The mayor said Malibu is spending about $90,000 in upfront costs to develop an official logo, and also to pay Stone's expenses as he approaches manufacturers at events like the apparel show in Las Vegas. Stone hopes to have the first clothing line in stores by 2014, and he'll get paid on the back end.
"The first collection we are going to be doing is sort of a lifestyle fashion line," he said. "Envision Hollister meets Abercrombie meets the Gap, and then mix all those together and sell them at Urban Outfitters."
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Will manufacturers bite? Malibu as a brand is in the public domain. The Chevy Malibu and Malibu Barbie don't pay royalties and have done just fine.
Why pay a licensing fee? Stone claims officially licensed merchandise sells well when the public is aware of it, and when customers believe the purchase will help fund a good cause. He pointed to the experience his father had licensing souvenirs to support the renovation of the Statue of Liberty and Ellis Island during the 1980s. "We all thought, 'You're crazy, why would anyone buy something that's public domain?' And the Statue of Liberty, during its height, we did close to $100 million."
Not everything has been a home run. "The Brooklyn Bridge was one that probably was most difficult and probably wasn't the most successful," Stone said. Apparently selling the Brooklyn Bridge remains a challenge—at least if selling the tchotchkes.
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What isn't clear is how much money Malibu can make.
"To tell you the truth, we don't know," said Mayor La Monte, who works by day as a producer of television commercials. "We're assuming we can make a considerable sum of money." The key, he believes, is licensing the right products. "We're not going to license shot glass holders and keychains, we're licensing high end clothing and resort wear, the kind of thing that would exemplify the Malibu lifestyle."
—By CNBC's Jane Wells; Follow her on Twitter: @janewells