SBJ/20100308/This Week's News

‘Much healthier’ licensing model for NASCAR near

Seven months of negotiations have put NASCAR and its top teams in position to create the first NASCAR Properties, a trust that will serve as a centralized licensing agency for the sport.

The unnamed unit will operate as a one-stop shop for licensees, but a key difference from other previously established league-licensing divisions is that revenue will be distributed to the teams based on sales and not a revenue-share agreement.

The licensing body is being called a trust because one body — NASCAR Properties — will hold the rights and grant licenses on behalf of the teams. Participation by the teams will be voluntary, but the top teams such as JR Motorsports, Hendrick Motorsports, Joe Gibbs Racing and Roush Fenway Racing are in, as are several others that own valuable rights, like Dale Earnhardt Inc., which manages the late racing icon’s legacy business.

The teams have agreed to include only certain categories  so far, like apparel. Which categories are in and which are out remains to be determined.

“There are so many different organizations with so many different issues that it takes a long time and it’s highly complex,” said Jeff Steiner, general manager of DEI. “But the nature of discussions are positive and it’s moving forward with very good collaboration from the teams.

NASCAR teams have managed
licensing rights in-house, leading
to confusion.

“This is going to be a much healthier model for licensees and retailers.”

In the past, NASCAR teams managed their licensing rights in-house — each team operates as an independent contractor, separate from the sanctioning body. That model was considered cumbersome and confusing for licensees because they had to negotiate five different contracts to get the licensing rights to five different drivers. Rights to the NASCAR mark were a separate conversation as well.

But in the new trust, those team, driver and NASCAR marks will be available under the umbrella of NASCAR Properties, or whatever the trust is eventually called, thus the one-stop shopping model.

Team executives involved in the formation of the trust say it might take the rest of the spring to finalize the arrangement, but it’s been called “imminent” by multiple sources. Talks began on Sept. 24 at NASCAR’s offices in Charlotte and have continued with multiple meetings each month. All of the top teams have been represented, while Paul Brooks, NASCAR senior vice president, has mediated the negotiations.

The trust will be run by a board of industry licensing executives, although it has not been determined how many will serve or how long the terms will be. The board will mostly consist of team executives, although officials from NASCAR also could be considered.

Never before have NASCAR’s teams and the sanctioning body combined their rights into one entity, making the formation of a NASCAR Properties a first for the sport.

“It’s long overdue,” said Joe Mattes, the vice president of marketing and licensing at Dale Earnhardt Jr.’s JR Motorsports. “Teams realize that we can’t continue on as independent contractors, at least in licensing. There has to be a set of standards that we all work by.”

The negotiations to unify the licensing rights were prompted by the financial troubles of Motorsports Authentics, the dominant licensee in the industry. MA, which has been on the verge of bankruptcy for the past year, owes millions to several teams. As part of the arrangement to create NASCAR Properties, teams will forgive MA for most of its debt.

Industry insiders say that even the most ardent opponents of MA have come to grips with losing that revenue. MA’s contracts with the top teams like Hendrick Motorsports and Roush Fenway Racing guaranteed as much as $3 million a year, but MA has been paying only a third to a half of the guarantee to the teams.

MA’s die-cast car business will be spun off into a separate entity and will be managed by a third party, industry sources said. Revenue from the die-cast business will be shared among the teams as a way to satisfy part of MA’s debt. MA is expected to continue as a much leaner company that focuses strictly on trackside retail sales.

MA just two years ago took in more than $200 million in annual revenue, but that number was cut in half in 2009 as the recession took a bite out of sales and business plummeted.

“Hopefully this licensing strategy works and this can become a testimonial for what can happen when teams pool their rights and work together,” Mattes said. “Some teams are already doing that in other areas, like engines and other equipment, so at least conceptually it’s a good thing.”

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