Jerry Jones’ 1995 Sponsorship And Antitrust Lawsuit Risks Critical To Growing The Dallas Cowboys’ Valuation

Risk taking is necessary for a business to grow.  For Dallas Cowboys owner Jerry Jones, a risk that he took in 1995 has had a significant payoff in his team’s ability to enter into the growing business of women’s sports apparel.

Seven years before Jones became the Cowboys’ owner, NFL owners voted to create the NFL Trust.  This resulted in each team transferring the exclusive right to use its club marks for commercial purposes to the NFL Trust.  The NFL Trust then entered into license agreements with NFL Properties to provide NFL Properties the exclusive right to license the trust’s property.  The motivation behind creating the NFL Trust was the thought that when placed into the market together, the value of all NFL team marks would be higher than if teams attempted to negotiate licensing deals on their own.

In 1993, NFL owners began capitalizing upon their decision to create the NFL Trust.  That year, Coca-Cola signed a five-year contract worth a reported $250 million to become the official soft-drink of the NFL.  In 1995, Visa USA would sign the then second-largest partnership agreement with the NFL, a five-year deal worth $50 million, to become the NFL’s exclusive payment card sponsor.

In the background of these deals, though, was Jones.  Not a team owner when NFL owners voted to create the NFL Trust, Jones realized that he and the Cowboys were in a situation unique from most other NFL teams:  The Cowboys didn’t need a stable of teams to secure lucrative endorsement deals.

With the business savvy cured from his education, which includes a Master’s degree in business, and successfully running his own Jones Oil and Land Lease, Jones set out to capitalize upon the brand recognized as “America’s Team.”  The owner of not only the Dallas Cowboys, but also their stadium, Texas Stadium Corporation, Jones entered into multi-million dollar sponsorship agreements with American Express, Pepsi and Nike through Texas Stadium Corporation.

While arguably not directly contravening the terms of the NFL Trust, since only teams and not stadiums were part of the trust, Jones nonetheless secured the ire of the NFL.  At an owners meeting in Atlanta in 1995, Jones was served with a $300 million lawsuit filed by NFL Properties.  The lawsuit raised claims including violations of the Lanham Act, breach of contract, breach of the implied covenant of good faith, unjust enrichment and tortious interference with contractual rights.

In response to the lawsuit, Jones and the Cowboys filed a motion to dismiss.  This motion was granted in part.  Then, Jones took a big risk:  He filed a $750 million antitrust lawsuit against the league.  It was this legal maneuver that put the Cowboys on the ground to becoming the most valuable NFL franchise.  In 2013, Forbes valued the team at a league-wide high of $2,300 million.

With portions of its lawsuit dismissed, Jones’ antitrust lawsuit motivated the NFL to do one thing:  Settle.  The settlement agreement Jones reached with the NFL allowed Texas Stadium Corporation to maintain its contracts with American Express, Pepsi and Nike.  It also provided every other NFL team the opportunity to sign their own stadium sponsorship agreements.  Arguably, though, Jones was the big winner of the settlement agreement, as he also retained the right for the Cowboys to enter into their own licensing agreements.  It is this right that allows the Cowboys to create merchandise apart from the NFL’s licensing agreements.

Today, the Dallas Cowboys are using the footing they gained through the contentious litigation to further build the value of their brand.  With the NFL identifying 44-percent of its fans as being female, in recent years, the league has taken a proactive approach to providing women with apparel choices that better suit their fashion sense.  Leading the league in this effort, are the Dallas Cowboys.

In recent years, the Cowboys have utilized their licensing capabilities to enter into team-exclusive partnership agreements with women’s apparel designers, including PINK by Victoria’s Secret and Peace Love World.  The partnership with PINK was born six years ago. According to Cowboys executive vice president and chief brand officer, Charlotte Jones Anderson, “Sales of PINK merchandise in our pro shops was so successful, that PINK wanted to create a stand-alone store in our stadium.  We are the only team to have our own stand-alone store and the first team to enter into a licensing agreement with PINK to produce Cowboys-only apparel.”

Seeing how female fans flocked to the team’s PINK merchandise, Jones Anderson set out to find other licensees to partner with to create Cowboys women’s apparel lines.  ”Seeing how successful our PINK line was really inspired us to go out again and find another partner to do something similar,” Jones Anderson said.  Earlier this year, the Cowboys partnered with Peace Love World to create a line of women’s apparel featuring tops, tanks, hoodies and pants with phrases including, “I Love Sundays” and “I am Dallas.”

For Peace Love World founder Alina Villasante, the growing trend of teams and leagues investing in women’s apparel opportunities has been good for business.  Launched in 2007, Peace Love World was born as a brand focused upon “spreading peace and love all over the world,” according to Villasante.  In wasn’t until 2013 when that the spreading of that message reached the sports space.

During the Miami Heat’s 2013 NBA Finals run, Villasante, a Miami resident, was contacted by Heat executives to begin producing women’s apparel for fans.  Through promotion solely on social media streams, Villasante’s creations, featuring phrases like, “I am Champion” and “I am Miami,” sold out in seven minutes.  ”The clothes got to the AmericanAirlines Arena and within seven minutes, they were sold out.  The team called me and told me to take the pictures of the items off of Instagram, because they had already sold out.  It was a great introduction for what I was going to be facing in the future in partnering with sports teams,” Villasante recalled.

The taste of success in the sports marketplace that Peace Love World experienced during the NBA Finals allowed Villasante to recognize that sports could provide a unique opportunity for her company to grow.  ”Women have been hungry to show up to games looking like we are ready to go out with our friends and to be very fashionable.  I wanted to provide women with clothing that gives them the feelings of femininity and loyalty, while also looking like a sports fan,” Villasante said.

Seeing the success that Villasante and Peace Love World achieved in their partnership with the Miami Heat, the Cowboys contacted her to build a line for the team.  Throughout the season, Peace Love World merchandise has been promoted not only in the Cowboys’ team store and online storefront, but in pop-up shops and at an NFL style lounge event.  For someone whose business plan did not initially include entering the sports marketplace, Villasante calls her sports partnerships with the Heat and Cowboys “the best thing that’s happened to me in the four-and-a-half years since I’ve launched Peace Love World.”

Jones Anderson credits the Cowboys’ capabilities to license their own merchandise for providing the team with an opportunity to take risks in the women’s apparel arena.  ”We are the only team that can produce, license and sell our own merchandise as a complete business,” Jones Anderson noted.  This ability has allowed the Cowboys to test the marketplace in ways that other teams are unable to.  ”For the longest time, people in retail believed that jerseys, hats and plain t-shirts were driving sales in the industry.  Taking a step into a market that is more luxury-oriented, like women’s apparel, was thought to have more risk behind it.  People didn’t have the cojones to jump in and try something if it wasn’t going to work,” Jones Anderson said.

With their own merchandising entity, Dallas Cowboys Merchandising, Ltd., the Cowboys had the flexibility to take risks when entering the women’s apparel marketplace.  ”For us, since we are able to do it just for us, we can run a test to see if there’s real traction in the brand.  It’s been incredible.  Our fans have been very receptive and they love that we are thinking of them differently,” Jones Anderson said.

Like business, success in fashion involves taking risks.  With the NFL finding that its women’s apparel sales have tripled in recent years, taking risks to meet the wants of fashion-forward female sports fans is likely to pay off for teams like the Cowboys and women’s sports apparel creators like Peace Love World.