Licensing Trust a ground-breaking move for NASCAR (cont'd)

The Trust decided it would focus on four key categories: apparel, collectible die-cast cars, toys and trackside retail. Those areas represent more than 80 percent of all merchandise sales. The teams will continue to manage their own licensing in other categories, but the Trust will be the licensor on behalf of the teams for these four.

The Trust entered into a joint partnership with Lionel Trains to manage the die-cast business. Lionel will share profits from die-cast sales 50-50 with the Trust. All revenue that comes into the Trust is then distributed to the teams based on their respective percentage of sales.

Motorsports Authentics, the joint venture between speedway giants International Speedway Corp. and Speedway Motorsports Inc., will manage trackside retail. Partners are still being sought for apparel and toys. It's likely that the Trust will have multiple apparel partners, which could include a retailer such as Walmart or a manufacturer such as VF.

Using a performance-based model to distribute revenue among the teams was critical to Hendrick Motorsports and JR Motorsports, which have the best-selling drivers. JRM handles the licensing for Dale Earnhardt Jr., while Hendrick oversees licensing for Jeff Gordon, Jimmie Johnson and Mark Martin. Together, they're the Yankees and Red Sox combined, representing about 70 percent of all NASCAR licensed product sales. The Trust wouldn't have materialized without them.

"No team is guaranteed to be on top forever," said Scott Hammonds, vice president of licensing at Hendrick. "Our focus was on fixing the model and that was the right thing to do for our sport. Who knows what's going to happen 10 years from now, but at least we know we can have unified conversations with our licensees and retailers."

As with anything that's done for the first time, none of it came easy. From the time NASCAR and team officials first met in September, discussions were exhaustive and exhausting, even repetitive. As many as 30 of the top licensing executives in the sport would fill the 20th-floor conference room in NASCAR's new Charlotte office tower for meetings, including one marathon session two days before Christmas that lasted 13 hours.

"I knew we were at least moving in the right direction because nobody got up and left that meeting before Christmas," laughed Jamie Rodway, vice president of licensing at Roush Fenway Racing. "It was like there was an unspoken commitment that we're going to make this work."

The meetings were sometimes contentious, sometimes funny. They met so often that the guard at the NASCAR offices knew them by name. They grumbled about revenue sharing, sponsors and a loss of control that they weren't used to.

"We had to remind everybody that Tom Brady doesn't walk into stores and sell his jerseys, and that's essentially what we've been doing because we've all been operating independently," said Dave Alpern, vice president of marketing at Joe Gibbs Racing. "A lot of people don't understand the intricacies of our sport.

"We're different because our teams represent multimillion-dollar companies that have worked extremely hard to build their brands. The idea of pooling the rights of their brand with a bunch of other brands doesn't sit well. We thought, 'How are we going to have that conversation with our sponsors?' The NFL owns the marks of its teams, but those aren't Fortune 500 companies like many of our sponsors. There was an initial shock we had to get past."

Hours upon hours were spent determining how revenue would be shared, who would run the Trust and who would participate. Meetings lasted so long that team owners would ask their licensing chiefs, "What have you been doing all day?"

"They thought we were playing golf," joked Mike Brown, vice president of licensing at Richard Childress Racing. "But there was so much to cover, so many questions, so many scenarios."

Brooks said the Trust model was chosen because it requires no ownership and no equity. It's simply a mechanism through which to operate the licensing business and hold the rights.

Key figures emerged throughout the process. Each team executive gave high marks to NASCAR's Brooks and Blake Davidson for organizing the meetings. Brooks, who's been compared to Henry Kissinger by Fox Sports chairman and CEO David Hill for his statesmanlike manner, took a no-pressure approach the teams appreciated.

"The key was that NASCAR facilitated, they didn't dictate it," said Ty Norris, vice president and general manager at Michael Waltrip Racing. "If they had dictated it, none of this would have happened. It helped all of us move forward and get this done in a collective effort."

Related:
• NASCAR Teams Licensing Trust creates die-cast line