ISC have merged, NASCAR also makes money from ticket sales.
No surprise but you misinterpreted a point I made yet again. My point about as the years go by, Nikes guarantees rise, is that If you sign a 6-8year deal with Nike, then when you go to renegotiate and sign an extension you will almost assuredly negotiate a HIGHER guarantee. The Royalty rate and all that other stuff may be the same on the back end and with bonuses, equipment probably increases in value provided as well though. So while In years 1-6/8 Our deal is superior with the full guarantee, once you factor in the renegotiation, and how that raises the ALTERNATIVE deal, the math changes on that Equilibrium value and what dollar figure you'd want a fully guaranteed contract at. So years 1-6 that $X+$Y I mentioned earlier is a great deal to have fully guaranteed. But years $7-12, that is no longer as good because the teams that were able to renegotiate have inched closer in the guarantees and bonuses and equipment, while maintaining their superior back-end upside. Thats why I'm saying the 12 year Contract length is THE primary detrimental aspect to the adidas deal.
Finally, please remember that the "total" value of a contract is NOT NOT NOT all about merch sales. Only about 30-40% of the total stated value of the contract comes from merch-sales/royalties. The other components are EQUIPMENT provisions (all of our helmets, pads, jerseys, and the player-edition gear such as sweatshirts, t-shirts, shorts, etc.) and ACTIVATION (the co-branded marketing expenditures that Nike makes on behalf of both of us, including promos).
Bro, not this again, lol. Bro we've been over 100 times that the TOTAL value is Guarantees, Royalties, Equipment, Bonuses, etc, etc, etc. Every time I have ever said Total Contract value I have referred to assigning a Dollar Figure to the total value the apparell provider is delivering to the University. There should be ZERO debate that you can assign a Dollar Figure to EVERY aspect of what you just wrote. The only thing I haven't been including in that Is Brand Reputational value. HOWEVER I have 1,000% said multiple times, that if you came to the conclusion that Adidas paid us $X in total Value and Nike paid us $X-$Z, BUT that your assesment of the brand rep value of being Nike brand is WORTH $Z or >$Z, I have no problem with that being your opinion and why you view the Nike deal as being better. I have LITERALLY said this repeatedly.
So For like the millionth time I have said I am happy with Adidas because A) I believe we made more in TOTAL - at least over the first 8 years, and maybe even to slightly less years 9 and 10 and B) I think our current design is far Superior than what we had with Nike, and as a part of that I think Nike significantly mistreated and de-valued us and our relationship.
However I have ALWAYS maintained that A) the 12 year contract length was a very large negative with us switching to Adidas and I do believe that if we would have only signed an 8 year deal with Adidas, that we would have unequivocally made the best deal available to us, and B) That I vastly prefer Nike to Adidas in general and ALWAYS have. Lol.
And I am 100% confident that no matter how many posts of mine you want to dig up, that they will all be taking these exact same points. But the funny thing is I usually have to re-quote my own posts to PROVE how I've been the one telling the truth the entire time, and it's been you who has been constantly misrepresenting me.
This is just funny cause you've acted like for 2 years like I don't comprehend every single point you make and agree with basically every explanation on how the deals works and why Nike deals can be superior. I just think that we got a large enough guarantee to make more money through Adidas than Nike, and that if this were an 8 year deal I'd have basically zero complaints about. But unlike you I can accept you disagreeing lol.
