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July 26, 2006
Taking License
by Andreas Fuchs
On June 20-22, New York City's Javits Convention Center once again brought together a record 23,000 attendees-manufacturers, brand owners, agents, promotional partners and retailers-from over 100 countries at Licensing 2006 International. Some 500 exhibitors-nearly 200 attending for the first time-represented a staggering 6,000 intellectual properties (the most in one place, anywhere) and hoped to get their share of the $175 billion in retail sales that licensed products generate globally.
According to the Annual Industry Report issued by LIMA, the International Licensing Industry Merchandisers' Association (licensing.org), "to gain an edge in the highly competitive retail marketplace," last year manufacturers paid $5.952 billion in licensing royalties in the United States alone. In addition to an overall increase of 1.8% from 2004, for the first time in the eight-year history of this study as conducted by researchers at both the Yale School of Management and the Harvard Business School, all categories showed year-on-year growth. "Licensing works," LIMA president Charles Riotto surmised during the press launch.
With $2.625 billion for a 44% share, entertainment/character licensing from TV and movies grew 2.4% and-with retail sales of $60 billion to match-continues to be the industry's dominant category despite the "struggle for box-office dollars." Riotto notes that there are films that consumers are "not paying to see in theatres" but continue to "pay to wear," as fashion maintained its leading category status with 17%. Perhaps he should have qualified that last year's royalty deals are driving this year's blockbusters, which are certainly selling tons of tickets and keep on moving truckloads of merchandise.
Despite remote-controlled Pixar Cars and Superman Returns pajamas, we may like to think of our industry as culturally fitting into the art category (+2.9% to $175 million) or-with d-cinema expenditures looming large-more likely ending up in the not-for-profit/charity group (+4.5% to $43 million). The business of food and beverage licensing is also noteworthy, especially given this issue's focus on concessions. Royalties of $1.08 billion (+0.5%) had corporate brands and trademarks like Campbell Soup, Hostess, Kellogg's, Pepsi, Pringles, Snapple, M&Ms/Mars, Jelly Belly and Kahlua looking for hungry partners. (See "Movie Munchies" in this issue.)
Calling it the "most powerful form of marketing," Riotto says licensing is mainly "about capitalizing on awareness and consumer trust. We're seeing fewer companies go for the quick hit and more long-range management plans for brands or franchises, which helps foster greater stability for the industry." With multiple installments from the likes of Harry Potter, Narnia, Spider-Man and Shrek, Hollywood has certainly set the present tone. Looking ahead, Riotto believes that new distribution channels will feed the need for more distinctive entertainment; retail sales of licensed online and interactive products, for example, generated some $5.09 billion.
Show management Advanstar Communications concurs: "With the explosion of digital technology, entertainment properties are the driving force in the battle for content. From classic characters to the latest blockbusters from movies and television, entertainment properties are providing much of the downloadable content for digital-and especially mobile-hardware."
In fact, movies were not only everywhere on the tradeshow floor-organizers considered 4 Kids Entertainment, A&E Television Networks, Discovery, Disney, MGM, New Line Cinema, DreamWorks SKG, Nickelodeon, Sesame Workshop, Sony Pictures, Universal Studios and Warner Bros. "the biggest names in entertainment"-but also very much represented among the 15 highest achievements in licensing. Disney's Cinderella received the LIMA Award as Best Character Brand License while Hot Topic was named Retailer of the Year for Napoleon Dynamite products, and Hasbro's Star Wars Light Saber Battle Game (Best Film, TV and Entertainment Licensee, Hard Goods) led the way to Star Wars: Episode III-Revenge of the Sith becoming Overall Best License of the Year. With $3 billion of worldwide retail sales, 2005 was "the biggest year ever for Star Wars merchandise." Many say the original film jumpstarted the entire licensing industry nearly 30 years ago. For 2008, a "breakthrough" computer-generated animation series for television is in the works and, closer to our readers' hearts, Indiana Jones IV with the original team. "The ultimate hero is poised to take on the world on his biggest adventure yet," the licensee information promised.
Heroes certainly loomed large at the show, with animation coming in a very close second and, given the success of the chronicles of one young wizard and three kids in Narnia, fantasy was lord of the royalty rings as well.
Fox Licensing not only favored more of Alien vs. Predator (11 million copies in the franchise sold) and big-screen versions of its TV hits "The Simpsons" (July 27, 2007) and "24," but also lined up partners for the epic adventures of Eragon (Dec. 15, 2006). As New Line and Scholastic presented a first look at The Golden Compass (Nov. 16, 2007)-with literary adaptations Mimzy and Inkheart scheduled for 2007 and beyond-Nickelodeon Viacom Consumer Products announced "exciting adult-targeted merchandising programs tied to high-profile motion picture releases" Beowulf (Robert Zemeckis, Thanksgiving 2007) and Dreamgirls (Dec. 25, 2006). The latter are looking for "apparel, mobile-phone applications, high-end collectible dolls, and social expressions."
The entire roster of Teen Titans and the latest Harry Potter (Order of the Phoenix, Summer 2007) stood attention at Warner Bros. Consumer Products, but Happy Feet (Nov. 2006), Teenage Mutant Ninja Turtles (March 30, 2007) and Where the Wild Things Are flourished there, too. Meanwhile, Disney's marketable theatrical titles for 2007 include Meet the Robinsons (March 30), Pirates of the Caribbean 3 (Memorial Day), Pixar's Ratatouille (summer) and Enchanted (Nov. 2).
With feature versions of The Land Before Time: Day of the Flyers (late 2006 or early 2007) and The Pirates Who Don't Do Anything (A Veggie Tales Movie for 2008), Universal Studios is building on already popular properties. This trend was also very much in evidence with Sweet Dreams starring Strawberry Shortcake for Fox Home Entertainment (October 2006 as part of KidToon Films) and live-action versions of The Transformers at Paramount/DreamWorks (July 4, 2007) and fashion dolls Bratz (MGA Entertainment, Avi Arad Productions and Crystal Sky Pictures are targeting a fall 2006 production start).
At Sony Pictures, plenty of gear for Open Season (Sept. 29, 2006) was on display, next to yet another bunch of penguins in Surf's Up (June 8, 2007) and the eagerly awaited Spider-Man 3 (May 4, 2007 with Thomas Haden Church as Sandman and Dylan Baker as The Lizard). At Marvel Entertainment, Fantastic 4 met The Silver Surfer (July 2007) as Ghost Rider (Feb. 16, 2007) lights the torch for a series of independently produced and financed movies that are kicking off in 2008 with one (or more) of the following heroes: Iron Man (Jon Favreau of Elf and Zathura), Incredible Hulk (Zak Penn of X-Men: The Last Stand), Ant Man (Edgar Wright, Shaun of the Dead), Captain America (David Self, Road to Perdition), Nick Fury (Andrew Marlow, Air Force One) and Thor (Mark Protosevich, Poseidon). Even good old Conan the Barbarian is coming back from Warner Bros. and Paradox Entertainment, not to mention the two- and three-decade anniversaries at MGM of Highlander (with a feature-length anime film in 2007 and a new live-action film for release this winter) and Rocky (with a November 2006 theatrical marketing and publicity campaign) followed in February of next year by Rocky Balboa.
Shrek the Third (summer 2007) had an ogre-whelming presence at the DreamWorks Animation booth, but retailers and merchandisers were quite sweet on Bee Movie too (Nov. 2007). Your reporter's favorite, however, looked very much like Kung Fu Panda (spring 2008). Unique animation and fabulous character rendering aside, how can anyone resists a lazy panda who must master the martial arts to fulfill an ancient prophecy and save his home from an evil snow leopard?
Figures quoted from License magazine's 2005 Industry Annual Report. Except where noted, all quotes in this article were taken from company statements. While concentrating on what matters most to our readers, feature films, the properties mentioned are nonetheless a personal selection and are in no way meant to convey a comprehensive survey.
This is why 2007 is so big for Marvel and Hasbro. Merchandise brings in much more money or at least has potential to bring in much more money than the theatrical revenue alone.
