BEHIND THE SCENES OF THE UPPER DECK/NHL/NHLPA LICENSE EXTENSION
Stroll the sun-drenched shores of Hawaii and you’re bound to see someone dancing in the sand.
It’s not every day however that hockey cards are the reason for busting a move.
“I was on the beach jumping all around,” Chris Carlin admitted. “My wife was looking at me like I was crazy.”
Carlin, who serves as Upper Deck’s Sports Marketing Manager, was with his family on a long-awaited vacation to the Aloha State when he got word that the company had struck a deal extending its current exclusive trading card license with both the NHL and the NHL Players’ Association.
“I knew there was a lot of movement happening with regard to the negotiations,” he said. “Still, I was very happy when it was done.”
Extending a license as an existing partner might not always bring about that kind of reaction, but these are unusual times. And while the deals came together fairly quickly, Carlin’s happy dance illustrates that there was a very real chance that Upper Deck might have been le out in the cold.
Just ask the folks at Topps and Panini how that feels. ose two companies were unceremoniously kicked to the curb by their major league partners years ahead of the expiration of their current licenses.
Call it the Fanatics Factor. With the online behemoth working behind the scenes to secure licenses by offering neverbefore-seen terms to leagues and players’ associations, UD had to come to grips with a new world order.
“Current market conditions required Upper Deck to look at extending earlier than normal,” Carlin said. “at’s not just because of Fanatics but because of Topps, which had just lost licenses, and Panini, which lost licenses. ey’re companies that have produced hockey cards previously and would definitely
be looking to find a replacement to licenses (they lost to Fanatics)”
e entire hobby was turned upside down back on August 19 when e Wall Street Journal broke the shocking news that Fanatics, the unchallenged giant in online sports merchandising, had brokered an out-of-le -field agreement to become the exclusive trading card licensee of Major League Baseball and the Major League Baseball Players Association. e agreement ended a relationship of 70 years between Topps and baseball.
It was only a matter of days before the next bomb dropped. e Athletic reported on Aug. 23 that Fanatics had sealed deals with both the NBA and the NBAPA to become that sport’s exclusive licensee in 2026. Panini has held an NBA exclusive since taking over from both Topps and Upper Deck in 2009.
At about the same time as the
NBA news broke, ESPN reported that Fanatics and the NFLPA also had an agreement on an exclusive license that would begin in 2026.
While the thought that Fanatics – a company well-versed in retailing fan gear, including trading cards – would become a manufacturer caught many industry observers by surprise, the real shocker was the scale of their commitment.
e key to securing deals in those three sports was term – believed to be 20 years – and big, big dollars. According to a memo obtained by ESPN, Fanatics’ deal with MLB and the MLBPA is more than 10 times larger than any previous agreement. e memo also states that the deal, when combined with other recent deals, is expected to generate roughly $2 billion by 2045.
Per the MLBPA’s annual report, Topps paid the union $20.4 million in 2020 licensing fees, the largest sum from any MLBPA licensee.
A company throwing around that kind of money had to be viewed as a clear and present danger to Upper Deck.
No one involved in the process was willing to state the level of interest Fanatics had in obtaining exclusives from the NHL and NHLPA, or if they were interested at all. But well-placed industry sources suggest that feelers were extended before hockey’s licensors decided that they valued something other than just deeper coffers.
ey wanted a partner they could trust.
“Upper Deck and hockey have been married for a long, long time,” Carlin said.
“As the NHLPA’s longest tenured licensee, we’ve been able to build a very special relationship. We’ve built up a certain amount of trust. I know we’ll only strengthen that relationship over the term of these deals.”
at theme was apparent in the PA’s post-agreement statement.
“roughout our relationship, Upper Deck has demonstrated its strong commitment to NHL players and their fans. ey have continued to deliver exceptional products over the last 19 months despite the difficulties brought about by the pandemic,” said Don Fehr, NHLPA Executive Director. “We look forward to continuing to build on our partnership and offer the highest quality traditional cards, as well as innovative digital collecting opportunities.”
Neither the PA nor the NHL responded to specific inquires about the agreement in time for publication.
One thing is clear, though. This deal was structured along the lines of previous agreements, and not the gargantuan Fanatics commitments.
Carlin couldn’t speak to specifics of the deal, beyond calling it an “exclusive, multi-year extension” to the existing agreements that were signed in 2019. Although no term was revealed as part of those negotiations, the deal was believed to run through 2024.
An industry source outside of the three parties told Beckett Hockey that the length of this new extension was “consistent with previous deals.” That would suggest something in the range of five years, rather than the 20-year terms signed by other leagues with Fanatics. That would seem to ensure stability in the hockey hobby through 2029.
As a privately held company, Upper Deck has no obligation to report what it is paying the licensors. It’s worth noting though that NHL commissioner Gary Bettman was quoted last year as telling the league’s Board of Governors that he could “triple the price” paid by Upper Deck in the existing deal. The PA also recognized an opportunity to add more to the coffers. Although no details were forthcoming, Carlin acknowledged the obvious.
“It’s safe to assume they’re not charging us less (for the rights),” he said.
The Fanatics deals reportedly afforded ownership stakes in the company to the licensors. It doesn’t appear that was on the table for the NHL and NHLPA.
“There are definitely new elements (to the agreement),” Carlin said. “But I can’t speak to exactly what those are.”
Aside from trust built up over three decades, what motivated the NHL and NHLPA to re-up with UD? Carlin offered the key selling points.
“What Upper Deck brings to the table is significant year-over-year growth in the physical space as well as significant growth in our e-Pack platform,” he said. “Creating a digital space and providing physical assets (through e-Pack) is something that’s proprietary to Upper Deck, exclusive to Upper Deck. We have customers literally all around the world opening up packs of Upper Deck hockey 24 hours a day. And there’s still room for growth. E-Pack was something that only Upper Deck could provide and it’s a significant part of our sales plan. There are so many people who don’t have a hobby shop nearby, who don’t have a Walmart nearby, so being able to extend our reach all over the world is something that only Upper Deck can really provide.”
Upper Deck’s experience in the digital space also held appeal to the licensors as they looked to expand into the fully authorized NFT space. Non-fungible tokens are unique digital collectibles whose ownership can be traced
using blockchain. They’ve seen massive growth in the music and art worlds, but the hockey world has seen only a smattering of player or team-licensed offerings.
That stands to change as a newly negotiated part of the current agreement.
“Through e-Pack we have been creating digital assets that are married to physical assets,” Carlin said. “Doing digital assets without a physical component is actually a lot easier. There are complexities with e-Pack that are much more difficult than an NFT. That said, it is important that our Evolution NFT offering is different than what’s out there, is compelling, is easy to navigate and safe for consumers to use. We’re focused on making sure our platform has a great launch, engages fans around the world, and is a lot of fun as well. There’s a lot of testing we’ve been doing, lots of tweaks we’ve made to provide customers with the best experience. We can’t wait for that to hit in early 2022.”
It’s easy to understand why there is excitement around this segment. “Look at how younger people are collecting,” Carlin said. “It’s different than hobby veterans. Younger collectors are more intrigued by digital assets, things they can show on their phone.
It’s a change in paradigm for collectors who are used to pursuing and sharing physical items. But these digital assets are going to be something that are going to be incredibly desirable in the future.”
Attracting a new generation of collectors is not the only appeal of NFTs. Using blockchain, the manufacturer and the licensors can secure a percentage of all future sales. That’s something that has eluded these entities when trading cards exchange hands on the secondary market. There’s no telling how much revenue that could generate.
Carlin also confirmed that the market for UD’s Evolution NFTs won’t be limited to an Upper Deck platform.
“We’ll share more information at launch, but it’s very important that these items have tradability and exchangeablity off-site,” he said.
What remains to be seen is how UD will interact with the new Fanatics trading card arm when the two companies are competing for shelf space in hobby shops.
“As of right now, Upper Deck and Fanatics have enjoyed a good relationship, with Upper Deck creating exclusive (packaging) and products specifically for Fanatics,” Carlin said. “I anticipate that relationship may change in the future, but it could go a variety of different ways. I think it’s too early to tell what the future may hold there.”
At least one thing that’s clear: Upper Deck and hockey will be connected for years to come.