Motorsports Authentics drops prices; plans to market fewer items

By Bob Pockrass - Associate Editor

Wednesday, February 11, 2009

Fans visit Dale Earnhardt Jr.'s souvenir trailer during the 2008 season.

Sam Cranston
NASCAR Scene

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DAYTONA BEACH, Fla. – Motorsports Authentics’ interim boss says the company will stress a philosophy of “less is more valuable” this year and will reduce prices for select items.

Don Hawk, the interim chief executive officer of the merchandise and diecast company that is jointly owned by International Speedway Corp. and Speedway Motorsports Inc., says the company needs to adjust its strategies for these economic times.

As a result, the company has lowered all standard T-shirt prices from $25 to $20, and he said hats have dropped $3 to $5.

“For 10 years, we wouldn’t change the price,” Hawk said about the merchandise business. “You will see a Dale [Earnhardt] Jr. T-shirt for the first time ever is $20 at trackside. That’s something unheard of before.

“We approached the teams and said, ‘Look, this is the economic environment. We’d like to cut back when we get to Daytona.’ Not one single team did not [do that]. They all went along.”

While the T-shirts are less expensive, there also could be a more limited selection to keep inventory at minimum.

“Less is more because when the demand becomes greater than the supply, this person will consume those goods quickly and will actually pay the same price or higher price,” Hawk said. “If you sell out, that’s actually a good thing.

“The mentally we’ve got to switch to is that it’s not a bad thing to hang a sign up, ‘This T-shirt is sold out. This diecast is sold out. This hat is sold out. And, oh by the way, there’s a new one coming.’ “

Hawk used the company’s limited number of Hendrick Motorsports 25th anniversary diecasts as an example of the new strategy. There will be 1,004 diecasts of one car and 3,488 of another.

“[The company] started making way too much stuff,” Hawk said. “It was a sign of everybody wanting to generate more cash. … Especially in these economic times, you don’t want to give the fan that many choices, and then the average person can only buy one – [maybe] one for himself, one for his wife, one for his kids.

“We’re trying to just be smarter. … You used to generate so much money in the souvenir business that if you had a few extra T-shirts and hats and diecasts, you didn’t care because cash was king.”

Hawk, who handled Dale Earnhardt Sr.’s business affairs and helped grow the NASCAR merchandise market, said that at times, even too many Dale Earnhardt Jr. items have been made.

“If you want to buy a Dale Jr. T-shirt, do you need to have 28 choices, or do you need eight?” Hawk said. “Eight is a good number; 28 is too many. … [T]he souvenir trailers are going to look as full on the display area on the back of the souvenir trailer, but there’s not as many of each T-shirt in stock here or in Charlotte, and there’s less amount.”

Hawk is the third CEO of Motorsports Authentics, the 50-50 joint venture of track-operating rivals International Speedway Corp. and Speedway Motorsports Inc. that began operations in 2005 when it bought out Action Performance and Jack Roush’s Team Caliber.

Hawk is the vice president of business affairs for SMI and hopes to have a replacement for himself at Motorsports Authentics soon. The company lost nearly $43 million in 2007 (not including a write-off of $69.5 million) and turned a profit of $3.2 million in 2008. Projections for 2009 are to break even.

So far this year, Tony Stewart’s sales have gone very well with his new team, Hawk said. He said Stewart’s replacement at Joe Gibbs Racing, 18-year-old Joey Logano, will need to perform to boost his sales.

“He should sell and the hype should come, but … the fans are going to say, ‘Show me,’ ” Hawk said of Logano. “He’s going to have to qualify well somewhere. He’s going to have to race real well. Obviously, the sooner he wins, the quicker he sells.

“Logano’s souvenir, license, merchandise, endorsements is kind of in the palm of his hand.”

Hawk said the number of merchandise haulers at Daytona has dropped from 29 to 23 for the company. He said the total number of merchandise haulers from all souvenir companies is about 50, compared with 75 during the heyday of the economy.

As far as suggestions that Motorsports Authentics should split into two companies, one that handles diecast and the other that handles apparel, Hawk said that he wants to follow JR Motorsports’ model of only working with select companies.

“The business model has got to start to change to the economic environment and the challenges around us, and also we really need to partner with ‘best-in-class’ partners,” Hawk said. “Does that mean one company may do the diecasts, one company has the apparel rights, one has hard goods?

“I think you’re starting to look at a business model like that down the road. I don’t want to be prophetic, but I tell you it’s a wise question. At the end of the day, the old [theory] … was to be all things to all people. Is that really the best thing? Sometimes it’s not good to stock everything. Then you don’t get in the [bad] inventory position. But the other thing is you become better at what you do.”

There are several apparel companies that could become the select company, including VF (the parent company of Wrangler, The North Face, Vans and other brands), Nike, Starter, and Under Armour, Hawk said.

“There have been a lot of conversations,” Hawk said. “We need to take a look at that. … ISC and SMI are more open to a new business model, and some of the teams are open to that.”

One reason Motorsports Authentics needs to have a good year is that it must renew a contract with Hendrick Motorsports at the end of the season.

“We’ve had some great input meetings with them – [Rick Hendrick’s] teams are really helping us a lot at looking at this new model,” Hawk said. “I think we’ll be OK. I don’t want to be prophetic. We’ve just got to perform. If you sell and you perform and you execute, you usually can get a renewal.”