Licensing game means betting on a winner

Updated: November 21, 2004, 9:05 PM ET
By Darren Rovell | ESPN.com

In souvenir trailers spread throughout Homestead-Miami Speedway, thousands of Nextel Cup champion T-shirts and hats are sitting in boxes. Emblazoned upon each is the winning driver's image, car number and sponsor.

It would take a psychic to pull off such a thing, right? After all, five drivers entered the season finale with a shot at the title.

Therein lies the rub: Some products proclaimed Kurt Busch champion. Others, Jimmie Johnson or Jeff Gordon. Even self-proclaimed long shots Dale Earnhardt Jr. and Mark Martin have championship merchandise with their names on it.

Licensees seeking to capitalize at the track assume the risk of producing limited quantities of items, just in case the driver they have bought rights to prevails. If their guy doesn't win the championship, they'll send the products back to the company warehouse to be destroyed.

"There is going to be a lot of championship product going in the incinerator," said Kevin Camp, senior vice president of licensing for Racing Champions, which has the license to make the goods for Jimmie Johnson, who was 18 points behind Busch to start the race, but would wind up finishing eight points behind champ Busch.

When Busch won the title Sunday he ignited a period known in the licensing industry as the "hot market," because of the quick turnaround and short window in which fans purchase championship products.

When the Boston Red Sox beat New York in Game 7 of the American League Championship Series, Major League Baseball licensees produced both Red Sox and Yankees apparel to have on site for fans who wanted to immediately flaunt their team's title.

But the NASCAR licensing world is much more complicated.

In September, licensees produced products for the 15 drivers who had the potential to make the cut of 10 drivers who were eligible to win the Nextel Cup championship.

Not only were there five teams who could technically win on Sunday -- though Earnhardt Jr. and Martin needed some luck -- but also different licensees responsible for making the products for different drivers.

"Unlike the other sports, there's not a single voice from the licensing side," said Mike Brown, director of sales and marketing for Team Caliber, which makes products for Busch and Martin. "Every one is pretty much an independent contractor."

Luckily, licensing directors only expect 1 percent to 3 percent of sales to come from fans purchasing their gear at Homestead. That means they can get away with having a couple thousand T-shirts and hats at trackside and run around-the-clock production to satisfy customers purchasing on NASCAR.com and QVC as well as other mass retailers.

"We've taken some risk here, but it's a responsible risk," said John Wikel, general manager of Action Performance, which has a license to produce Jeff Gordon and Dale Earnhardt Jr. products. "Dale is more popular, but he's further down in the points."

If Gordon or Earnhardt Jr. had won, the championship gear payoff would have been worth millions of dollars more than for the less popular Busch's triumph. About $2.1 billion worth of NASCAR licensed product will be sold this year, according to Blake Davidson, managing director of licensed products.

To minimize financial exposure, Action Performance, Racing Champions and Team Caliber have teamed together in a joint partnership. The companies have similar designs for any product that had to be ordered from overseas, including outerwear. Patches will be assembled and embroidery will take place once the champion is crowned, so essentially there's no wasted product.

Camp said 3,500 items -- including hats and shirts -- would have been available for on-site sale if Johnson had won. Since he fell short, $20,000 worth of JJ products will return to the warehouse in Dyersville, Iowa, to be destroyed.

"It's really a gut check," said Brown, who has about double the money invested thanks to having two drivers who could win it all. "You have to decide what the point of pain is, how much you are willing to lose if you don't win. But you have to risk things because the payoff, if you do win, is so significant."

Darren Rovell, who covers sports business for ESPN.com, can be reached at Darren.rovell@espn3.com.

Darren Rovell | email

ESPN.com Sports Business reporter

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