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International merchandising: The silent giant of the new TV economy

In today's demanding return-on-investment economic environment, producers, broadcasters, and distributors around the world increasingly look to merchandising as one of the key components for financing program development. This is especially true with children's programming.
April 1, 2002

In today’s demanding return-on-investment economic environment, producers, broadcasters, and distributors around the world increasingly look to merchandising as one of the key components for financing program development. This is especially true with children’s programming.

One of the first questions asked by broadcasters in response to kids programming pitches is ‘Does it have any pre-established recognition in another medium?’ If the answer is yes, your project gets to pass ‘go.’ But don’t get too excited just yet.

With a glut of programming on the shelf, broadcasters are not paying large license fees. Producers must look to international presales to offset the cost of production, as well as to determine a property’s potential life span–the more broadcasters committed to a project, the greater chance it has of living beyond the initial 26-episode order, which helps offset the initial production expense.

However, merchandising–which often generates as much as 30% of the production budget–remains the silent giant in all of this. If you can demonstrate success for a property with broadcast presales, merchandising, or both, your project has the potential to become a huge asset to virtually any U.S. broadcaster. If your property can offer additional media value beyond the TV screen from its onset, it’s going to be the more attractive buy.

Today, the need for merchandising support is equal to the need for a strong ratings performance, and the challenge of offsetting development costs now rivals that of satisfying the demands of an increasingly savvy audience. The phenomenal success of programming developed outside the U.S.–from Pokémon to Teletubbies–has demonstrated the viability of this new broadcaster perspective. A property that can substantiate its ability to generate ratings and huge merchandising revenues also brings the broadcaster built-in viewer awareness and appointment viewing–two essentials for fast-paced ratings growth.

Concurrently, the retailer enjoys accelerated product sales without suffering an extended lull before the viewer becomes a buyer. Pokémon and Teletubbies needed no introduction to American kids. Quickly earning the loyalty of U.S. audiences, these shows opened the U.S. broadcast door a bit wider for many international producers.

This growing emphasis on international broadcast and merchandising success has reversed the paradigm for selling first into the U.S. and then picking up ancillary revenue from global sales and merchandising. In fact, many global producers and worldwide toy companies are willing to pick up international rights only, recognizing the significant economic potential of a property without factoring in the U.S. marketplace. This growing emphasis on developing broadcast and merchandising strategies simultaneously increases the importance of international program markets such as MIPCOM and MIP-TV, and licensing events such as Toy Fair and Licensing Show. Acknowledging the importance of collaboration between producers, broadcasters and merchandisers in developing, promoting and marketing children’s properties, all three sectors concede the importance and value of keeping apprised of one another’s business.

The industry needs to be cautioned that the more ancillary sources of revenue pursued–the more international licensing and merchandising opportunities exercised on behalf of a property–the more multicultural appeal that program will need to have. Whereas U.S. producers and toy manufacturers have traditionally preferred rich character-based properties developed specifically for their marketplace, an increased focus on reducing financial risk and maximizing global business opportunities has given rise to a greater acceptance of non-U.S. programming.

When producers, broadcasters and toy manufacturers sit down to review potential properties for development, they all want to know how long it will take to recoup their investment. Yes, a good story line is important to a broadcaster, but the formula driving and financing development is how long it will take to recover the development cost through international merchandising and broadcast sales.

Joy Tashjian is president of Joy Tashjian Marketing Group–agency of record for Mainframe Entertainment–and Mainframe’s head of international sales.

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