'Enormous Financial Commitment' Keeps UD Out of NBA

McWilliam Says NBA Financial Commitment Too Much

Wednesday February 11, 2009

In an e-mail sent to collectors who are members of Upper Deck�s Diamond Club � a VIP group of the company�s biggest spenders � Upper Deck chairman Richard McWilliam said he didn�t want to speculate on all of the factors that contributed to the NBA�s decision to choose Panini as its exclusive trading card licensee. But had Upper Deck agreed to the same financial terms for the license that Panini did, McWilliam said it would have threatened his company�s �financial solvency� for the next several years.

�As many of you are aware, the NBA trading card market has been in a state of steady decline for the last five years,� McWilliam wrote. �Significant revenue losses and eroding profit margins led to an unsustainable business model. Based on the success of our exclusive relationship with the NHL and NHL Players Association, we encouraged the NBA to consider an exclusive licensing relationship for their trading card business, and we aggressively lobbied for Upper Deck to be that exclusive partner.�

After negotiating with the league, McWilliam said his company could not reach an agreement with the NBA on the �financial value of an exclusive license.� The result was an end to the company�s 18-year run as an NBA card licensee.

�I can assure you it was extremely difficult to walk away from such an important and influential piece of our company�s history, but it would have been a far greater offense to burden the company and its employees � as well as our consumers, collectors, dealers and distributors � with the enormous financial commitment sought by the NBA,� McWilliam said. �Without a doubt, this was a commitment that would have greatly threatened the financial solvency of our company for many years to come. The obligation would have also required Upper Deck (or Topps, for that matter) to make irresponsible and damaging decisions with regards to basketball production volumes and brand releases. Again, this was a very difficult decision, but absolutely the right decision for the future of our company.�