Even though it has the largest population and the strongest GDP in continental Europe, Germany has never been a licensing powerhouse. Generations of German parents have long exerted a bit more control over kid purchases than their counterparts in the UK and North America. But they may just be softening up.

The territory is going through the ‘Kids Are Getting Older Younger’ phenomenon that hit North American shores more than a decade ago, and parents are starting to relinquish some gatekeeping duties. ‘Mothers are moving slowly away from this superhero-mom role model and are trying not to micromanage their kids’ consumption, relying more on the judgment of their children,’ says Michael Boehme, Disney Consumer Products’ director of franchises for the GSA and Nordic area. ‘If you talk to German preschoolers these days, they have very elaborate opinions on what they want and don’t want. Parents feel less inclined to argue with them.’

However, while licensors may be looking to capitalize on the more laidback attitude of German parents, economic and demographic conditions are conspiring against them. Alexander Weber, senior marketing consultant for The NPD Group in Germany, reports that the national inflation rate so far this year is sitting at around 3.2%, while average salaries have only increased by 1.6%. Simply put, there’s less discretionary income available, and German consumers typically save, rather than spend, in the face of tougher economic conditions.

Combine these factors with a decreasing birthrate, and the kids licensing business isn’t likely to grow in the coming years. Just 10 years ago, 780,000 babies were born annually in Germany, and that figure has since dropped to roughly 680,000. The licensed toy market seems to be bearing that out, with year-to-date sales as of June ’08 dropping 2% from 2007. (Last year, revenues declined by 8% overall.) Interestingly, Star Wars toys are still sitting at the top of the heap, even though it’s been several years since the last entertainment release kicked the franchise up into a frenzy of activity. NPD’s Weber says Star Wars is a perennial in the market because of its classic appeal and the strong marketing support it gets from German mainstay Lego.

That said, Uli Stoef, CEO of licensing agency m4e, is taking some comfort in the fact that parents and grandparents are continuing to spend money on other licensed goods for the kids in their lives, particularly video games. He says the category’s sales have grown by 28% in the last year, and licensed apparel is also performing well. Entertainment licensing is still one of the top-three licensing sectors, and Stoef says children’s licensing is responsible for about 80% of that business.

The tougher licensing climate in Germany has made licensors more resourceful. For the last three Septembers, for example, DCP has held a Disney Princess Ball for girls between two and eight in a real German castle. The ball is a key brand-building effort, and more than 1,000 girls and their parents plan to take part in this year’s event, which will include dancing and creative activities, plus a special storytime reading by Maja Synke, Princess of Hohenzollern. The event benefits from coverage in local newspapers, TV broadcasts on Super RTL and ARD, and on popular kids websites.