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Volume 20 No. 42

Marketing and Sponsorship

After years of partnering with an array of toymakers, NASCAR has signed its first exclusive toy licensing agreement, with Spin Master.

The agreement gives Spin Master the right to produce cars, toys and games.
The multiyear deal gives Spin Master the right to make cars, toys and games. The company will pay NASCAR’s licensing trust, known as NASCAR Properties, a licensing fee and royalties, and commit to specific marketing and promotional spending.

Terms of the agreement were not available.

Spin Master, with U.S. offices in Los Angeles, is a privately held toy company with more than $1 billion in revenue. It is the creator of Bakugan Battle Brawlers and Air Hogs and has licensing agreements with Disney and Nickelodeon.
It will launch its first line of NASCAR products in the spring of 2012.

“We want to grow two segments within the NASCAR business,” said Craig Sims, Spin Master’s vice president of global licensing. “One is the collector. But if you take a look at the toys we’ve introduced the past few years, we’re all about storytelling. We’re really going to try and increase the excitement of [NASCAR] toys and we’re going to try and really introduce excitement into kids toys.”

It’s the fourth major agreement signed by NASCAR Properties, which was created a year ago. The group also has signed agreements with Motorsports Authentics to manage trackside retail; Lionel NASCAR Collectibles for die-cast cars; and Wal-Mart for apparel and novelty gift products.

The trust has revolutionized NASCAR’s licensing business by creating a centralized licensing agency that represents teams, drivers 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.

Sims said Spin Master probably wouldn’t have considered signing a licensing agreement with NASCAR before the trust. He added, “It led to the economies of scale and the efficiencies and opportunities that may have not existed previously.”

NASCAR began searching for a toy partner not long after creating the trust. It spoke to Hasbro, Mattel and other toymakers before selecting Spin Master. It picked the company because it liked Spin Master’s ingenuity and efforts to put its toys before its own brand, said Blake Davidson, NASCAR’s vice president of licensing and consumer products.
“They took an approach of ‘There’s no limitations at all,’ and that really grabbed us,” Davidson said.

Officials at NASCAR Properties consider the toy category to be one of the most important because it can help the sport appeal to youth. NASCAR has an aging fan base, and it has worked to appeal to youth by allowing children into the garage on race day.

“We see toys as an extension of efforts at growing the fan base,” said Scott Hammonds, Hendrick Motorsports’ vice president of licensing and the chairman of NASCAR Properties’ toy committee. “Innovation is key to us because kids can’t go out and play NASCAR in their backyard. It’s a little more difficult to get a kid into NASCAR, and innovation can help.”

Spin Master will be tasked with not only creating toys but also rebuilding the toy business of NASCAR, which has not had a major toy partner most of the year.

“We have to get the business humming,” Sims said. “We’ve gotten a lot of great feedback already for spring 2012, when we are launching our product. We want to get back to a point where NASCAR has a brand in the business.”

The stately gazebo with custom latticework is the first sign that this isn’t the standard U.S. Open merchandise pavilion.

Polo is making its presence at Congressional known with a 36,000-square-foot pavilion.
In its first year as the U.S. Golf Association’s apparel partner, Polo Ralph Lauren is dressing up the place this week at Congressional.

“I’ve been doing this 17 years and this is the most exciting thing we’ve done to merchandising,” said Mary Lopuszynski, the USGA’s senior director of merchandising and licensing.

Polo has long had a presence in the sport, mostly through putting its Polo Golf brand on stars like Tom Watson, Davis Love III and, more recently, Luke Donald, the world’s No. 1-ranked player going into the U.S. Open. The apparel giant also has been on big stages before, such as the Ryder Cup, U.S. Open tennis championship and the Olympics, so it knows how to play the premier events.

Polo is taking that experience to the U.S. Open golf championship this week with a redesigned 36,000-square-foot merchandise pavilion, new styles that commemorate the U.S. Open, and an upscale feel to the shopping experience inside a tent that looks nothing like a temporary structure.

In all, 30 tractor trailers were used to ship fixtures to Congressional, just outside of Washington, D.C., including woodwork and millwork accents that will create the feel of a Ralph Lauren store.

“It’s not quite like one of our stores, but you’ll be able to tell that our fingerprints are all over it,” said Tom Nolan, senior vice president of golf and tennis for Polo Ralph Lauren. “It’s certainly a great retail shopping environment … and it gives us a chance to reach our customers in a unique way.”

In addition to providing at least half of the product for the pavilion, Polo will be outfitting 5,500 volunteers, more than 300 USGA staffers and about 1,100 USGA committee members on-site. Adidas, Nike, Ashworth and other golf apparel makers will have space in the pavilion, as well. The structure is located next to the 17th hole, near the main entrance for spectators.

Polo Ralph Lauren’s history in golf

1987 —
Polo Golf is introduced.

1993 — Polo Ralph Lauren signs Tom Watson, Davis Love III and Jeff Sluman to wear Polo Golf.

1994 — Polo Golf adds Justin Leonard to its stable of golfers.

2002 — Luke Donald joins the Polo Ralph Lauren team to wear the RLX brand.

2006 — Polo outfits the U.S. Ryder Cup team, captained by Tom Lehman, in Ireland.

2006 — Morgan Pressel becomes the first female golfer to join Polo Ralph Lauren.

2010 — Polo signs Webb Simpson, Matteo Manassero and golf instructor Todd Anderson.

2011 — Polo Ralph Lauren signs a five-year agreement with the U.S. Golf Association to be the official apparel outfitter for the U.S. Open, a deal that includes designing the merchandise pavilion.

Source: Polo Ralph Lauren

Considering that the five-year agreement was signed in October, the Polo Ralph Lauren sports marketing team has scurried to get the volunteers and staff outfitted and the pavilion designed. Terms of the deal were not released, but Polo does not pay a traditional sponsorship fee to the USGA. Polo’s expenses are built into the construction and design of the merchandise pavilion.

The company said that it is advertising in Golf Digest and The New York Times, but it does not plan a media buy on the tournament’s broadcast partner, NBC.

“We’ve made a significant investment in the marketing and activation to link our brand with golf,” said Nolan, who emphasized that the USGA relationship is not intended to be a one-week initiative around the Open.

While this week’s tournament marks the formal launch of the deal, there will be tentacles that market Open merchandise the other 51 weeks, as well. That was the case last week when a Bloomingdale’s catalog featured Donald on the cover. Donald made an appearance at Bloomingdale’s in New York last week to generate publicity for the new line of Open apparel, as well as the RLX brand that he promotes.

“We’ve had the pavilion approach for a long time, but with Polo we’re going to be able to expand what we’re doing,” Lopuszynski said. “Instead of focusing on one week, now we’ll have a marketing focus the rest of the year. It’s more of a true brand alignment [with Polo] than we’ve ever had. What we have here at the pavilion is a tremendous improvement on the presentation and the product, but we’re now thinking about how we’re going to reach people at other times of the year.”

The USGA does not release its sales figures from the Open, but Lopuszynski said the 2008 event at Torrey Pines was the biggest seller. The following year at Bethpage was tracking close to those same numbers before bad weather struck the event. Last year’s tournament at Pebble Beach did not feature a large pavilion because of the agreement with the resort.

More than 100,000 transactions are normal in years the U.S. Open has a pavilion, and hats are usually the best seller. The pavilion will have 52 terminals for checkouts and 1,200 volunteers.

Roush Fenway Racing has hired IEG’s sponsorship measurement division to provide independent, third-party return-on-objective analysis to new sponsors.

The race team and sponsorship analysis company are labeling the new service RoushFenwayOnTrack. IEG has never partnered with a team or property to do similar research in the past. Roush executives hope the service enables sponsors to better evaluate the value of their sponsorships with the race team.

“We’re trying to put a mechanism in place that addresses sponsors’ concern and gives them that comfort that there is a measurement program,” said Roush President Steve Newmark. “If you’re three months into a sponsorship and you’re having a conversation that, ‘We need to measure this,’ then it’s too late. You have to measure as you go along.”

Roush will pay for the service from IEG and include it in its sponsorship packages alongside assets such as driver appearances, production days and show car programs. Sponsors will be able to hold independent meetings with IEG to define their objectives and develop measurement tools to track their sponsorship’s performance. IEG will share the results with the partner.

“When the sponsor gets their results, it won’t be biased in any way,” said Larry Albus, vice president, client leadership, IEG Consulting Group. “Our task is to provide the information to the client, the sponsor. We’re on retainer to the team to provide that information. It’s about as independent as you can be.”

Sponsors can include the measurement services from IEG during negotiations, Newmark said. He added that Roush developed the partnership with IEG in response to calls from existing and prospective partners for a system for justifying their sponsorship spending.

“We’re fairly confident the results will be good and are putting this out there based on our confidence in our program, but like any objective measurement service, we know the results might not be good,” Newmark said. “Still, we believe we have to provide value to our sponsors, and this is a way to show it.”

Four of Roush’s major NASCAR Sprint Cup partners were up for renewal this season. 3M is the only one to renew to date, and IEG measurement services weren’t included in the deal.

The team remains in negotiations with Diageo’s Crown Royal, Aflac and UPS. Newmark said he expects those talks to continue through the summer.

Terry Lefton
The sports economy is the red-headed stepchild in a room full of fair-haired WASPs.

How many businesses are there in which the desire to participate is strong enough that profitability is often a secondary or tertiary motivation for investing?

We have a friend of more than 20 years whose marketing business is now owned by a holding company. They asked him last year to find an agency or other sports-related business that would be immediately profitable and backed him with a war chest of better than $100 million.

“We keep seeing a lot of fuzzy accounting in companies we’ve been looking at,’’ he said. Accordingly, no acquisition has been made.

Paul Fireman was asked to look for a sports agency to buy, but hasn’t found the right one.
That’s a long-winded way to get around to the subject of this column: Paul Fireman, who purchased the rights to distribute Reebok shoes in 1979 and sold Reebok to Adidas for $3.8 billion almost six years ago. Familiar as he is with all sports properties and of the vagaries of selling from storefront, Fireman reminded us that the sports economy isn’t so different from the one he sold into for so many years: oversaturated and largely profit-starved.

“Sports are easy and attractive to enter,” Fireman said recently, in a Manhattan conference room. “Every kid grows up kicking or hitting some kind of ball, and there are easy points of entry. Building a brand and sticking around is what’s hard.”

As for those elusive profits within sports? “It reminds me a lot of most malls,” mused Fireman. “You walk through them, and most of the stores aren’t making much, if any, money.”

Having built and sold a brand behemoth, the Reebok founder these days is applying his acumen to spotting growth brands. His Fireman Capital Partners has investments in companies marketing jeans, eyewear, juice, paint, fashion bedding for children, and, most recently, a return into athletic footwear with Newton Running.

“I fought this one like a dog,” he joked.

Whatever the product, Fireman is now in a position where he has to evaluate whether companies with good ideas will, or can be, companies with a big brand and sales to match. Engineering growth, he has learned, takes the sort of vision that defies convention.

“Academics generally don’t succeed in business because they know all the reasons why not,” Fireman said. “Success comes from an irreverence for rules and resolve that resists conventional influence.”

Whether it’s in the world of golf, where Fireman has poured more than $130 million into developing the Liberty National Golf Club in Jersey City, N.J., or back in footwear, he’s seen a familiar game of piling on.

“Something gets hot, everybody wants in and they over-proliferate,” he said. “Innovation, engendered by competition, can change that.”

When Fireman began competing with the likes of Nike, Converse and Adidas, the U.S. sneaker market tripled from its billion-dollar level in just a few years. More recently, he sees the athletic footwear market as entirely too stable.

“Nike is so big they are monopolistic in many ways, and the others have surrendered,” Fireman said. “There’s peace, and peace promotes a period of no growth.”

Fireman gives Under Armour kudos for molding a great brand but doesn’t see the same innovation in its footwear as with the underlayer products on which the company was founded.

“Under Armour’s done an absolutely sensational job of branding, but from my vantage point, they haven’t figured out how to invest and build footwear,” he said. “I remember when we were spending $50 million or more on R&D. It’s the hardest money to spend, because most of the time you don’t know when you will see results.”

Like so much of the sports economy.

Terry Lefton can be reached at