Insider: What issues are in play in IU apparel deal?

The financial arms race in college athletics apparel contracts took a fresh shot in the arm Tuesday, when the eye-watering figures of Michigan's new deal with Nike were announced.

Indiana's Big Ten neighbors to the north signed the most lucrative such contract in the country when they returned to the Swoosh, to the tune of $169 million over the next 11 years, an average of more than $15 million per year.

IU is shopping around for its next apparel contract, with the current agreement between the university and Adidas ending next year. The Hoosiers have been with their current provider since 2004, but they're open to all opportunities right now.

So what factors are in play? And what's at stake? Here's a first look at the landscape in front of Indiana.

APPAREL IS BIG MONEY

This wasn't always the case. In fact, the 2008 Adidas agreement Indiana is currently finishing is actually one of the richer such deals in the conference.

(For fun, here's a look, from MLive.com, at apparel deals around the conference.)

But revenue streams are constantly changing in sports, and the college level is no different. TV contracts are becoming fatter and fatter, as evidenced by the massive injection of revenue the SEC and Big Ten Networks have provided conference schools.

Apparel contracts have begun to trend that way as well, especially for brand-name schools.

Michigan just got paid, as did Notre Dame. Texas might be next.

There's gold in apparel contracts right now.

BUT MONEY'S NOT FOR EVERYONE

Tennessee just ended a nearly two-decade relationship with Adidas to move to Nike, but the Volunteers are taking a pay cut to do so.

According to the Knoxville News-Sentinel:

"Nike gave UT a $2 million signing bonus, which the Vols received last summer. But even with that factored in, the $1.2 million per year Nike pays throughout the life of the contract is $750,000 per year less than UT's deal with Adidas."

Nike is making up for that, according to the News-Sentinel, by offering free product and extra incentives from sales royalties. Essentially, Nike is leveraging its brand to take the place of flat cash payments.

That's not always the case. The Oregon company -- inarguably the preeminent force in American athletic apparel right now -- is reportedly paying almost half of its annual deal with Michigan in cash (the rest coming in apparel).

But the larger point here is that money isn't the only driving force behind apparel deals, and the final price tag isn't necessarily just reflective of physical cash payments. Again, from the News-Sentinel story:

With Adidas, UT received $1.8 million of free product for department use per year and a 9 percent royalty on Adidas' adjusted gross sales of UT products with a guaranteed minimum royalty of $200,000 per year.

Nike will provide $3.4 million in free product for program use in 2015-16 and an average of $2.96 million per year throughout the life of the contract. Tennessee will receive 13 percent of royalties on all net sales of Nike's UT products.

"I think the athletes like wearing the brand," said Matt Powell, the vice president for industry analysis in sports and leisure trends at the New York-based NPD Group. "I think the students like having the brand on their apparel. Likely, they can drive more sales. In that way, the schools can make up for the lower up-front cost."

Agreements can also include booster clauses, essentially guaranteeing that contracts will never sink below a certain size, relative to their peers.

SO WHAT DOES THIS MEAN FOR IU?

Indiana doesn't approach a deal like this from the same position as, say, Michigan. The thrust of football branding, combined with Michigan's overall national appeal, gives the Wolverines a negotiating advantage few schools share.

But IU will still operate from a position of strength on several fronts, in any potential negotiations.

First, the Hoosiers' men's basketball brand is one of the nation's most recognizable. Whatever title droughts opposing fans want to cite, the IU logo carries more heft in the sport than almost any other, and whether on ESPN, CBS or the Big Ten Network, IU basketball often gets prime time TV billing, which bolsters brand appeal.

Second, Indiana's alumni base is one of the nation's largest. The actual figure changes yearly -- over time, I've had anywhere from first- to fourth-largest living alumni base cited to me -- but Indiana annually reports a massive number of alums. That's a deep well of potential customers.

And while it's smaller-scale, IU has an individual apparel item, its candy-striped warm-up pants, as popular as nearly any in college athletics. The pants are often among Adidas' most-sold single items.

Indiana is unlikely to see a windfall reaching as high as Michigan's, but the department could stand to substantially increase revenues from its current contract.

There's no firm indication what IU's next move might be, whether to stay with Adidas or take up with one of its competitors. But as the Michigan deal shows, these contracts must be negotiated well in advance of their beginning, so it would make sense to expect news sooner, rather than later.

Follow Star reporter Zach Osterman on Twitter: @ZachOsterman.