167 - $800M From Bankrupt Brands | Authentic Brands Group
Update: 2025-01-28
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Get JD's best content to your inbox — subscribe at jondavids.com. Today, Jon talks about how Authentic Brands Group generates $800M annually by revitalizing distressed brands like Forever 21, Juicy Couture, and even deceased celebrities' estates.
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00:00:00
This company is making $800 million a year off bankrupt brands.
00:00:04
I was fascinated.
00:00:06
So I spent two hours digging into this business.
00:00:08
Here are the basics.
00:00:10
The company is called Authentic Brands Group.
00:00:12
They own names like Forever 21 and Juicy Couture.
00:00:16
They breed a new life into new icons.
00:00:19
And they do it in a pretty creative way.
00:00:21
There's a ton to learn from this business.
00:00:23
I'm going to tell you exactly how they do it.
00:00:25
That's coming up in just a sec.
00:00:27
My name is John Davids, you can call me JD.
00:00:29
Welcome to the podcast.
00:00:31
If you're a fan of the show, you know what I'm going to ask.
00:00:33
Make sure to like, subscribe, comment, wherever you're listening.
00:00:37
Apple Spotify, YouTube, and of course, get my best stuff to your inbox at johndavids.com.
00:00:43
Now, let's get to the show.
00:00:44
You're listening to Making It With John Davids.
00:00:51
So Authentic Brands Group follows a pretty specific model.
00:01:00
Number one, it all starts with buying distressed brands.
00:01:03
Authentic always starts at the same place.
00:01:06
They spot a struggling brand with big potential from Ted Baker to AeroPostal.
00:01:12
They're not all bankrupt per se.
00:01:14
Sometimes they've just hit a wall.
00:01:16
They can't grow anymore.
00:01:17
And they need a reset.
00:01:19
The current owners want to get it off their balance sheet and find a new home.
00:01:23
Authentic comes in, scoops them up for the right price.
00:01:26
Of course, and then they get to work.
00:01:28
Number two, they license everything.
00:01:32
So this company doesn't actually make or sell stuff.
00:01:35
Manufacturing, distribution, retail, e-commerce.
00:01:39
They do none of it.
00:01:40
Instead, they team up with licensing partners to do all the work.
00:01:44
These partners do all the heavy lifting.
00:01:46
And they kick back about 5% of annual sales to authentic.
00:01:50
That's authentic's primary revenue model.
00:01:52
While getting 5% royalty on the sales made by their licensing partners.
00:01:57
This means predictable revenue, little overhead, and very juicy margins.
00:02:02
But there's still a lot of work to do.
00:02:04
Number three, find the right partners.
00:02:07
So these guys have over 50 brands to manage.
00:02:10
And with that kind of quantity, authentic needs friends who can help.
00:02:15
And they have quite a few.
00:02:16
So for example, authentic work to it, the Retail Powerhouse JD Group to distribute the Reebok brand globally.
00:02:23
Authentic join forces with mall giant Simon Properties Group to keep hundreds of JC penny stores opened after they acquired that brand.
00:02:32
Authentic teamed up with SACs to keep the Barney's New York brand in front of high-end shoppers when they acquired it.
00:02:39
So the right partners can make all the difference.
00:02:41
You have to understand, authentic, because they don't have the retail relationships.
00:02:46
They're not selling direct to consumer.
00:02:48
They really rely on these partners for all sorts of things.
00:02:51
Number four, they tap into celebrity culture.
00:02:54
Here's where it gets really interesting.
00:02:56
It's not just conventional brands.
00:02:58
Authentic oversees celebrity names like David Beckham, Muhammad Ali, Shack.
00:03:03
They make money on endorsements, brand in merchandise, NFTs, and a whole lot more.
00:03:08
Because think about it, these are brands too.
00:03:10
Marilyn Monroe has been gone for decades.
00:03:13
Elvis too.
00:03:14
But their brand still rake in millions each year.
00:03:17
Who's managing all that?
00:03:18
Who's managing those estates?
00:03:20
Who's making sure that they can monetize, that they can get Marilyn Monroe's face on a t-shirt on the rack at Walmart?
00:03:27
Who's actually making that money?
00:03:28
Authentic is.
00:03:30
When you saw the Elvis movie a couple years ago with Tom Hanks, who was actually on the other side of that saying, "Yes, you can use the name and likeness of Elvis Presley."
00:03:39
That was authentic.
00:03:40
Authentic is here to collect and manage, but you better believe they're collecting.
00:03:46
Number five, they go global.
00:03:48
Once you get things done at home, it's time to hit the road.
00:03:51
So take Arapostal, for example, after inking deals in the US, authentic found partners in India, South Korea, Middle East, and beyond.
00:04:00
They're always trying to get their brands as much reach as possible.
00:04:03
Because if you can get more reach, you can get more revenue, and you can get more relevance.
00:04:08
And that's how you make $800 million a year off bankrupt brands.
00:04:13
So I shared this story on my Instagram, my LinkedIn, YouTube, TikTok, threads, millions of you saw it, so many comments.
00:04:21
I'm going to get into some of those comments right now.
00:04:23
So on LinkedIn, a lot of people chime in from the business side, and they give me insights that I just can't find anywhere else.
00:04:29
Because oftentimes, these are insiders who are involved in some of the deals.
00:04:33
So Kristen commented and talked about Spark Group.
00:04:36
So Spark Group, from what I understand, is a joint venture or a partnership of some sort between Simon Properties Group and Authentic.
00:04:44
Now, Simon Properties Group doesn't just bring money, although they do bring a lot of money, but what they also bring is all the mall relationships, because Simon owns a lot of malls across the US.
00:04:55
So when you're thinking about retail brands, like Eropostal, Forever 21, Reebok, of course, JC Penny, they're the operational powerhouse that brings these brands back to life in the hands of customers worldwide.
00:05:10
That's what Kristen actually said.
00:05:11
And it makes a lot of sense.
00:05:12
If you think about it, if you've got a partner that brings you money, that's good, because cash can buy you a lot of things.
00:05:18
But when you have a partner that comes in and they bring you not just money, but also some kind of other asset, a value add, a strategic operational asset that you can use in some way,
00:05:29
it obviously goes a lot further.
00:05:31
And that's exactly what Authentic got when they partnered with Simon Properties and created this Spark Group.
00:05:37
They got to control the JC Penny brand, what it looks like, what it does, the licensing, the field, all that kind of stuff.
00:05:44
But at the same time, Simon is in there with the actual space in their malls.
00:05:49
So they're getting a lot out of it too.
00:05:51
They're getting to keep these stores open, foot traffic coming to the mall.
00:05:55
What would happen if a bunch of JC Penny is just one under?
00:05:58
You'd lose your anchor tenant at a whole lot of property.
00:06:00
So there's a lot in it for Authentic, but there's also a whole lot in it for Simon.
00:06:05
And that is a great partnership.
00:06:06
Someone else pointed out that there's a lure to this whole business model.
00:06:11
The idea of just owning the brands, being able to control the brand image and that others do the heavy lifting, it's very appealing and a lot of people have tried it, but a lot of people have failed.
00:06:20
And I know, I totally get that.
00:06:23
I've had clients at Influicity who run this exact same playbook and some of them have not done as well in the long run.
00:06:29
Because at the end of the day, if all you control is the brand, you don't have any control over the manufacturing, what it looks like in the end consumer, the logistics, what it looks like on the shelf at retail.
00:06:42
So of course, there's a lot of risk there because if all you have is the brand and nothing else, you lose a lot of control along the way.
00:06:49
The other thing is that you have to make sure the unity economics work out.
00:06:52
So if all you're making is 5%, or 4%, or 6%, and that's the roof, that's the cap of what you can make, doesn't leave a lot of room for margin improvement and enhancement.
00:07:04
And you got to take that 5%, and then you got to run your entire business with that.
00:07:08
Think about it, 95% of every dollar that goes to Marilyn Monroe, Elvis, Reebok, Aeropostell, 95% is going to other people.
00:07:18
So even though the brand is owned by authentic, they only get 5%.
00:07:24
So it's a very appealing business model that is so hard to actually get right.
00:07:29
And I think a lot of great management, Jamie Salter, absolutely at the head of this company, absolute gangster when it comes to doing this kind of stuff, understanding the brand,
00:07:40
understanding the right purchase price, because if you buy this right and you make sure you buy it at a price that you can actually make it work, it's no different than real estate.
00:07:48
I mean, most of the money is made not on the sale, but on the acquisition.
00:07:53
When you buy it right, you almost can't go wrong.
00:07:56
I mean, things can go wrong, of course, but if you protect your downside and you say, listen, things can go wrong by 10, 20, 30%, and I'll still make money or I'll still break even,
00:08:06
that's how you actually protect yourself in this kind of business.
00:08:09
Watch your downside.
00:08:10
The upside takes care of itself.
00:08:12
Hmm, I'm hungry.
00:08:16
You guys hungry?
00:08:17
I could go for some fried chicken right now from Jolly B.
00:08:20
And no, this is not a commercial for Jolly B.
00:08:23
This is a commercial for Influicity.
00:08:25
That's my marketing agency.
00:08:27
And Jolly B is one of our amazing clients.
00:08:30
You can see how we help drive more foot traffic to their restaurants across America at Influicity.com.
00:08:36
Check out the case study.
00:08:38
And hey, while you're there, check out all the other case studies from the amazing clients we work with.
00:08:43
Influencer marketing, podcasts, social media, content, AI, and so much more.
00:08:49
And if you want to work with us, just hit the Let's Talk button over at the top of the website.
00:08:53
That's Influicity.com and I'll see you there.
00:08:56
A lot of people in the comments were comparing this to the Amazon roll-up business model.
00:09:01
I don't know if you guys know about this, but there have been companies like Thrassio.
00:09:04
I've talked about this on the podcast before.
00:09:06
Companies that went out and bought Amazon sellers and tried to roll them up.
00:09:11
The problem with that model is that if you're just buying a random Amazon store and you figure all by 50 Amazon stores that are each doing $3 million in revenue and I'll create this powerhouse,
00:09:23
the problem is that those aren't real brands.
00:09:25
When we talk about a brand, we're talking about a Reebok, an Aeropostal, an Elvis, a Shaquille O'Neal.
00:09:32
Like those are true global brands.
00:09:35
People know them.
00:09:36
They resonate with you.
00:09:37
The Amazon shop that sells candles, you know, candlesarrust.com.
00:09:42
Like that's not an actual brand.
00:09:44
That's why I think companies like Thrassio, the Amazon roll-up model, it's kind of hard to compare to authentic because these are real brands at the end of the day.
00:09:52
So I had a bunch of people contact me who are vendors and partners of authentic, really all over the world.
00:09:58
I had people contacting me saying, "Hey, we work with authentic.
00:10:01
"Let us know if you want any info."
00:10:02
So there's a few things here that are super interesting.
00:10:05
Number one, these guys pioneered a couple of things.
00:10:08
They pioneered the model of the Legends Group.
00:10:11
That's what they call it internally.
00:10:12
Their Legends Group includes names like Marilyn Monroe, Elvis, Muhammad Ali, and they do deals with companies ranging from Walmart to Dolce and Gabana to license these brands.
00:10:23
Think about that for a second.
00:10:24
Think about the elasticity and the appeal of a brand like Elvis, right?
00:10:29
You can take Elvis, slap him on a t-shirt, and sell that t-shirt at Target for $12.99.
00:10:35
And like, that's fine.
00:10:37
No one would blink an eye at that.
00:10:38
But you can also take Elvis, put him on a Ferrari or a Rolex or a five-star hotel, use that as the brand, and sell that for an ultra premium price.
00:10:48
And again, no one would blink an eye.
00:10:50
That's totally fine.
00:10:51
That would fit the Elvis persona.
00:10:53
To have this kind of elasticity where you could be at Walmart or at the Ritz Carlton, is actually kind of strange.
00:11:01
But that's what they get with this Legends Group of theirs.
00:11:04
I would say Marilyn Monroe, Muhammad Ali, Elvis, and many others, they all kind of fit that bill.
00:11:10
So there's a lot of market versatility to some of these brands that they own.
00:11:14
The other side of the Legends Group is what they call living legends.
00:11:17
And I've literally never heard of this before.
00:11:20
I was talking to an insider at Authentic about this model.
00:11:24
And this was kind of surprising to me.
00:11:26
So think about this for a second.
00:11:27
They've done deals with people like Shakeel O'Neal and David Beckham, who are both very much alive, where they buy, let's say, 50% of their IP, of the intellectual property to the name and likeness of this person,
00:11:41
and then take a share of the revenue for their entire lives.
00:11:45
And probably after their lives too.
00:11:47
I bet you they buy into the States as well.
00:11:49
I was listening to this and I thought, how does that even work?
00:11:54
Like how would you buy a stake in a person?
00:11:57
They probably have a management company out in Hollywood.
00:12:01
They have agents and like you are going to own 50%.
00:12:05
What if there's a disagreement?
00:12:06
But they've really kind of ironed out this model.
00:12:09
I think Shakeel O'Neal was the first one where Shaq can come into the portfolio.
00:12:13
Authentic can represent and expand the brand licensing and the revenue streams of the Shaq name.
00:12:18
Shaq can then also complement other brands in the authentic portfolio.
00:12:23
Like Reebok for example, like what a perfect partnership.
00:12:26
I'm sure there's all kinds of equity sharing.
00:12:28
Maybe Shaq owns a piece of authentic.
00:12:29
Obviously authentic owns a big piece of Shaq.
00:12:32
And these businesses can kind of work in harmony.
00:12:35
Just kind of a really interesting model and it makes you think what's possible when you use creativity to do all kinds of interesting things.
00:12:42
Authentics also looking at new ways to monetize the brands they have.
00:12:46
So one example here is Nautica.
00:12:48
They're doing a residential development under the Nautica brand.
00:12:51
Like when I think of Nautica, I think of sunglasses.
00:12:54
But I guess you could take that brand and turn it into some kind of residential development.
00:12:59
They're doing that.
00:13:00
It seems to be successful.
00:13:02
They're expanding the presence of some of these brands into China and also all parts of Europe.
00:13:07
So really interesting stuff.
00:13:08
Total portfolio retail sales of this company is $32 billion.
00:13:14
And when I took my number, so people say, well, John, this is a private company.
00:13:19
They're PNL's in public.
00:13:20
How do you know that they're making $800 million a year off bankrupt brands?
00:13:25
What I'm looking at is a portion.
00:13:27
So I basically did some math.
00:13:28
They said 5% of the, not the retail sales, but the wholesale, the licensing revenue because they don't get a portion of the retail revenue that's different.
00:13:38
But if you take a portion of the licensing revenue, I would estimate that the take for authentic is about $800 million a year in revenue.
00:13:47
At Influicity, I talk so much about the power of brand.
00:13:51
And I always say, think about brand like gravity, like the weight or the mass of your brand.
00:13:58
Because a lot of marketers and business owners, they want to deal with the marketing math.
00:14:03
They want to say, how can I spend a dollar in my marketing to make $2 in marketing?
00:14:07
And what I say is, how about you try to spend a dollar to make $1,000?
00:14:12
How about you spend a dollar to make $10,000?
00:14:15
How is that possible?
00:14:16
And that's only possible if you have brand weight.
00:14:20
I think authentic demonstrates that really well.
00:14:22
An entire business just built off the intellectual property of brands by doing nothing else.
00:14:29
But the reality is, if you look at businesses all across the world, all across industries, there are lots of businesses that are effectively just brand businesses.
00:14:38
So I've talked about a few of these before.
00:14:39
Coca-Cola is a drink company that doesn't actually make drinks.
00:14:44
They don't make bottles, they don't make cans, they don't make anything that you actually drink out of a can.
00:14:49
They make the syrup.
00:14:51
They sell that syrup to others who turn it into the actual Coca-Cola drink and Coke realized that being the business of syrup was better than being in the business of soda.
00:15:00
So they got licensing and bottling partners all around the world.
00:15:03
I think they have like 200 or 300 now.
00:15:06
One point they had over 400.
00:15:08
They've slimmed those down.
00:15:09
They've consolidated.
00:15:10
But Coke does $45 billion a year in revenue in the most recent year, just owning the brand of Coca-Cola.
00:15:18
Visa's another company.
00:15:19
Visa is a company that doesn't do credit or cards even though when you think about Visa, you think about credit cards.
00:15:24
Ah, they don't do any of it.
00:15:26
It's a payment network for banks so that banks can send money to each other.
00:15:31
But they all need one thing to keep the cash flowing and that's trust.
00:15:35
And when you want trust, you got to build a brand.
00:15:38
So they slap that visa logo on a three by two piece of plastic and we all trust it and we all swipe our Visa card 600 million times a day.
00:15:47
Another example of this is Nike.
00:15:48
Nike is a clothing maker, but they don't actually produce the clothing.
00:15:52
They don't manufacture clothing.
00:15:54
They don't manufacture shoes.
00:15:55
They don't manufacture golf equipment.
00:15:57
They don't make any of it.
00:15:58
They own the brand and they outsource all of the creation of the actual clothing.
00:16:04
And now, of course, they do design.
00:16:05
They do things internally to make sure the brand has the authenticity and the actual, you know, the rigor of Nike, they're not going to put their logo on just anything,
00:16:15
but they primarily own that brand and control that brand globally.
00:16:19
So there's lots of examples in business of companies essentially investing and owning and monetizing their brand.
00:16:26
Authentic just takes it to the absolute extreme.
00:16:29
That's all they do.
00:16:30
And I think the lesson out of all this is that if you are a business owner, a business builder, anybody who's responsible for driving revenue at your company, you got to think about what you're doing to create brand mass,
00:16:42
to create brand weight, to create brand gravity.
00:16:45
In such a way that even if you turned your Google ads off, people would still talk about you.
00:16:50
You know, what are you doing on social media, on organic, on YouTube, on TikTok?
00:16:55
Are you part of the conversation?
00:16:56
Are you part of the culture?
00:16:58
Are you famous within your little niche, your little corner of the world?
00:17:02
That's important.
00:17:03
If you look at all the brands they have, I'm sure if you looked at authentic 40 or 50 brands or whatever they've got, I'm sure there are a whole bunch that would mean nothing to you, but maybe there are a couple that would mean a whole lot to you.
00:17:15
Maybe you're really into AeroPostal or you're really into Elvis or you're really into Muhammad Ali or you're really into Juicy Couture.
00:17:24
Like that's your thing, right?
00:17:25
And so if you think about it, it might be your whole thing because that brand has invested and made it your thing.
00:17:31
Even though it's not for everybody, the brand means something to you and you will go out and buy it because that brand resonates.
00:17:38
So there is power and brand, invest in it, make it your own and your business will do very well.
00:17:44
That is the business of Authentic Brands Group.
00:17:47
Let me know what you guys think.
00:17:48
You can get me at johndavids.com.
00:17:50
Of course, while you're there, get on the newsletter and I'll talk to you guys next time.
00:17:54
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