Positive shelf image

Consumer products mavens find consolidated retail scene isn't child's play

What: The Licensing Show
When: June 20-22
Where: Javits Convention Center, New York
Speakers & panelists: Leigh Anne Brodsky, prexy, Nickelodeon & Viacom Consumer Products; Elie Dekel, exec VP licensing & merchandising, 20th Century Fox TV; Alfred Kahn, chair & CEO, 4Kids Entertainment; Joshua Kislevitz, senior VP, domestic licensing, United Media; Isaac Larian, CEO, MGA Entertainment; Ross Misher, prexy, Brand Central; Tim Rothwell, prexy, worldwide consumer products media group, Marvel.

It’s still a lucrative field, but entertainment licensing requires more work and careful strategizing than ever, as the forces of scarce shelf space at retail and consumers who increasingly want products to be cooler, more interactive and cheaper conspire to make the biz far more challenging these days.

And that’s not to mention the greatest challenge for licensors small and large right now — retail consolidation, as more and more product sales go through big-box chains like Target, Wal-Mart, Toys R Us and Best Buy, and boutique outlets like Musicland fall by the wayside.

The consolidation of retail outlets exacerbates the time crunch being passed down by compressing film-release windows, with properties tied to current theatrical features now having only a six- to nine-week time period in which to strike at stores.

“There’s a lot of coordination needed to get merchandise on the store shelves and get it there at the right time,” says Charles Riotto, president of the Intl. Licensing Industry Merchandisers’ Assn. (LIMA). “If you’re a week or two late, you’ve probably missed the boat.”

“It’s a relatively flat business right now,” concedes Tim Rothwell, president of worldwide consumer products for Marvel Entertainment. “You have all the major intellectual property owners out there fighting and groveling for attention.”

Indeed, LIMA’s last licensing study, published in 2005, indicates that the overall licensing revenue in North Americagrew less than 1% in 2004, with apparel (17.5%), toys and games (16.3%), and software and videogames (9.6%) representing the biggest categories.

Of course, amid this flat market, some of the bigger names in entertainment licensing say trends like retail consolidation actually work in their favor. Meanwhile, others are figuring out ways to innovate around the current challenges.

For its part, Disney has found that the efficiency advantages enjoyed by the larger retail chains has helped it move more merchandise.

“(Retail consolidation) has actually helped us, surprisingly,” says Andy Mooney, chairman of Disney Consumer Products, the industry’s No. 1 licensor. “Those retailers who have highly efficient supply-chain managers can put Disney on the floor, and make as much money in Disney as they can make on their private-label business.”

Meanwhile, on the innovation side, congloms like Warner Bros. have found ways to imbue life into their film properties that transcend release windows.

Brad Globe, president of worldwide consumer products for Warner, says the studio has focused on extending its brands beyond the impact of the film release. “Superman Returns,” for example, benefits from not only being based on a timeless superhero character and a highly anticipated film, but retailers knowing that there will be support for the property beyond the theatrical release.

“We’re trying more and more to use the movie as a tremendous event to create interest by the consumer,” Globe adds. “It’s like a big event that engages the consumer in an important way, but then it’s important to work with our partners and our retailers to extend the life of the property.”

Entertainment licensors are also trying to broaden distribution channels, choosing to go with specialty outlets and boutiques to move their products.

In fact, staging events at high-end boutiques has been a successful trend — one that’s expected to further proliferate as licensors look to use such events to create a halo effect that drives consumers to their brands.

“Every big movie now has a launch at a Robertson Blvd. retailer,” notes Ross Misher, president of Brand Central, which staged the 2004 “Are you a Betty or a Veronica?” event for Archie Comics at Kitson.

That effect can also help develop biz in high-end markets for certain properties, like home furnishing, food and pet items, and lifestyle brands.

Warner, for example, recently plied such a strategy with its Tweety property, using fashion and upscale licenses on a decades-old Looney Toons character that has no new film or TV component to support it.

In fact, on a strategic level, the studio has taken to working more closely with retailers to build programs that meet their needs regardless of whether there’s a new film release to behind it.

“We don’t really have to wait for the studio to give us a movie,” Globe says. “There’s already things that are in our library, we just have to untap what that value is.”

Indeed, perennial and classic licenses help retailers, consumer goods manufacturers and entertainment companies smooth out the ups and downs of the film and TV business.

“The challenge is to match up the strategic fit, just not slapping it on a product and getting it out the door, but really finding the right fit with the personality of the character and the attributes of the brand,” says Leslie Levine, VP marketing for Classic Media, which owns older properties such as “George of the Jungle,” “Underdog,” “Lassie” and “Dick Tracy.”

Meanwhile, on the lower end of the retail spectrum, entertainment licensing has been making inroads at dollar stores, groceries and pharmacies.

Niche markets such as comicbook stores also have been successful for genre-based properties with the potential to tap into a base of devoted fans.

“The infrastructure is really there for that fan base,” Misher says. “Those are the guys who know the ins and outs of the properties.”

Digital dilemma

Shelf life issues aside, studio consumer products divisions are experiencing some of the same issues their film- and TV-programming brethren are — the expansion of consumer demand into digital products.

The licensing market has also been affected by children becoming more comfortable with technology at a younger age, their interest in toys giving way to videogames, the Internet and iPods.

Pascal Bonnet, director of licensing for French game publisher Ubisoft, says competition for new entertainment licenses is intense in the videogame business.

Because of that, his company looks mainly at tentpole releases and high-rated TV shows, seeking to get 25% of its revenue from licensed games. It recently sold more than 2 million copies of a “King Kong”-themed game that was licensed from Universal, and the company just licensed the ABC skein “Lost.”

There are risks, especially as the cost of licenses and of making games increases. “What if the movie doesn’t work?” Bonnet asks. “What if the TV show doesn’t get the ratings that it had in the past? But again, you try to mitigate and try to be picky.”

It’s own challenges aside, the interactive side of the licensing business is creating enough heat to make life in other areas of the biz more difficult — launching new properties for small children has become tougher, for example.

“We’re really looking at extending our reach to where consumers are every day, and creating product that makes sense for those venues,” says Maura Regan, VP and GM of global licensing for Sesame Workshop.

One such area that’s worked well for Sesame is food licensing, with the company launching a “Healthy Habits for Life” initiative with Hain Celestial.

In any event, most execs agree that these kinds of innovative approaches work best right now in a field where formula is death. Success increasingly requires creativity in finding the right relationships with licensees, manufacturers and retailers.

“If you’re creative and take on properties that have a built-in fan base, there’s still a huge opportunity in entertainment licensing and marketing,” Misher says.

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