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With an Orange Bowl win for the University of Iowa, an Insight Bowl victory for Iowa State University and a potential NCAA basketball tournament bid for the University of Northern Iowa, the success of the athletic programs at the three state universities is generating fan fervor that could again produce record growth in royalty revenues from the sale of licensed merchandise.

Steve King, co-founder of Ankeny-based Tailgate Clothing Co. and one of many licensees for all three schools, said the athletic accomplishments bode well for sales of merchandise to retailers.

“Especially now, when we show the fall line here in a few weeks, both of those bowl victories are fresh off of everybody’s mind and so everybody is excited and already talking about where Iowa is going to finish and where Iowa State is going to be projected. (Their success) directly affects our sales, because those stores perceive that buzz and know people are going to be even more excited about the programs.”

The three universities all have licensing programs that authorize the use of their trademarks and logos by companies that pass the application process. The licensees then manufacture school-themed products – shirts, hats and coats, for example – which they sell either directly to consumers, or more often, to retailers. When a licensee like Tailgate Clothing makes a sale to a retailer like Scheels All Sports, the school receives a 10 percent royalty on the purchase price.

The potential for more royalties is even more good news for the three universities, which are hoping to continue an upward trend in royalty revenues that peaked at a collective record of $2.84 million during fiscal 2009 (July 1, 2008, to June 30, 2009). In a five-year period dating back to fiscal 2005, royalty revenues increased a combined 42.7 percent.

Iowa was the clear leader in 2009, drawing in $2 million in royalty revenues. Iowa State took in $690,000, and Northern Iowa brought in $140,000, with all three schools showing a dramatic improvement over the five-year span – Iowa 46.6 percent, Iowa State 35.3 percent and UNI 27 percent.

The general excitement for next football season, in which Iowa is sure to be highly ranked and Iowa State will return key players for head coach Paul Rhoads’ second season, will be reflected in the pre-orders for fall 2010 from retailers that are trying to project sales for next year, said Dale Arens, trademark licensing director at the University of Iowa. How much the retailers pre-order is often based on how successful the retailers anticipate the team will be in the upcoming season. And make no mistake, football success is the key.

“Basically for us, football drives the licensing business,” said King, who pointed out there are a few exceptions, like Duke University and the University of North Carolina. “And for us, whenever the football does better, you definitely see a noticeable increase in sales.”

King said his business had its best year ever in 2009 despite the economy and achieved record profits during the last three quarters. It’s probably little coincidence, then, that both Iowa State and Iowa had standout football seasons in the midst of that three-quarter stretch.

“You always can count on your core fans, but you just have that unknown where there are fringe people that are kind of fans but not die-hards. But once their team is winning, they become fans,” King said.

King’s sales success during the last two quarters of 2009, along with the results of other licensees, will be reflected in the results for the first two quarters of fiscal 2010 for the three universities. That’s why hope is running high that royalty revenues will continue to climb in 2010.

Iowa State University

Each of the three universities experienced at least one year-to-year decline in royalties during the previous five years, but Iowa State was the only school to show a decline in fiscal 2009. The decline, which happened when revenues fell from $750,000 in fiscal 2008 to $690,000 in fiscal 2009, was caused by the economy and a poor football season, said Leesha Zimmerman, program director of Iowa State’s trademark office.

Iowa State’s decline coincided with a men’s basketball team that failed to make the NCAA tournament and a football team that went 2-10 and was ultimately abandoned by its coach, Gene Chizik.

New coach Paul Rhoads, however, took the team to its first bowl game since 2005 during Iowa State’s second quarter of fiscal 2010. The result? Zimmerman said that though the school hasn’t received the royalty funds yet from Licensing Resource Group (LRG) – the contracting agent that helps administer Iowa State’s licensing program – she believes the second quarter of fiscal 2010 will be the biggest in the program’s history.

“I am hoping that it is in part because of the enthusiasm for how well football did this year,” she said. “When we go to a bowl game, we are going to reap a little bit more because there is more national attention and just good will from our fans.”

The positive second quarter gives her hope that Iowa State will bounce back and have a record year.

Arens said that Iowa State is poised to make great gains next year because of a sort of “perfect storm” due to what he thought would be high advance sales in anticipation of next season.

King said that though football is Iowa State’s biggest draw, basketball gives it a second wind in the spring. All the more reason why Zimmerman and Iowa State are pulling for an NCAA tourney berth for the basketball team. That looks a bit more unlikely now – lofty expectations have deflated a bit after the Cyclones’ 1-4 Big 12 start.

“I’m kind of real excited about fiscal ’10 just to see kind of what we end up with at the end of the year,” Zimmerman said. “I’m hoping that we see a big spike.”

Looking toward the future, Zimmerman said the goal is to reach $1 million in annual royalties.

University of Iowa

The Hawkeyes are celebrating the 30th anniversary of the Tiger Hawk logo this year. The stability that signifies, along with a football program that has historically been the best in the state, are some of the reasons Iowa has a clear advantage in royalty revenues compared with Iowa State and UNI. Iowa State, for example, has used four logos during that period, and UNI three.

Arens felt that that stability has helped insulate Iowa from large peaks and valleys based solely on the performance of the school’s athletic teams, and said that even in years when the football team hasn’t done as well, royalties continued to increase.

“It is kind of neat to see how fans put their money where their mouths are, and you always hear about the Hawk fans,” he said.

Arens thought Iowa is probably in the top half of the Big 10 Conference in terms of royalty revenues, but said comparing just numbers is like comparing apples to oranges.

“What I mean by that is, for us to do $2 million in business in a state with a 3 million population and no metropolitan base is probably disproportionately high compared to, say, Columbus, Ohio, which has 20 to 30 million people in a two-hour radius of its campus.”

Iowa sure wouldn’t mind going the route of Louisiana State University. The school brought in $3.1 million in fiscal 2007, then saw its football team win the Bowl Championship Series title during fiscal 2008, which helped bolster royalty revenues to $5.3 million for that fiscal year, according to the Greater Baton Rouge Business Report. The total placed the school fourth in rankings of the 200-plus universities that have deals with Collegiate Licensing Co. – a company similar to LRG. Iowa is not included in those rankings, because it manages its own royalty program.

“We are obviously a strong brand in our state, we’re a strong brand regionally, but are we a national brand yet? Probably right on the cusp of that,” Arens said. “To get that, we need to have what happened to us last month (Orange Bowl victory) happen.”

The hype and expectations are high for Iowa football next season, and the school hopes to capitalize on royalty revenues from pre-orders for fall 2010. Still, Arens said predicting fiscal 2010 would be tough because of the economy. But hey, a national championship sure wouldn’t hurt for fiscal 2011.

Just ask LSU.

University of Northern Iowa

UNI is clearly in a different situation than Iowa State and Iowa. The school lacks the glamour of having a Division I Football Bowl Subdivision program, and is the smallest of the three universities.

But being in a market with two larger schools actually gives UNI a boost, said Leon Costello, the college’s associate athletic director, because it can piggyback off of retailers that sell Iowa State and Iowa merchandise who then see the possibility of selling similar UNI products.

UNI may be well behind the other two schools in terms of royalty revenues, but Costello said that since changing its logo about eight years ago, the university has seen revenues increase consistently. And, he said, the school has realized that royalties are a growing commodity that it is beginning to make an effort to grow.

“We feel that we have just kind of cracked the surface and we need to reach out and do a little bit more internal promoting of ourselves to retailers to get licensed, and then just kind of grow our product in the state and nationwide,” Costello said.

Especially with the poor economy, Costello said that UNI is looking for every kind of external resource that might make money.

“Nowadays, trying to find those sources of revenue are coming few and far between, but we know that this is one of the hot ones,” he said.

And it’s likely hot for UNI because of its men’s basketball team, which was ranked at one point this season in the Associated Press Top 25 before losing to Wichita State, and has been to the NCAA tournament four of the past six seasons. NCAA tournament appearances mean UNI can get its image not only in front of its smaller in-state fan base, but also in front of out-of-state alumni who can’t watch the Panthers otherwise.

“I would say that success breeds success,” Costello said. “Especially in the licensing world, when a team has success and you can take that success here locally and when a team qualifies for the NCAA tournament, that is kind of the rallying cry for people that may not be in Iowa anymore. That kind of spurs them to go online and buy some merchandise.”

Costello said that the short-term goal is to crack $150,000 in royalties, and the long-term goal is to break $200,000. Although numbers were down during the first two quarters of fiscal 2010, there is hope – and it rides on the shoulders of UNI’s basketball team.