SBJ/July 23 - 29, 2007/This Weeks News

Dale Jr. will handle his own licensing rights

The future licensing rights to Dale Earnhardt Jr. will be negotiated by Earnhardt’s own company, JR Motorsports, not Hendrick Motorsports, for whom he’ll drive next season. It’s yet another indication of the way the popular driver is maintaining control of his name and brand.

Earnhardt Jr.’s licensing is believed to generate
$30 million or more each year.

Earnhardt will be the only NASCAR driver whose personal company controls the licensing of his team’s merchandise and apparel. Jeff Gordon at one time had his own company that handled his team licensing, but that operation has since rolled into HG Licensing, a joint venture between Gordon and team owner Rick Hendrick.

HG handles licensing for Hendrick’s other cars as well, but will not have control over Earnhardt’s licensing, which is believed to generate $30 million or more in revenue annually. Earnhardt’s licensed goods account for about a third of all NASCAR merchandise sales, experts in the industry say.

Typically, the teams control the licensing rights to any images and merchandise that involve the car, the sponsor and the driver together. Some drivers have created their own brands, such as Tony Stewart’s “Smoke” and Earnhardt’s “Junior Nation,” but that merchandise doesn’t include the car and the sponsor. Earnhardt will be the only driver who controls licensing rights for his car and sponsor, in addition to himself.

Joe Mattes, who was hired in May as JR Motorsports as vice president of licensing, said he’ll work closely with HG Licensing, but JRM will have the authority to make its own deals.

Earnhardt’s business model is similar to the one employed by his father late in his career. Earnhardt Sr.’s licensing went through his own company, Sports Image, not Richard Childress Racing, where he drove until his death in 2001.

“We’re positioning Dale Jr. as a driver and as a brand, and if we’re going to match those up, we’re going to have to have a very active role,” said Mattes, who also spearheaded the licensing for Earnhardt Sr. at Sports Image before a stint at NASCAR.com as vice president of e-commerce. “We’re going to have more control over picking our partners, the brand and the vision.”

Licensing deals normally split revenue among the driver, team and sponsor, although the percentages might vary from one deal to the next. Revenue usually is determined by a guarantee from the licensee, plus royalties. JRM will still have a business agreement with Hendrick to share in the revenue — neither team would divulge the breakdown — but JR Motorsports will select the licensee and approve the products as well as the distribution.

During Junior’s time at Dale Earnhardt Inc., Joe Hedrick, DEI vice president of licensing, handled his licensing. While DEI issued marks to about 70 licensees, JRM will be more discriminating. Mattes said he doesn’t have a number in mind, but “they’ll have to be the right ones. Less is more, in this case.”

Mattes referred to it as “cleaning up the marketplace. There’s no sense in having five licensees selling glassware.”

“What you’ll probably see is that they’ll look at the leaders in various product categories and make sure they choose partners that can support the license,” said Blake Davidson, NASCAR’s managing director of licensed products. “They’ve got to be able to activate the license through marketing and deliver at retail.”

Junior’s licensing deals at DEI expire at the end of this season, which gives JRM a clean slate to work with. Negotiations with licensees have already begun.

Motorsports Authentics is in an exclusive negotiating period with JRM to obtain trackside rights for Earnhardt’s merchandise in 2008 and beyond. Other licensees will be picked but won’t be able to sell trackside if MA and JRM strike an exclusive deal.

Mattes said Motorsports Authentics was granted an exclusive negotiating period because JRM saw MA as a quality partner. MA already owns exclusive trackside deals with most of the major Nextel Cup teams, including Hendrick’s No. 24 and 48 cars, Joe Gibbs Racing and Richard Childress Racing. Mattes said JRM and MA continue to negotiate terms for the license and did not put a timetable on their talks.

Mattes also said that he hopes to work closer with licensing officials at other teams so that they can collaborate on deals with retailers and licensees.

“Listen, Dale Jr. changing teams is a watershed event. If we don’t take advantage of it, then we’re all missing an opportunity,” he said.

MA, which projects losses of $15 million to $20 million this year, in part because of canceled orders related to Earnhardt’s DEI merchandise, anticipates a spike next year when Junior’s Hendrick-related products go on sale. Earnhardt’s sponsor at DEI, Budweiser, will not follow him to Hendrick.

Hendrick has not announced a sponsor for Earnhardt’s car, but reports have Pepsi and Pepsi brands on his hood in 2008.

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