It’s a numbers game

Talk about a franchise player.

When Dale Earnhardt Jr. announced that he was quitting his family motorsports company, Dale Earnhardt Inc., to drive next year for Hendrick Motorsports, the tremors were felt not only on NASCAR tracks across the country but in the merchandising business too.

And nowhere as much as in the cash registers of Motorsports Authentics, the licensing company that operates most retail trailers parked trackside at NASCAR events, each emblazoned with the name and image of a top driver.

Earnhardt’s team switch put such a crimp in orders of apparel carrying his No. 8 car number and his red Budweiser sponsor livery that it almost single-handedly swung Motorsports Authentics financial results for 2007 from a projected profit to an expected loss. During a conference call with investment analysts July 10, executives at International Speedway Corp., which co-owns Authenticsattributed as much as half the shortfall -- up to $10 million -- to the slowdown in orders for Earnhardt’s goods.

The effect of Earnhardt’s decision on orders in the $2-billion NASCAR merchandise market suggests just how driven that market is by personalities and tradition.

“There’s no question he’s the biggest seller of merchandise in the sport,” says Mark Dyer, a former licensing executive at NASCAR who became chairman and chief executive of Motorsports Authentics in June. Industry estimates are that Earnhardt accounts for more than 30% of all driver merchandise sales. “When you have such an unusual situation as him announcing he’s leaving his team, his number, and his sponsor so early in the season, it has a ripple effect through the whole distribution system.”

Earnhardt is one of an elite group of NASCAR drivers who control their licensing rights, rather than funneling them through their team owners. His JR Motorsports licensing company has an exclusive deal through the end of this year with Motorsports Authentics for racing-related goods, but it also markets Earnhardt in separate deals with such sponsors as Adidas.

What’s remarkable is that Earnhardt’s popularity, like that of the Boston Red Sox and Chicago Cubs, is independent of his performance in competition. He has never won a championship -- indeed, he’s on the verge of missing this year’s Chase for the Nextel Cup, the mini-tournament for the all-around championship involving the top 12 drivers by points on NASCAR’s top Nextel Cup circuit. He is in 13th place, 158 points behind Kurt Busch.

Fan loyalty in NASCAR runs deep, and the source of Earnhardt’s following is unquestionably the fan base of his father, Dale Earnhardt Sr., who died in a crash at the 2001 Daytona 500, NASCAR’s signature race. Earnhardt won the Daytona 500 in 2004, but since that year he has won on the Nextel Cup circuit only twice.

That doesn’t faze his fans. “He’s Dale Earnhardt Jr.,” said Jason Vowels, 36, of Waveland, Ind., after buying nearly $300 worth of die-cast car models, T-shirts and a hat emblazoned with Earnhardt’s likeness at the driver’s souvenir trailer in the infield of Indianapolis Motor Speedway during July’s Allstate 500 at the Brickyard. Much of the merchandise was selling for 50% off, although none of the shoppers interviewed said that accounted for the purchases.

“I’ll be a fan wherever he goes,” said Vowel. “I’ll buy the new stuff too,” he added, referring to the new lines of merchandise that will be tied to Earnhardt’s new car, number and lead sponsor. (His No. 8 will stay with his former team, Dale Earnhardt Inc., now controlled by his stepmother. Nor will Budweiser be following him to his new team.)

Merchandise and memorabilia dealers say that Earnhardt’s trinkets and apparel have remained so popular since his announcement that they haven’t been able to keep up with demand. Some say they are mystified by the claim of Motorsports Authentics that orders have slowed.

“If any dealers are saying they’re losing sales, we’ll buy the stuff off them,” said Jeff Barnes of City of Industry-based High Banks Racing, a leading Southern California merchandise dealer. He said he had no trouble selling out his supply of Earnhardt’s die-cast cars, including an Elvis Presley theme that will adorn Earnhardt’s car at Richmond (Va.) International Speedway on Sept. 8.

Motorsports Authentics, for its part, says that the slowdown mentioned in July applies to orders from the company’s biggest retailers, including Wal-Mart and Target, especially for apparel.

“When the announcement was made, mass retailers shut off new ordering to sort through their inventory,” Dyer said in an interview. Target and Wal-Mart declined to comment on the Earnhardt issue, although Wal-Mart said that all licensed NASCAR merchandise “continues to remain popular.”

JR Motorsports, Earnhardt’s licensing company, says it has detected the same falloff in the market as Motorsports Authentics. “It feels like an after-Christmas sale right now,” says Joe Mattes, vice president of licensing. “We’re selling the same number of units, but at a discount,” especially among apparel lines.

Die-cast cars are still hot sellers, Mattes said, noting that when the Elvis-themed cars were offered on the television shopping channel QVC this month, “15,000 cars evaporated in minutes. It was a walk-off home run.”

It’s almost certain that the slowdown in sales will end soon, after Earnhardt’s new car number and lead sponsor are announced. Mattes said he expects word to come down by mid-September, which would allow limited lines of clothing and other merchandise to reach retailers in time for holiday sales. Dyer of Motorsports Authentics says the announcements will touch off a sales frenzy.

“This is the most eagerly anticipated new car debut in the modern history of the sport,” he said.

The fans already are loosening their pocketbooks. As he purchased a sleeveless T-shirt at the Brickyard trailer in July, Dave Thornton, 45, of Richmond, Ind., said he would simply add to his collection when the new clothing came out.

“I’m true to him, whatever he does,” said Thornton, who had been a fan of Dale Sr. “I’ll buy more with his new colors. Whatever it is, I’ll have one of those too.”

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Popular pick

NASCAR’s Most Popular Driver Award is awarded to the fans’ favorite NASCAR driver. It started out as a poll of only the drivers but eventually included all NASCAR Cup competitors. Today it is voted for by fans across the United States.

YEAR DRIVER

1956 Curtis Turner

1957 Fireball Roberts

1958 Glen Wood

1959 Junior Johnson

1960 Rex White

1961 Joe Weatherly

1962 Richard Petty

1963 Fred Lorenzen

1964 Richard Petty

1965 Fred Lorenzen

1966 Darel Dieringer

1967 Cale Yarborough

1968 Richard Petty

1969 Bobby Isaac

1970 Richard Petty

1971 Bobby Allison

1972 Bobby Allison

1973 Bobby Allison

1974 Richard Petty

1975 Richard Petty

1976 Richard Petty

1977 Richard Petty

1978 Richard Petty

1979 David Pearson

1980 David Pearson

1981 Bobby Allison

1982 Bobby Allison

1983 Bobby Allison

1984 Bill Elliott

1985 Bill Elliott

1986 Bill Elliott

1987 Bill Elliott

1988 Bill Elliott

1989 Darrell Waltrip

1990 Darrell Waltrip

1991 Bill Elliott

1992 Bill Elliott

1993 Bill Elliott

1994 Bill Elliott

1995 Bill Elliott

1996 Bill Elliott

1997 Bill Elliott

1998 Bill Elliott

1999 Bill Elliott

2000 Bill Elliott

2001 Dale Earnhardt Sr.

2002 Bill Elliott

2003 Dale Earnhardt Jr.

2004 Dale Earnhardt Jr.

2005 Dale Earnhardt Jr.

2006 Dale Earnhardt Jr.