CupScene.com

(By Greg Engle)

Posted: Wednesday,September 30th, 2009

(By Michael Smith, Sporting News NASCAR Wire Service)

NASCAR and the sport’s top teams are discussing ways to rescue their troubled licensing business by bringing all of the team and driver rights under one banner, marking the first major step toward creating NASCAR Properties.

Those rights currently are splintered from team to team, which means a licensee might visit five teams to acquire five licenses. A centralized agency such as NASCAR Properties would make all of those licenses available from one entity like the other professional leagues do.

The groundwork for NASCAR Properties was set Sept. 24 during a day-long meeting at the governing body’s new office in Charlotte.

More than 20 teams representing the top 40 or so cars were expected to attend, including high-ranking executives such as Roush Fenway Racing president Geoff Smith, Joe Gibbs Racing president J.D. Gibbs, Hendrick Motorsports general manager Marshall Carlson and Richard Petty Motorsports president Rick Russell, among others. Dale Earnhardt Jr.’s licensing chief, Joe Mattes, said he’s on board as well, which is critical because Earnhardt traditionally has accounted for about a third of the sport’s licensed merchandise sales.

Paul Brooks, NASCAR’s senior vice president and a driving force behind the idea, said officials from his office have been meeting with teams individually since the summer, but the summit at NASCAR’s office brought all of those executives together for the first time.

“We are exploring the potential benefits of a unified industry approach to licensing,” Brooks said. “The ongoing dialogue with all stakeholders has been very positive and collaborative, and that is truly encouraging.”

How NASCAR Properties takes shape remains to be seen, but most team representatives want to see it run by a board of team, NASCAR and track executives. A revenue-sharing model will pay teams and drivers based on their sales, so every team’s cut will not be equal.

“What we’re trying to get to is a model that will make the whole pie bigger,” said John Bickford, general manager of Hendrick Gordon Licensing, which represents Jeff Gordon, Jimmie Johnson and Mark Martin, three of the sport’s top sellers. “Jeff Gordon has had a pretty big slice of the pie for a while, but I’d bet he’d take a smaller slice of a bigger pie. And a bigger pie helps everyone.”

Several team officials agreed that there’s significant momentum behind this movement to aggregate rights, especially with the industry’s leading licensee, Motorsports Authentics, believed by many team officials to be on the brink of bankruptcy. MA, which is jointly owned by the sport’s top two track owners, International Speedway Corp. and Speedway Motorsports Inc., produces and distributes the lion’s share of hats, T-shirts and die-cast cars that are sold trackside each week.

MA’s struggles reflect the declines in NASCAR’s licensing industry, which peaked by all accounts in 2002 and has shrunk since. The revenue for the leading licensing giant at that time, Action Performance, was more than $400 million and it employed 500-plus workers.

MA, which was formed by consolidating Action and Team Caliber, had revenue of about $200 million in 2008, and industry sources say its 2009 revenue could be as low as $125 million with fewer than 200 employees.

Those sharp drops have created a sense of urgency among NASCAR and the teams to come up with a new licensing model.

“If MA were to go bankrupt, it would be pretty embarrassing for the NASCAR world,” said one high-ranking team executive.

No one from MA was available for comment.

Other leagues, such as the NFL, NBA, NHL and MLB, have entities that hold the exclusive trademark and licensing rights for each team, but that model has never been used in NASCAR, where each team is an independent contractor. The teams have always handled their licensing businesses in-house in the past. The question becomes whether all those teams are willing to work together to have “One voice, one vision,” said Mattes, the vice president of licensing and marketing at JR Motorsports. “It’s important that we get everybody on the same page, and (before this meeting) we’re not even in the same library.”

While there are few examples of race teams and other entities aggregating their rights under one NASCAR banner, the most prolific was the landmark 2001 TV deal that brought the sport its six-year, $2.4 billion contract. It marked the first time that TV rights were sold as a consolidated package, whereas before each track had sold their TV rights separately.

While it’s typically not easy to get all of the teams to agree on anything that pools their rights, the despair of the licensing industry has forced them to consider a new concept. Most team executives say that revenue from licensing ranks third or fourth behind sponsorship, winnings and for those that have them, engine leasing programs. A handful of team executives said that MA has been late on royalty payments this year, further eroding from that revenue line.

With sales down and rights fragmented from team to team, Brooks and his group at NASCAR, including Blake Davidson, managing director of licensed products, brought the concept of NASCAR Properties to the teams over the summer months. NASCAR has been studying its licensing business since 2007, industry sources say, because sales have been off.

“NASCAR is presenting a concept that will position everyone together and carry licensing and merchandising for several years to come,” Bickford said. “This is not only something that can help the sport short-term, but also make it better 10 years from now.

“This sport has never been about grouping everyone together, but this is a chance for us to all push the ball uphill collectively.”

Michael Smith is a reporter with SportsBusiness Journal.