Licensing disputes have been very common in sports card manufacturing over its history with significant consequences for the industry. For example, the most valuable high-profile sports card, the T206 Honus Wagner card, is so scarce exactly because of a license denial. Back in 1909, the American Tobacco Company, which packaged baseball cards with cigarettes as a premium, sent all the players that were to appear in their baseball card series $10 for the rights to use their images on the cards. Assuming that no player would turn down that money, cards went into production. However, shortly after production began, Wagner returned his $10 through an intermediary and denied permission for more cards to be produced with his image. The lore associated with the story is that Wagner did not want to be associated with selling cigarettes, but his motives were never fully clear, and he did endorse chewing tobacco and cigars.
In any case, the American Tobacco Company had to pull the card early from printing runs, and it is estimated that a very few went into circulation. Given that cards were not collected and preserved well at the time, this situation led to the around twenty T206 Honus Wagner cards that are estimated to be in existence today. Also, because Wagner is estimated to be one of the top players to have ever played baseball, it is easy to see why some T206 Honus Wagner cards have changed hands for over $1 Million.(footnote 1)
In the modern era, licensing of sport cards can be quite complicated. For example, a fully licensed baseball card will pay royalties to Major League Baseball (MLB), The Major League Baseball Players Association (MLBPA) and to the individual player on the card. Other sports follow similar licensing agreements. Players often let their league’s organized labor group like the MLBPA negotiate their individual rights with sports card companies whereby the labor group keeps some money in a general pool that supports the group or subsidizes other causes. In baseball, it has long been that the MLBPA licenses rights to the player’s image (and autographs on cards) and gets those royalties. The league, MLB, then licenses any copyrighted logos, team names or other major league registered trademarks.
The exception to this general rule is Topps' dealings with baseball players. Throughout its long history, Topps has signed individual major (and sometimes minor league) baseball players to long-term contracts of up to five years with annual one-year extensions. This situation is a legacy leftover from Topps' battle with Bowman in the 1950s for player contracts whereby both companies tried to sign players to long term contracts with these contracts sometimes being exclusive. It was such exclusive player contracts that allowed Topps to have a virtual monopoly in the 1960s and 1970s in baseball cards issued with gum. Topps would rather prefer not to license with the MLBPA because it just adds another level of royalty payments. The MLBPA, while not getting Topps to sign a license, has however been able to use the threat of the union getting players to not renew their contracts to get Topps to pay the players greater royalty levels. Therefore, the MLBPA has been able to somewhat influence Topps. (footnote 8)
This separation of licenses can lead to some cards that are licensed only by certain parties. For example, the card below, which is a 1990 Ken Griffey Jr. ‘Jumbo California Sunflower Seeds’ card has the Mariners logo air-brushed from Griffey’s hat. Because the card was only licensed by the Major League Baseball Players Association (MLBPA), it cannot show the Mariners’ logo without violating Major League Baseball’s trademark or copyright of that logo. The reason a card producer would want to go that route is because it is less expensive to produce the cards without having to pay the MLB a cut. Many cards can be found over with similar lack of lack of logos and other MLB owned symbols such as years and years of Post Cereal Cards.
A player or former player can even sell his own image rights without the representation of his or her union or league. For example, Nolan Ryan licensed his image to Pacific Trading Cards in 1991 for a complete set based on his career (see card below). Note of the scan of the back that Pacific also received a license from Major League Baseball (MLB) as seen by the MLB logo on the back of the card and that Ryan’s hat in the picture has the Angels trademarked logo. Other players like the late Ted Williams licensed their own images for cards over the years, which is why Fleer was able to produce an entire Ted Williams set in 1959 despite Topps claiming to have sole right to produce baseball cards for the MLB from 1955 to the early 1980s (I will have a bigger post on this later).
Here’s a Ted Williams card from his 1959 Fleer set:
The terms of licensing agreements are usually kept secret by the contracting parties. Since none of the involved companies or licensors (like the MLBPA) are publicly-traded companies, disclosure of terms is not something investors could pressure management to divulge. That being said, lawsuits occasionally happen that reveal the terms, which generally seem to be favorable to the licensors and players. For example, in March 2012, the National Football League Players Association (NFLPA) sued Upper Deck for non-payment of royalties (e.g., licensing fees) to both the NFLPA and over 200 NFL Players. (footnote 2) The suit reveals that Upper Deck had to pay minimum guaranteed royalties to the NFLPA plus a percentage of revenue generated by cards after the minimum royalties were met. The suit does not reveal the percentage royalties or at what level of sales they take effect. Also, various players received royalties for their autographs at different rates. Dallas QB Tony Romo autographed enough cards to be owed $180,000 by Upper Deck. Former Bronco QB Tim Tebow signed enough to be owed $84,000.(footnote 3) Late payments to the NFLPA were also assessed an interest rate of 1.5% per month. Finally, Upper Deck also had to make payments to some NFLPA charities. (footnote 2)
This situation suggests that power in the sport card licensing arrangement lies with player’s associations (and players) first and then second with the leagues involved. This makes economic sense since these parties hold the ‘scarce resources’ in the sports card economic ecosystem. The scarce resources being access to player images and league team logos, uniforms, etc. Indeed, the leagues and the players associations are in monopoly positions where the only fact that holds them back from charging more is that they need sports cards to market their sport to the end consumer.
Recent Developments in Licensing
In closing, it might be worth a peek at some recent trends in licensing. First, in 2009, MLB decided to give sole copyright permission for baseball cards to Topps. (footnote 4) I really do not understand the logic behind this decision from MLB because companies can still produce Player’s Association licensed cards, just minus the MLB logos and trademarks. I suspect that they either received great terms from Topps or that Michael Eisner, former Disney CEO now running Topps, knows how to sell his story very well. The stated reason is that the baseball card market with its many product lines, offerings per company and super-premium products was chasing away kids who were confused by the multitude of products. While this makes sense, I have not seen Topps be extremely responsive to the kids’ market since this exclusive license was granted. They seem to put much of their marketing muscle behind premium products that are really beyond kids’ collecting budgets. More to be seen down the road…
In trend two, Upper Deck seems to be basically flouting copyright law right and left, and is getting sued constantly. (footnote 5) The company seems, in my opinion, to be quite litigious over its history, and I suspect that it is in financial trouble. (footnote 6) Upper Deck’s only solid licensing agreement situation is with the NHL and NHLPA. They basically do not have licenses with major football or baseball institutions. They now produce rookie football cards of college players under license with the Collegiate Licensing Company, which represents NCAA schools. (footnote 7) This allows them to get around paying the players themselves because when Robert Griffin III appears in a Baylor uniform on a card, Mr. Griffin gets no cut. College athletes sign away the rights to their images in college in order to play. Seems like a cheap route to get images of upcoming rookie players, but nothing seems too weird for Upper Deck right now.
In closing, it might be worth a peek at some recent trends in licensing. First, in 2009, MLB decided to give sole copyright permission for baseball cards to Topps. (footnote 4) I really do not understand the logic behind this decision from MLB because companies can still produce Player’s Association licensed cards, just minus the MLB logos and trademarks. I suspect that they either received great terms from Topps or that Michael Eisner, former Disney CEO now running Topps, knows how to sell his story very well. The stated reason is that the baseball card market with its many product lines, offerings per company and super-premium products was chasing away kids who were confused by the multitude of products. While this makes sense, I have not seen Topps be extremely responsive to the kids’ market since this exclusive license was granted. They seem to put much of their marketing muscle behind premium products that are really beyond kids’ collecting budgets. More to be seen down the road…
In trend two, Upper Deck seems to be basically flouting copyright law right and left, and is getting sued constantly. (footnote 5) The company seems, in my opinion, to be quite litigious over its history, and I suspect that it is in financial trouble. (footnote 6) Upper Deck’s only solid licensing agreement situation is with the NHL and NHLPA. They basically do not have licenses with major football or baseball institutions. They now produce rookie football cards of college players under license with the Collegiate Licensing Company, which represents NCAA schools. (footnote 7) This allows them to get around paying the players themselves because when Robert Griffin III appears in a Baylor uniform on a card, Mr. Griffin gets no cut. College athletes sign away the rights to their images in college in order to play. Seems like a cheap route to get images of upcoming rookie players, but nothing seems too weird for Upper Deck right now.
1 For more on the T206 Wagner card, see http://en.wikipedia.org/wiki/T206_Honus_Wagner . The above history of the card draws extensively on that web site.
2 A copy of the full lawsuit can be found here: http://www.sportscollectorsdaily.com/wp-content/uploads/2012/03/NFLPAvsUpperDeck.pdf . It is an extremely long document, but it shows how much each player was even damaged.
5 For example, see: http://bats.blogs.nytimes.com/2010/03/03/upper-deck-settles-suit-but-will-distribute-cards/?scp=1&sq=upper%20deck%20lawsuit&st=cse
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