Property Damage: Licensing Industry Feels the Gloom, Too

T. L. Stanley

Brandweek

June 9, 2008
 

Politicians stumping for high office aren't the only ones talking about the sluggish economy, through-the-roof gas prices and the mortgage meltdown. It's top-of-mind with property owners and their licensing partners as the annual Licensing International Expo (better known as the Licensing Show) opens this week in New York before its cross-country move to Las Vegas next summer.

The toy business, thought to be somewhat recession-proof, has been hit by higher costs for essential materials, manufacturing and shipping, along with recalls that continue to take a bite out of marketers' revenues. Consumer spending is down, especially for discretionary items, and retailers are more cautious than ever about taking risks on licensed goods, often preferring their own private label products. (As a result, the International Licensing Industry Merchandisers Assn. is reporting that manufacturers in North America paid $5.98 billion for rights and royalties in 2007, which was down slightly from the previous year.)

That makes shelf space even tougher to come by than usual, said licensing industry executives.

"Buyers are being careful and making decisions later," said Leigh Anne Brodsky, president of Nickelodeon & Viacom Consumer Products. "They still have to bring consumers something new, and they're looking for partners to bring excitement to create that retailtainment."

The environment has caused her team to "redouble our efforts" to get in front of retailers more often to tout events like SpongeBob SquarePants' 10th anniversary, and Dora the Explorer's live action movie set for 2010. They're also customizing their approach to each retail chain, offering exclusive product and tailored ideas aimed at making them stand out, an approach that many property owners said they're taking these days.

The current environment necessitates that a lot more thought go into each stage of licensing.

"If people are going to buy one toy instead of five, I have to figure out how to be the one," said Christina Miller, vp-consumer products at Cartoon Network Enterprises, where the focus will be on Ben 10: Alien Force and the channel's other boy-skewing properties. "The product, the marketing, the price—everything has to be right."

Though entertainment continues to be the biggest piece of the licensing pie, Hollywood films don't have the luster they once did because of the packed movie schedule and the quick in-and-out of underperformers at the multiplex.

Retailers prefer franchises like superheroes and evergreens over new, untested properties. The behemoths like Marvel and Disney continue to score space, while smaller properties go looking.

The gathering won't be all gloom and doom. There's likely to be an eco-friendly air permeating the Javits Convention Center as everyone tries to go green (appealing to both consumers and retailers, who are touting a similar message). Entertainment companies are reviving the old—Sony's pumping the 25th anniversary of Ghost Busters and the still-gestating Green Hornet—and following each other—on the heels of Pixar's Wall-E and Paramount's Transformers, there are a rash of robot-themed movies in development like RoboSapien (Arad Productions), Pet Robots (Disney) and Robotech (Warner Bros.).

Celebrity licensing, already ubiquitous, will be highly visible at this year's show, as will corporate brands that are increasingly using licensing as a way to communicate with consumers who are skipping TV ads and other traditional media.

A picky marketplace might not mean bad news for corporate brand licensing, said Michael Stone, president and CEO of The Beanstalk Group, because harried shoppers are likely to gravitate to names they know. But they still make choices as the cost of gas and groceries continues to climb.

"In bad times, people buy what they need," Stone said, "and that means some categories will suffer more than others."