Upper Deck cuts 119 workers off payroll

(This story originally ran in the May 6 issue of the San Diego Union-Tribune)

By Mike Freeman, San Diego Union-Tribune

Reeling from the loss of its license with Major League Baseball, Carlsbad, Calif. card and collectibles maker Upper Deck has slashed its staff by 119 workers, according to state records.

The company notified the state Employment Development Department of the layoffs through a Worker Adjustment and Retraining Notification Act, or WARN, filing. The job cuts become effective May 10.

This latest round of layoffs comes on top of 33 positions that were eliminated in January.

“Due to recent changes in Upper Deck’s license portfolio, the company was forced to make some tough decisions regarding its work force,” spokesman Terry Melia said. “Staff cuts were necessary to right-size the company to ensure long-term sustainability.”

Upper Deck provided workers with 60 days’ notice, so many have probably left the company. Upper Deck said jobs were eliminated across the board.

The company declined to say how many employees remain. Upper Deck is believed to have employed from 300 to 400 workers before the layoffs, based on data from the Carlsbad Chamber of Commerce and other sources.

“It’s safe to say that Upper Deck still employs more people within its trading card division than any of its competitors. And in today’s economy, that’s saying something,” Melia said.

The layoffs, coupled with lawsuit settlements and the loss of licensing agreements with major sports leagues, have industry watchers wondering what’s in store for a firm that ranks near the top of the collectibles industry.

Known for its bold card designs, marketing acumen and brash corporate culture, Upper Deck climbed to the top of sports card and memorabilia market shortly after it was founded in 1989.

But it has suffered some high-profile blows recently to its business and image.

Last summer, it lost its license with Major League Baseball to use team logos and uniforms on its cards. MLB Properties instead granted an exclusive license to Upper Deck’s rival, Topps.

Baseball cards are the bread and butter of the collectibles market, and Upper Deck had been an MLB licensee for 20 years.

In January, the company released three sets of baseball cards showing players in action — a move designed to thread a legal needle that would allow it to produce cards without a license.

MLB Properties sued for trademark infringement, saying at the time that Upper Deck owed the league $2 million in unpaid royalties. Upper Deck settled the lawsuit in March, agreeing to pay “a substantial sum of money” for releasing unlicensed cards, according to the league.

In addition, the union for Major League Baseball players sent an e-mail to player agents in April saying Upper Deck had not paid several players royalty money, according to The New York Times, which obtained a copy of the e-mail.

Finally, Upper Deck settled a bitter, yearlong lawsuit in February with Konami Digital Entertainment over Yu-Gi-Oh! cards, which are based on a hugely popular Japanese animation franchise that includes shows and games. The lawsuit contained an embarrassing admission that Upper Deck, which has touted its efforts to combat counterfeiting, knowingly produced nearly 610,000 counterfeit Yu-Gi-Oh! cards in violation of its distribution agreement with Konami.

The amount Upper Deck was required to pay Konami was not disclosed by either company.

Upper Deck also has failed to come to terms with NFL Properties to license team logos and uniforms. The company declined to comment.

Upper Deck still has a license with players unions for other sports and a license with the organization that owns the rights to NCAA logos and uniforms. The company recently produced a set of cards called Greats of the Game Basketball that depicts stars such as Larry Bird, Magic Johnson and Hakeem Olajuwon in their college gear.

The company also has an National Hockey League license and is making a set of soccer cards. Perhaps its most valuable assets are the rights to market memorabilia from Michael Jordan, Tiger Woods and LeBron James.