"A lot of people think, Well, I've got the license for the Olympics, I've got it made," observes Peterson "No Listen, brother, that's only the beginning. . . . We found out that our regular distribution system didn't work, we had to find new ways of selling and merchandising product that we never knew existed. . . .The Olympics has really opened our eyes."
Knapp Communications Corp. Unlike Ooh La La and other licensees, Knapp Communications Corp., the publisher of Bon Appetit, GEO, Architectural Digest, and Home magazines, was interested in image rather than profits when it went after the Olympics. "It wasn't just a business decision," says Raymond E. Hebert, president of Wilshire Markcting Corp., the Knapp division, based in Los Angeles, that will produce fine-art posters and calendars for the games. "We position ourselves as one of the premier, affluent publishing companies in the U.S., and we felt quite strongly that we should be attached to this historic event."
Nevertheless, Hebert admits, a lot of "business" went into making the deal. He spoke with former licensees, weighed the financial risks and opportunities, and prepared a formal proposal. "It was very elaborate," says Hebert, "flip-chart presentations, samples, financial pro formas." After nearly two years of negotiations, Knapp was finally selected over four other companies.
Since that time, the LAOOC and Knapp have signed 15 major American artists--among them, John Baldassari, Richard Diebenkorn, David Hockney, Roy Lichtenstein, and Robert Rauschenberg -- to execute the posters. As with every other licensed product, each poster had to be approved by the LAOOC. "They have final approval of the images," Hebert explains, "of anything, in fact, that carries the Olympic symbol." Advertising, packages, lettering on the side of a company's truck -- if the Olympics are mentioned, the committee rules on it, and, for some licensees, it has turned thumbs down.
The annoyance factor, Hebert notes, is more than offset by the benefits: quality products and fierce protection of the Olympic name. "There have been problems in the past with competing, unlicensed products," he says, "but I can tell you right now, I know the attitude of this committee -- they'd go right after them." Even the phrase "Olympic Games" is protected.
Knapp will produce a signed edition of 750 posters, which will sell for $250 each as well as unsigned $30 prints. "If one of the images really hits we might sell 20,000 of them," he notes, "and if I don't have every signed poster sold by this time next year, I'll be very disappointed." The prime customers for signed posters will be other licensees and sponsors. Hebert has been negotiating with such companies as ABC television network, GM, and Levi Strauss that have expressed interest in using the posters for promotional purposes.
The company will also put out wall and Olympic items. "We have a very sophisti -- cated marketing plan," Hebert says. "We're going to sell posters by direct mail, as well as through the magazines... and through a retail network -- both national and international -- of museums, galleries, and fine-art stores.
"I can tell you right now," he continues, "that we're going to commit millions of dollars to marketing," a significant investment for Wilshire. "We have a staff that's totally dedicated to this one project."
Good public relations, rather than the profit motive, may motivate Knapp, but the bottom line isn't being overlookedPapel Inc. The bookshelf sitting behind Joe Walsmith, president of Papel Inc., in his North Hollywood office is vibrant with Olympic giftware: The red, white, and blue stars of the logo decorate ashtrays and plates; Sam the Eagle carries the Olympic torch on mugs and dinner bells. Papel, a small company (125 employees, less than $20 million in sales) founded by Phil Papel 26 years ago, has had its license for two years, and has already been transformed.
Stan Papel, son of the founder and currently chairman of the board, "saw it as an opportunity to leverage the company in terms of its image and position in the giftware community," Walsmith explains. "He viewed it clearly as a commercial opportunity. " Although the games are still almost two years away, the investment has already paid off handsomely. An Olympic virgin, like most of the other licensees, Papel had intended to retail its line at hotels, airports, theme parks, and gift shops, as well as at the games themselves. (Its items are already moving well at major Southern California tourist attractions) What it hadn't counted on was the lush opportunity presented by Olympic sponsors
"That opportunity is significantly larger than the retail opportunity," observes Walsmith. "We'll make more profit dollars off of sponsor-promotion activities than we will off retail sales." Papel is already producing a series of collector's beer steins for Anheuser-Busch, manufacturing "official" coffee cups for AMF, CocaCola, Arrowhead Puritas Waters, and Converse, and pursuing programs with all the sponsors, such as Levi Strauss and Buick. "If we were to work out something with McDonald's," muses Walsmith, "say, a Sam the Eagle figurine, I mean, you're talking millions of units."
What sort of financial impact has the license had? "Well," says Walsmith, "using '82 profits as a basis, if we were to do nothing else but Olympic merchandise in 1984, our'profits would be... worst case: 2x, best case: 4x." And Papel, Walsmith makes clear, is not about to sit back and do nothing else; he knows that, as of August 12, 1984, the Olympics will be over.
"We look at the Olympics as an opportunity to increase our capital base and leverage our future," Walsmith explains"Those profit dollars are going to be reinvested in things like an East Coast distribution center and used to strengthen our sales and distribution center and to introduce three new marketing programs in January." He notes that Papel has been able to hire employees it couldn't have afforded before. "We have a new director of marketing, and we just shook hands with a new controller today -- both have great credentials.
"I've been meeting with banks all this week," he adds, "and I can assure you that they're very interested in those profit dollars in terms of the amount of credit they give us today. . . ."
Like many of the licensees that obtain their product from overseas or from subcontractors, Papel will have no problem dealing with the surge in demand, its giftware comes from Japan but is decorated in North Hollywood. "Slapping on decals is relatively simple," says executive vice-president Dick Saklad, "so scheduling production is fairly straightforward." Even so, Papel intends to take no chances. The giftware licensee for the Montreal Olympics ran out of product, Saklad notes, even before the games started. "That won't happen with us," he vows. "We'll crank it out 24 hours a day, seven days a week if we have to, to feed the pipeline. We've got contingency plans -- we can even bring in trailers and work out of them."
For a small, closely held company such as Papel, the Olympics can represent a major stepping-stone. "I don't think there's any question that the Olympics are a unique phenomenon in the life of a company like Papel or Ooh La La," says Walsmith. "It puts us on the map in no uncertain terms."
