SBJ/20100607/This Week's News
NASCAR and Wal-Mart talk exclusive deal
Published June 7, 2010
Wal-Mart is in deep discussions with NASCAR team and league officials about a wide-ranging deal that has both sponsorship and licensing implications.
Senior-level Wal-Mart executives were guests of NASCAR at the May 22 Sprint All-Star Race in Charlotte and returned this past week to tour race shops and meet more team executives as the mass retailer explores potential partnerships.
While several scenarios are being considered and the talks remain fluid, industry sources say that Wal-Mart is discussing the potential of a direct license that would make it NASCAR’s exclusive retailer in the mass merchandise space. A direct license would give Wal-Mart the ability to select its suppliers and set prices for certain categories, such as hats and T-shirts.
These negotiations are going on as NASCAR attempts to roll its team and league licensing rights into a trust, which would create a centralized licensing agency for the sport.
Wal-Mart is believed to be exploring sponsorship opportunities with Hendrick Motorsports as well. Hendrick’s drivers — Jimmie Johnson, Jeff Gordon, Dale Earnhardt Jr. and Mark Martin — account for close to 75 percent of all licensed sales in the sport, industry analysts say, making it a logical team for Wal-Mart to sponsor.
Landing Wal-Mart, the world’s largest retailer, as part of an exclusive mass merchandise deal would be a significant coup for any sports property, especially if it entails a NASCAR store-within-a-store concept.
This sort of hybrid sponsorship/licensing deal is also at the forefront of large deals of recent note, like the recent NFL/Verizon arrangement, which bundled content and sponsorship rights.
Most retailers, particularly Wal-Mart, are loath to spend on sponsorships, so these deals, if completed, could generate major ripples across the industry.
“This should create a feeding frenzy among teams and leagues,” said Darren Marshall, senior vice president of research at sports marketing agency rEvolution. Marshall also suggested that the NFL, in the throes of designing a new licensing program, and the U.S. Olympic Committee would be likely targets if Wal-Mart looks to expand its sports licensing base.
When the trust is formed, NASCAR teams and drivers will have the ability to opt in or out of specific programs. Target, for one, sponsors Chip Ganassi Racing’s NASCAR and IndyCar teams, but it’s uncertain how it might react to Wal-Mart’s moves.
It’s a smart play because the Wal-Mart/NASCAR audiences have a lot of overlap,” said David Schreff, CEO of Bedare Sports and Entertainment, Greenwich, Conn., and the former president of the NBA’s media and marketing group. “As long as there is some guaranteed NASCAR media and guaranteed in-store promo and product placement, it’s a bold, acquisitive move.”
Before Wal-Mart and NASCAR can move down the aisle together, NASCAR must finalize its trust, which will be a centralized licensing agency representing team, driver and league marks. In the past, each team managed its own licensing rights and licensees were required to do a different deal for each driver it wanted. Five licenses often meant five separate negotiations.
Under the new NASCAR trust, which is believed to be in the final stages of the approval process, team licensing rights would be managed by the trust, and licensees would enjoy the first case of one-stop shopping in NASCAR. Paul Brooks, NASCAR’s senior vice president, and Blake Davidson, NASCAR’s managing director, licensed products, have been moderating the licensing talks with the teams.
Wal-Mart is also thought to be considering a sponsorship arrangement with a team or multiple teams, with Hendrick Motorsports in the middle of those discussions. It’s unclear, though, if the mass retailer will settle on one car for a chunk of the season, sponsor multiple cars for a few races each, or perhaps put together several driver deals into a marketing platform, a la the Gillette Young Guns or the Coca-Cola family of drivers.
One scenario, according to sources, has Wal-Mart sponsoring Gordon’s No. 24 Chevrolet for half of the season or more, as primary sponsor DuPont looks to scale back its spending. DuPont’s current primary sponsorship on the No. 24 car ends this season, and while the longtime sponsor is expected to remain in some form, it’s uncertain whether DuPont will remain the primary.
Other industry insiders say it’s unlikely that Wal-Mart would sponsor a single driver because the retailer will potentially have licensing arrangements across a variety of drivers.
All options are believed to be on the table. Wal-Mart’s agency of record is The Marketing Arm, which has its Millsport outlet in Charlotte that focuses on motorsports.
While Wal-Mart has long been a primary outlet for NASCAR licensed goods, the store began giving thought to a deeper relationship earlier this year.
Hendrick Motorsports drivers, including Earnhardt, Gordon, Johnson and Danica Patrick, who races part-time for JR Motorsports, a team jointly owned by Earnhardt and Rick Hendrick, visited Wal-Mart executives in Orlando in February. The drivers were there to talk about the importance of teamwork at a national sales meeting.
At the same time, NASCAR issued a request for proposal for a company to take over the licensed apparel business from Motorsports Authentics, the slipping trackside licensee that had been running apparel and diecast. NASCAR and Wal-Mart discussions progressed from there through the spring.