At the height of its popularity, the Starter Jacket was a global icon that transcended athletics and came to represent a decade. Poised to become a real challenger for sports licensing supremacy, it all crumpled in a satin massacre. What went wrong?

Of all the various pieces of ephemera from the late ’80s and into the mid ’90s, the Starter Jacket remains one of the most enduring sartorial pieces for both men and women alike.  Capitalizing on much more than just a person’s regional leanings as it related to sports allegiances, the fad became intertwined with burgeoning hip-hop culture and transcended wins and losses on the field. Poised to become a $350 million dollar acquisition by Nike (based on their evaluation), the Swoosh would later purchase the fledgling brand for pennies on the dollar ($43 million USD in 2004). While nostalgia has brought the jacket back into mainstream consciousness and sports apparel companies like Nike continue to thrive as evidenced by their $25.3 billion USD in 2013, it’s hard to imagine what could have possibly gone wrong when seemingly every man, woman and child between the ages of 8 and 20 had an extra “s” on them as if plural statements.

To understand the collapse, is to first understand where they achieved their competitive advantage. In 1976, Starter entered into non-exclusive licensing agreements with a number of professional sports league, paying royalties of 8-10% for the right to manufacture and market copies of professional athletic apparel. According to Brian Jennings, Group Vice President of Consumer Products Marketing for the NHL in 2001, “it would only be a slight overstatement that [David] Beckerman (Starter Founder) created the licensed sports apparel industry.” In subsequent years, they forged partnerships with the MLB, NBA, NFL and NHL as well as 150 universities – making it one of the first companies to have the rights to collegiate programs and their stars who would one day transition to the pros. What’s key to that ability is that it widened the age market of the endorser and allowed Starter to penetrate markets that lacked a pro team and viewed college sports as the athletic gospel. By 1989, sales were $58.9 million USD. When the ’90s rolled around, they had more than doubled to $124.6 million USD. The company was thriving but a perfect storm of labor unrest threatened to derail everything.

In 1995, team-licensed sportswear was a $13.8 billion USD business due in large part to the prevalence of cable television and ESPN’s role in producing upwards of 7,500 hours of sports programming. When Beckerman first shelled out $5,000 USD and agreed to a 5.5% royalty fee with the various leagues, he wasn’t necessarily a big fish yet, but he was the only one swimming in the pond. By the mid ’90s, there were 400 licensees selling over 4,000 products. Since Starter had refused Nike’s offer, they weren’t necessarily flush with cash and were on par with other brands like Salem Sportswear, Apex and Nutmeg Industries who would be the first to go belly up. At the time, Starter’s licensing fees between 1995-1997 were 29.3 million, 33.8 million and 30.5 million USD when just five years earlier it had been 11.1 million. Although Starter had made 405.9 million USD in 1996, to put that in context with the “big boys,” Nike had increased its net sales to 9.2 billion between 1995-1998. With rising licensing fees, Starter relied on their sales that stemmed from professional sport connotations.

The MLB and NHL’s Role

When the MLB decided to strike during the 1994-1995 season, Starter had just reported its first loss in company history and saw its stock drop from $21.50 USD to $6.62 a share. As The New York Times noted at the time, “Without the games, there is no game. And no business. The franchises the owners are trying to protect by imposing a salary cap are worthless without the players. And the players who resent the salary cap won’t have a salary cap to worry about without the franchises.” Equally so, without the copacetic dealings between management and players, those that had spent multi-millions of dollars to use the players as billboards and cash in on the ability to offer “authentic, game-worn products” was lost. Ian Gormar, Vice President of Marketing at Starter said, “Obviously, the baseball strike has hurt us. There is a lot of business lost.” When pressed with how much he replied, “Significant. That’s all I can say. [Retail] buyers are shifting from Major League Baseball to NBA, NHL and NFL.”

The NHL you say?

Before 1994’s showdown between owners and players, the NHL had gone through a 10-day labor dispute in 1992 – so while it was still fresh in fans’ memories, many assumed newly installed commissioner, Gary Bettman, would see to a swift resolution. Instead, what fans and those invested in the game got was a 103-day lockout and a 48-game regular season.

This is a moment when Starter could have zigged when they continued to zag. While everyone saw the value in licensing team apparel, one could argue that the Starter insignia and brand recognition was still intact. Where as a company like Under Armour today markets itself as “performance apparel,” Starter could have realized that continuous labor unrest, as well as an enormous amount of competition, paved the way for other ways to be involved in sportswear. In a 1996 interview, Beckerman stated “the successful ones recognize their limitations.”

The NBA’s Role

The NBA was entering their second lockout in as many seasons, although in 1996 it lasted only a few hours as the player’s union and league wrestled over $50 million USD in profit sharing from the television revenue. But in 1998-1999, the fight over putting a cap on players’ salaries lasted 204 days and cost the league 464 regular-season games – ultimately shortening each team’s schedule to 50 games. Not only had the league suffered showcasing their product, it was the first season to be played without Michael Jordan in a Bulls uniform (retired, but ultimately would return with the Washington Wizards).

Mike Nichols, the editor of the Phoenix-based Team Licensing Business Newsletter – a trade publication – said the lockout completely wiped out two of the league’s biggest retail times of the year: back-to-school and Christmas. In speaking with MarketWatch in 1998 he said, “Basically, NBA sales are nonexistent. Even if they started the season tomorrow, there would not be a huge rebound.” At that time, league apparel accounted for $1.5 billion USD in revenue. Neil Hernberg, sports marketing manager of Pro Player – the apparel maker – told The New York Times that he predicted a 75% percent loss for the company if they NBA play didn’t coincide with the Christmas season. At the same time, Steve Raab, vice president of marketing for Starter, said, “The market is soft. Retailers are reducing and canceling orders.”

Following yet another strike and additional competition from others like adidas, PUMA and FILA, Starter attempted to strike deals with the USTA and MLS, but neither proved to be as lucrative. By 1997, the company reported a $36.9 million USD loss. By April of 1999, they were forced into bankruptcy. The combination of needing to be a company like Nike or Reebok to pay the rising licensing fees combined with a vital period for earning between 1994-1997 proved to be too much. Starter had created a popular brand that relied too heavily on mitigating factors.

Today

“With a history dating back to the ’70s, the convergence of sports, fashion and entertainment was created and defined by Starter, which paved the way for many brands to follow suit,” says Carl Banks, G-III Sports President/Founder and former NFL pro, who brought the satin jacket back to the public in 2013. Seemingly capitalizing off what original founder David Beckerman achieved as well as the nostalgia that plays heavily with today’s generation, it seems that history is repeating itself and with players’ unions as strong as ever, labor unrest will continue to threaten the business model.

Words by Alec Banks
Features Editor

Alec Banks is a Los Angeles-based long-form writer with over a decade of experience covering fashion, music, sports, and culture.

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