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The mighty marketing machine that is the National Basketball Association is grinding to a halt because of an all-too-familiar monkey wrench: a labor dispute with its players.

Worse, the threat of a prolonged imbroglio between NBA owners and players is jeopardizing the already shaky health of the $11 billion sports licensing industry, just as it was beginning to appear that all four leagues-Major League Baseball, the National Hockey League, the National Football League and the NBA-were regaining the synergy that's required for the industry to thrive.

"The industry flourishes when all of us are hitting on all cylinders, so we are of the belief that all leagues should be playing and be as healthy and successful as possible," said Jim Connelly, VP-worldwide licensing for NFL Properties.

With NBA team owners locking out players and an elite cadre of players led by Michael Jordan trying to decertify the NBA Players Association, Advertising Age has learned that the NBA has canceled marketing meetings with licensees and sponsors scheduled for early August.

Moreover, many licensees say retailers are preparing for the worst by ordering less NBA merchandise than usual, and those retailers that have yet to place orders, like the influential national chain Pro Image, say they are taking a wait-and-see posture.

In addition, sources say a major licensing deal with Reebok International is on hold pending the resolution of the labor squabble. NBA and Reebok spokesmen wouldn't comment, but both said there are ongoing talks. Reebok, which beat Nike to an NFL apparel license last year, was on track to best it again with the NBA, sources say.

Nike continues to talk with both leagues about similar deals. Both marketers are hungry to enter the pro sports licensing game to beef up their apparel business both in the U.S. and abroad.

This news comes in the wake of one of the most successful years in NBA history, with national TV ratings and licensed merchandise sales reaching record highs.

"I'm very concerned," said Tom Shine, who sits on the board of directors of the Indiana Pacers and is president-CEO of Logo 7, a leading sports licensee based in Indianapolis. Logo has seen orders for its NBA merchandise drop 25% from this time a year ago. "The track record has been set by baseball. The map they've drawn has shown retailers the way the game has to be played."

Baseball has also evidenced the damage a work stoppage can inflict. According to Sportstyle Magazine, sales of MLB-licensed merchandise in 1994 dropped to $2.1 billion, down from $2.9 billion 1993. The NFL was up in '94 to $3.15 billion from $3 billion in '93, while the NBA shot up to $2.8 billion from $2.2 billion in '93.

The NBA's '94-'95 numbers aren't in yet, but analysts say the NBA enjoyed a strong spring, propelled by an integrated marketing campaign created by Berlin Cameron Doyle, (now Fallon McElligott Berlin), New York, that was unprecedented among pro sports leagues.

But with the NBA in flux, MLB in shambles and the NHL still emerging, the NFL will be looked upon by the industry as its top dog, to prove that sports licensing has a future. It's a challenge the NFL is willing to take on.

"It will be incumbent on the NFL this coming season to build its business at retail to prove to a growing number of skeptics that this industry is not dead," said Mr. Connelly.

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