Pretend for a moment that you’re a consumer products exec with franchise hopes for your studio’s new original film concept. With no track record or built-in awareness with which to entice partners, you face the daunting task of convincing the risk-averse licensing market that your property will be one of the season’s breakthrough hits.

You manage to line up some strong promotional partners and launch with a limited licensing program. The film takes off and sets box-office records, your partners are clamoring for more, and the big-fish companies that turned your licensing pitch down a year ago are ruing the day they chose not to bite.

When the studio greenlights a sequel, you map out an aggressive follow-up campaign. But how will you apply the knowledge gleaned from your first go-round, and where can you now take the property that you couldn’t before?

Last year’s Oscar-winning CGI film Shrek broke the coveted US$250-million box-office barrier, set a new standard for innovative summer promotions, and racked up video sales of more than 20 million units. With a sequel tentatively slated for summer 2004, what key components of the original program will be used to unlock Shrek’s franchise potential?

Bowing with a conservative licensee roster encompassing toys, interactive, apparel and accessories, promotions overshadowed merch on the success front. According to DreamWorks head of consumer products Brad Globe, promos are a burgeoning category on the feature film scene and a creative process to which the promotions team must be committed. Says Globe: ‘I think sometimes movie promos almost look phoned-in–like nobody tried to go to another level in originality.’

To avoid that stigma, studios need to align with partners willing to take a property’s principal characters and themes and do something really unique with them. Indeed, Shrek partner Baskin Robbins raised the bar on innovation in designing unique themed treats such as the gross-looking but tasty Shrek’s Hot Sludge Sundae. Demand from both con-sumers and franchisees was so high that Baskin Robbins extended its April-to-June promo window by six weeks.

Although a firm story line hasn’t yet been hammered out for the sequel, and the consumer products team isn’t yet certain what it will have to work with, Globe expects many of the original partners to return and more to be added to the promo cast. ‘There’s no reason to think that we won’t have US$100 million in additional marketing support on a worldwide basis–we got fairly close to that mark the first time around,’ he says, stressing that for him, partnerships are less about how much money is put up and more about the execution. ‘Yes, you want a certain critical mass, but if the execution and creativity don’t look like they’ll be strong, the pitch doesn’t have as much of an impact on us.’

Now that Shrek is a known commodity, Globe is certain that retail doors will open a little wider and there will be more opportunities to bring Shrek’s world to life at the retail level. ‘To me, it’s all about retailtainment. If we’re going to continue to have a certain level of success with these event movies, then we have to create events at retail–whether it’s a POP, contest or characters in-store,’ he says. As a caveat to licensors whose franchise success may provide a false sense of security, Globe adds: ‘If product is just placed on a shelf with no support, it can get lost in big-box retail outlets, no matter what property it stems from.’

For all its success, DreamWorks’ first Shrek experience was a trial-and-error learning process, with some elements not fitting as well as others. ‘McFarlane Toys did a terrific job for us in doing the collectible figures, but it didn’t make a lot of sense,’ says Globe. ‘This really isn’t an action-adventure property like a Star Wars or a Jurassic Park, so it’s not really an action figure property. It’s more about bringing the characters to life so kids can relate to them as characters, not just as figures or plush that don’t do anything.’ So in hindsight, Globe would have preferred to see low-tech interactive toys–such as talking plush–included in the toy offering.

Fortunately, market awareness breeds a willingness among licensees to put up more product development cash, allowing for more innovative product such as tech toys. Of course, the summer release date poses a market dilemma–fewer toys are sold during the summer, so retailers tend to buy inexpensive movie product and wait until the high-traffic holiday season to stock pricier interactive items. Even so, it’s becoming less expensive to build technology into toys, and Globe would like to see some low-cost tech toys added to the sequel’s product lineup.

Globe points to a classic quagmire through which studio consumer products teams perpetually have to muddle as they are forced to develop licensing programs up to two years in advance of a movie release–the vision they are given at the outset of a project may not play out in the final cut.

‘This is a movie that boys and girls enjoyed pretty much equally, and I think we emphasized the gross boy product a little more than we might have had we seen the finished film,’ muses Globe. In deference to the love story that played out as a strong theme in the completed film, he might have used Fiona a little more prominently in merch. Still, Globe is satisfied that he made smart choices given what he had to work with. After all, boys love all things gross, and Shrek’s licensees–like Disguise, which produced a farting Shrek costume for Halloween 2001–certainly delivered on that front.

As a studio launching a new family film division with its first kids property last March, Miramax/Dimension faced a steeper challenge than family-friendly DreamWorks. Both Miramax and Dimension had largely been associated with art house fare and horror franchises until that point, and had no experience and little credibility in the kids entertainment world.

In developing a merchandising program for Spy Kids, Dimension senior executive VP Michael Helfant had to rely on gut instinct and the advice of agent Malibu Licensing Group. With just four licensees on-board for the launch, ‘promotional and licensing activity was limited–but understandably so,’ reflects Helfant. ‘The worst thing you can do is over-develop and under-deliver.’ Believing in the property and its franchise potential, Helfant deliberately shied away from certain categories in hopes that a box-office hit would open up more lucrative opportunities later on.

Helfant entertained offers from video game companies wanting to develop successive Spy Kids games, but decided it was too soon. ‘I believed that the property was bigger than the license fee I would have had to take at the time,’ he says. ‘And I think I gambled correctly.’ Indeed. The film grossed more than US$100 million domestically and shipped six million video units, and when the August 2002 sequel was greenlit, Disney Interactive snapped up the rights to produce two games based on the flick. So far, Spy Kids 2 has attracted more than 25 licensees and lured back at least one original partner–Buster Brown.

This time around, L.A.-based consultancy Brand Central is developing the licensing program. While Dimension maintains a positive relationship with Malibu Licensing Group, Helfant saw a chance for a fresh start in Brand Central’s ‘aggressive and hungry’ president Ross Misher. Misher’s Spy Kids 2 strategy revolves around role play, with core toy licensees Play Along (action figures, play sets, vehicles and spy gadgets) and Manley Toy Quest (role play sets) creating lines that enable kids to become super spies.

‘The first time out, licensees are anxious about developing product around a property that may come and go in three weeks if the movie doesn’t perform,’ says Helfant. While that is a non-issue now, he maintains that there isn’t much he’d change about the way the original program was handled, given that he was marketing an unknown commodity as the studio’s first kid venture.

With the sequel under its belt, Dimension is currently planning an animated series for fall 2003 that may offer licensees one more shot at a repeat performance.