It’s no secret that the U.S. licensing industry is entering a state of maturity, with overall royalty income across all sectors hovering around the US$5 billion mark for the past few years. According to industry org LIMA’s most recent annual Licensing Industry Survey, U.S. licensors brought in approximately US$5.9 billion in revenues in 2005, up 1.8% from the previous year. As LIMA president Charles Riotto notes the real news is it’s the first time since the Yale/Harvard team began conducting the study nine years ago that every category of license (including character/entertainment, art and corporate brands) finished up or even in revenues.
‘The survey shows the overall stability of the industry,’ says Riotto. ‘Licensors weren’t prone to huge swings based on the success or failure of a handful of properties.’
On the character licensing front, which accounts for 44% of the entire market, royalty income was up 2.4% to US$2.62 billion. And while huge 2005 hit Star Wars certainly deserves credit for part of the uptick, Riotto says the research showed steady improvement in the programs of several existing properties also contributed to the bump. In particular, Jim Benton’s snarky It’s Happy Bunny seems to be building on its resonance with tween and teen consumers.
Drilling down into character/entertainment royalties a bit further, toys and games still grabs the lion’s share of all merch sales, but revenues dipped again by 1.2% in ’05 to finish at US$709 million. The second-largest source of income for this group of licensors, software/videogames, was down by 5% to US$341 million. Of the established product segments, home décor witnessed the biggest increase, shooting up 17% to US$105 million.
Interestingly, the category with the largest growth is one of the smaller ones – ‘other’ scored a whopping 51% gain, doubling to US$105 million in 2005. According to the Yale/Harvard team, products such as card services and electronics qualify as other. The sharp increase in the number of character-licensed consumer electronics deals over the past year is a likely contributor. In fact, respondents pegged the continued adoption of electronics by kids as one of the larger opportunities for new revenue in the coming year.
In terms of overall trends, direct to retail continues to weigh heavily on the minds of character/entertainment licensors. Keeping up with the quickly shifting market strategies of highly competitive mass retailers in the U.S. isn’t getting any easier. Additionally, the divide between the small group of large licensors (i.e. Disney, Warner Bros.) and the larger bunch of niche licensors continues to widen, and may be exacerbated by the long-term portfolio-wide licenses being signed by the character powerhouses. Riotto admits the further proliferation of these types of deals would make it even more difficult for smaller, original properties to break the market.
However, for his part, Riotto says it’s too soon to declare a portfolio-wide-deal epidemic. ‘It’s going to take some time to play out and see if it will continue.’