Partnerships and film properties prop up 2002 licensing market

From a trade press view of the licensing sector, Q4 2001 and spring 2002 may have seemed rather quiet. Indeed, according to LIMA’s 2002 Licensing Industry Survey, North American revenues dipped 4.12% in 2001 over the previous year to US$5.6 billion. And the studio-driven character licensing market – which accounted for the bulk of total industry revenue at 44.3% – was down 4% over 2000 figures.

However, with the success of programs for Spider-Man: The Movie and Star Wars: Episode II – Attack of the Clones in spring 2002, a low buzz signaling industry rejuvenation grew more audible in the second half of the year. Part of that is owed to what the industry did with its down time. Rather than employ the ‘license ’em and leave ’em’ strategy of past property booms, licensors have been actively building relationships with their manufacturing and retail partners. This has helped blur the lines between merchandising and licensing, potentially offering licensors the opportunity to tap into the promotional budgets of their licensees.

While feature film successes have helped quell the reverberation of the Star Wars: Episode I merch meltdown, licensees are still in risk-averse mode, generally preferring larger, longer-term deals with licensors that can offer multiple properties. This could, in part, explain why Spider-Man was such a breakout success. Feature films are often a risky proposition with their short windows, but Marvel took the edge off by padding film deals with classic character rights and offering agents such as CPLG rep deals covering multiple properties (including those for which Marvel has film development deals).

As the overall entertainment industry trend towards business consolidation continues, the traditional property development model has been challenged by indie studios well-positioned to adapt to shifts and create properties with fully-formed applications in media, publishing, gaming and consumer products from the get-go. In April, Make Way for Noddy producer SD Entertainment made strides in that direction by adding licensing and interactive divisions to its production services, and signing a development deal with like-minded company The Story Hat for TV/film concept Finster the Monster Truck. The Story Hat’s model also drew the attention of AAC Kids as a co-pro partner on boys action series Dragon Boosters. And producers without in-house licensing arms increasingly involved licensing partners earlier in the development process to ensure series merchability, recently evidenced by German agency CTM’s involvement in RAI Fiction/Rainbow’s girl fantasy series Winx.

Spidey spins a sticky merch web in 2002

What may have been the year of the horse according to Chinese astrology was undeniably the year of the spider in the licensing industry.

While Spider-Man: The Movie grossed more than US$805 million worldwide and broke box-office and first-day video/DVD sales records (seven million units were sold on November 1), Spidey merch proved even stickier. At press time – five months after the film’s release – some licensees were still reporting sell-through levels of about 25%, several retailers had decided to carry film merch through Q1 2003, and Sony was still fielding offers from potential licensing partners.

Sony managed apparel, interactive and novelizations, and Marvel took control of all other categories under the contract terms of joint-venture company Spider-Man Merchandising LP. But ‘what we ended up doing was working together, which allowed the strategy and its implementation to be focused so that licensees were getting information and support from one resource,’ says Sony Pictures Consumer Products’ executive VP Al Ovadia.

And Marvel’s trust in Sony to manage its largest asset was a major benefit. ‘Spider-Man is Marvel’s crown jewel and they could have been much more difficult and proprietary,’ says Ovadia. The greatest challenge? How to differentiate movie merch from classic.

Thanks in part to Marvel’s art direction, Spidey’s updated film look helped to achieve that point of differentiation. And the varying interpretations of characters served to compliment rather than complicate. ‘The classic property – with the event overlay of the film, strong tie-in partners and a full roster of licensees – gave the retailer hope relative to more recent film licensing programs that did not deliver on expectations and hype,’ says Marvel’s executive VP of consumer products, promotions and media sales Russ Brown.

Indeed, many of the programs’ 285 licensees far exceeded expectations. In the U.K., sales of Toy Biz’s Dual-Action Web Blaster hit US$468,000 through distributor Vivid Imaginations, limited only by availability. ‘If we could have let it rip and shipped all we wanted to, chances are sales could have been close to US$778,000,’ says CEO and co-founder Nick Austin, whose overall Spider-Man business (film and classic) will exceed US$31.1 million at retail this year.

Hot on the Trail

Applause

On track to become a master plush and gift company, Woodland Hills, California’s Applause signed deals with the likes of Nick and National Geographic this year. While the jury’s still out on whether Applause can wrest mass-market plush rights away from the toy giants, licensors are impressed with the company’s specialty and mass distribution reach.

CBBC Worldwide

With retail sales of US$512 million, the IP unit’s increased profile within the BBC has been reflected by internal restructuring. In the U.K., licensing is now teamed with the books, video and audio segment to facilitate brand marketing to retail as a complete range. The IP team now has two separate teams to build upon the company’s preschool expertise and grow its tween portfolio. 2002 has also been marked by splashy property launches, notably for Ace Lightning and preschool property Fimbles.

Copyright Promotions Licensing Group

As Hollywood’s pipeline to Europe, CPLG had its merch hand in some of the most talked-about licensing events of 2002 – Spider-Man: The Movie, Star Wars: Episode II – Attack of the Clones and Men in Black II. Beyond feature films, the agency made sports licensing strides with its worldwide program for FIFA World Cup. On the rep rights acquisition front, CPLG picked up rights for Hamtaro, Care Bears, World Wrestling Entertainment and Anne Geddes-esque baby photographer Tom Arma.

HIT Entertainment

HIT also ploughed full steam ahead in 2002, notably acquiring powerhouse brand Thomas the Tank Engine via its acquisition of Gullane and cutting through the red tape holding back the high-potential Pingu franchise. Bob the Builder posted a fourth consecutive year of revenue growth in the U.K., with consumer product sales up 9% over 2001. The preschool-centric company also made tween market strides in 2002, launching both Sheeep and Pingu in the gift sector.

ShoPro USA

ShoPro USA is arguably one of the biggest small company success stories of 2002. An affiliate of Shogakukan (Pokémon), the fledgling company lined up an impressive roster of partners for Japanese import Hamtaro’s U.S. debut. Airing twice daily on Cartoon Network, the Ham-Hams danced their way to Licensing Show 2002 with Hasbro and Nintendo on board. While it’s still too early to tell whether Hamtaro’s U.S. program will rival its domestic one, ShoPro deserves plaudits for its spectacular debut outing.