Wicked Good

It started out as a way to save some money. The Araca Group, a theatrical production company in New York, was co-producing the blockbuster musical “Wicked” and in charge of all the merchandising. The demand for T-shirts and other memorabilia was incredibly high, and the company was spending too much money on production. So it cut out the middle man by purchasing Simi Valley screen printing company House of Ink, immediately rebranding it as Araca Ink LLC and moving the printing in-house. The screen printing business exploded since that 2006 deal, as the group added more clients, prompting Araca Ink in June to sign a lease to move into a 65,000 square-foot industrial building in San Fernando. It has more than doubled the space of its two buildings in Simi Valley. “It’s all about making things more efficient,” said James Pellechi Jr., president of Araca Ink. “Our initial goal was controlling costs, but this just keeps growing.” The company still has exclusive merchandising rights to the “Wicked” brand. The show tours across the globe, drawing tens of thousands of spectators, wallets in tow. There are about 2,500 shows a year, and Pellechi said Araca can move about 300,000 T-shirts at them, in addition to other souvenirs such as hats, key chains and commemorative snow globes. And like merchandise sold at any live event, prices are jacked up. A “Wicked” T-shirt can set you back $45 and a coffee mug almost $20. Neil Stern, a senior partner at Chicago-based retail consulting firm McMillanDoolittle LLP, said it’s easy for Araca to have success given its association with a monster Broadway hit. But he noted that most licensed merchandise has a limited product lifecycle. “The lasting part of the business model is to get in, and then out of, properties at the right time,” he said. “You want to ride a wave and then exit.” Beginnings Araca was founded in 1997 by brothers Matthew Rego and Michael Rego, and their friend, Hank Unger. They started in a windowless office in Times Square. The goal was simple: The three wanted to produce the work of up-and-coming playwrights off Broadway. Like all businesses, ambition grew, leading to the company’s inaugural Broadway production in 2001, critically acclaimed “Urinetown: The Musical,” which won a bevy of awards, including three Tony Awards. The firm also provided management and marketing to a series of off-Broadway productions, including “The Death of Frank,” “The Vagina Monologues” and “The Laramie Project.” In 2003, the group’s cache vaulted as it co-produced “Wicked” with Universal Pictures, which is owned by Comcast Corp. of Philadelphia. The musical is based on a book by Gregory Maguire, which is a spin-off from “The Wizard of Oz,” with the classic story told from the point of view of the witches. “We’ll do about $50 million worldwide this year on the merchandise front,” said Peter Pergola, Araca’s executive vice president of client services in New York. “One of the major future drivers for our business will come from here.” All of the items, from the T-shirts to key chains, are acquired wholesale, while Araca Ink does all the printing in-house. The San Fernando facility, at 459 Park Ave. in an industrial park, has allowed Araca Ink to increase its output significantly. Pellechi said the company spent more than $150,000 on renovations and purchasing additional screen printers and drying equipment. “We can do 50,000 impressions a week now, easy,” he said. The company measures output by individual impressions, which vary based on the shirt design. Many shirts have more than one impression. Pellechi said Araca Ink employs about 50 people on the screen printing machines in two daily shifts. In addition, about 20 people work in administration. Expanding product line Lauren Whitehead, vice president of domestic licensing at Van Nuys toy manufacturer MGA Entertainment Inc., said though the margins are strong, the market for show-related apparel is limited, given the niche audiences that follow musicals and comic book characters. “In the specialty market, there will always be a place for this,” she said. “But in the mass market, it’s hit or miss. If you can get these things into Wal-mart or Target in numbers, you’ve pretty much hit a home run.” Pellechi said Araca Ink does some business with big-box retailers, including Wal-Mart Stores Inc., but mostly sells at live events and online. He acknowledges that while “Wicked” has been wildly successful, theatrical productions, with few exceptions, have a shelf life. Because of that, Araca Ink is focusing on expanding in the music business and looking to add other clients in the entertainment industry. In fact, in the last few years the company has struck licensing deals with toymaker Hasbro Inc. of Pawtucket, R.I. and popular music groups OneRepublic and Black Label Society. Pellechi said one of the biggest opportunities for the screen printing business is the recently released Her Universe product line, which is a joint venture with Ashley Eckstein, actress and voice of Ahsoka Tano in “Star Wars: The Clone Wars.” The line features sci-fi apparel for female fans. And the line has grown by securing licensing rights from Walt Disney Co. to produce a line of “Star Wars” apparel for women. Think Darth Vader dresses. “It’s really geek chic,” Pellechi said. “There is a big demand for this.” Her Universe also includes outfits from the popular sci-fi shows “Star Trek” and “Doctor Who.” Pellechi said growing other revenue generators such as Her Universe will help the company expand in the future. “We have to stay diversified,” he said. “‘Wicked’ is great, but if that show stops, we will be fine.”