This year, we check in on the changing scene in Australia’s licensing
and toy market. Also under the microscope is the new report from The Joan Ganz Cooney Center that’s trying to chart a new course for educational toys. Finally we preview Yo Gabba Gabba’s funky new toy line
from Spin Master.
While not one of the world’s largest markets, notoriously license-happy Australia – which annually moves approximately US$1.75 billion in licensed goods at retail – remains an important territory for properties with global aspirations. But the closure of the country’s licensing giant Gaffney International last August left numerous licensors without a home for their IPs, saddling them with the onerous task of finding new representation asap. The question many had at the time was, ‘Is there life after Gaffney?’ And it seems there is – a number of new and smaller players have come on to the scene. So who’s making a splash Down Under now? Read on, and find out what they’re facing in the increasingly competitive Aussie toy and retail market.
THE GAFFNEY GAP
There’s no doubt that the collapse of Gaffney left much of the Australian consumer products crowd in shock. Late last summer, Fred Gaffney’s namesake licensing agency went into voluntary administration, citing cash flow issues and pressure from ongoing legal action. Gaffney took Aussie sensation The Wiggles to court, claiming the group that has entertained countless preschoolers owed commissions on international deals made up until December 2006, when the pair’s relationship ended.
‘Pretty much every third person in Australian licensing has worked with Gaffney,’ says Corus Entertainment’s Lily Yan, senior manager of international licensing for Latin America, Asia-Pacific and the Middle East at Corus Entertainment. Debra Joester, president and CEO of the Joester Loria Group in New York, adds Fred was ‘larger than life’ and was often credited with establishing the licensing industry Down Under. However, since the agency’s closure, she says many of Gaffney’s former staff members have gone on to work elsewhere in the territory, or have started up their own agencies. In short, beyond a hectic scramble for new representation in September, the Australian licensing landscape appears to be rather bucolic again.
So who’s picked up the pieces? A natural reaction on licensors’ parts may have been to run to the nation’s now-largest independent agent Haven Licensing, based in Surry Hills. Certainly, over the last 15 years, MD Tom Punch and his staff have amassed a top-notch portfolio, bringing on high-profile properties from HIT Entertainment and Sesame Workshop in the past 18 months to join Nickelodeon, Marvel and Twentieth Century Fox brands. HIT, which reportedly experienced a 50% revenue bump in the region in 2006, even named Haven its international agent of the year in June 2007. However, as Punch himself notes, he can’t take on all comers. ‘There aren’t enough hours in the day and our time is maximized,’ he says. ‘We’re on the lookout for exciting opportunities…but we are limited by the clock.’
NEW AGENCIES, NEW OPPORTUNITIES
Haven aside, there are a few enterprising upstarts on the scene now, and none seem to have benefited more, so far, than Melbourne-based Wild Pumpkin, managed by former retailer and one-time Gaffney staffer Lim Mi-Kyoung. Since last September, the two-year-old agency has picked up six high-profile international brands – Care Bears, WWE, LazyTown, The Smurfs, Cartoon Network and 4Kids Entertainment (minus Teenage Mutant Ninja Turtles).
As for what made Wild Pumpkin stand out, American Greetings Properties director of international licensing Carla Silva, refers to the ex-Gaffneyites recently brought on-board. She says the hires made reassigning Care Bears to WP after Gaffney’s closure an easy transition – several of its employees already knew the property and key licensing partners. The upstart agency was also appealing because of its strong retail connections forged by Mi-Kyoung, which AG and WP quickly put to work by building a large program for Care Bears that hit every major Australian retailer last November.
The launch of the property’s feature film Oopsy Does It! coincided with CB’s 25th anniversary, and the pair pulled out all the stops. Department store Myer and mass-market chain Target (no relation to the US retailer) featured a CB concept area, held in-store character appearances and proffered POS distribution. The promotion’s biggest success proved to be with Kmart (again, no US connection), which merchandised CB product throughout the store, including end caps, and gave away a kids t-shirt with every purchase of a CB plush. Kmart sold its entire stock of 20,000 bears and was so pleased that it’s lining up for a repeat performance this year.
For her part, Mi-Kyoung is taking the influx of new clients in stride. ‘All the licensors acted on [the Gaffney] disaster immediately…so I don’t think it has had a negative impact on the business,’ she says. She does admit that there was a five- to eight-week transitional period with the brands WP picked up, but it was ‘business as usual’ after that.
The agency has also tripled staff numbers to service the new clients that effectively more than doubled the size of WP’s original portfolio (H2O – Just Add Water, Crusty Demons, Smay Designs and Fluffy Gardens). To offset the influx, Mi-Kyoung says she went for experienced hires who had, on average, five to seven years in the business.
WP isn’t finished growing either. It’s got another four properties in the offing, and Mi-Kyoung makes the annual rounds at Licensing Show, MIPCOM and other markets to keep an eye out for promising new additions. And if there’s one hole in Wild Pumpkin’s portfolio now, it’s in the tween space. ‘Our market needs more tween brands, since there aren’t many major licenses for this particular age group available at retail in Australia,’ says Mi-Kyoung.
Nine-year-old Merchantwise, based in Prahran has also undergone a growth spurt in the months just prior to and following Gaffney’s closure. Launched by former Disney Consumer Products exec Alan Schauder as a provider of creative, strategy and research services for licensors, specializing in the construction of style guides and packaging, the company moved into agency work in 2003. It landed homegrown sensation The Wiggles in January 2007, and 4Kids Entertainment appointed the agency to rep Teenage Mutant Ninja Turtles post-Gaffney.
And with Merchantwise’s combination of support and licensing services, director Schauder believes it presents a unique proposition for licensors. ‘Our mix of skills positioned us to assist brands requiring significant development,’ he says, adding Merchantwise has even produced monthly licensing research for retailers, brand owners and licensees. The agency’s BrandTrends subscription-based newsletter has been publishing eight times a year since 2001, tracking the popularity and attitudes towards kids properties via surveys conducted in shopping centers.
To stay effective in the market, Merchantwise concentrates on maintaining a small-ish portfolio of non-competing properties, working to establish retail homes for the brands it does take.
And it was this attention to detail along with Merchantwise’s support capabilities that attracted Corus’ Lily Yan to the agency when it came time to reassign rights for tween girl property Ruby Gloom. While there’s a Nelvana toon series based on Ruby, Yan was looking for an agent to position the property as a fashion and lifestyle brand in Oz. Merchantwise’s experience in mounting design-driven licensing programs for local tween girl mags Total Girl and Girlfriend made it doubly attractive.
The current Total Girl lineup includes a range of fashion apparel and accessories, hair appliances, music CDs and a novel series, while Girlfriend has a DTR deal with Kmart for apparel, footwear and fashion accessories.
Turning to Ruby Gloom, plans abound for the property next month. Apparel licensee Designworks is releasing an exclusive range of t-shirts at tween-skewing specialty retailer Jay Jays and distributor Magna Pacific is getting set to launch two DVD volumes of the Ruby series. For mid-year, Impact Rock Merchandise is working on sticker decals, phone charms and posters.
Clearly Merchantwise is keeping itself busy, but Schauder says there’s room for more additions to the agency’s portfolio, and he’s looking for more kids and sports properties.
Then there’s brand-new International Film Group, which launched last April and may have just found itself in the right place at the right time. The company, helmed by head of distribution Sue Woollard, executive producer Catherine Nebauer, and CEO and founder Jennie Hughes, opened its licensing doors with several DIC properties (including Inspector Gadget, Cake and Madeline) in hand, and quickly added Paramount Pictures. Since then Manhattan Beach, California-based The Sharpe Company appointed IFG to look after Franny’s Feet, Naughty Naughty Pets and Angry Little Girls.
Though IFG was the new kid on the block, Sharpe president Charlie Day was impressed with its founders’ years of industry experience. ‘I like the fact that IFG, at this point in its evolution, will be focused on a relatively small number of properties but brings great experience to the market,’ he says.
THE OZ RETAIL LANDSCAPE
As for the Aussie licensing and toy market itself, the picture doesn’t look terribly different from its US and UK counterparts. In fact, a quick glance at a list of the country’s top kids licenses has the likes of Thomas and Friends, Dora, Hannah Montana and Spider-Man claiming the top spots. Exceptionally strong local properties, such as The Wiggles and Saddle Club, round out the ranks. So it should come as no surprise that TV exposure drives the bulk of consumer traffic to retailers for licensed product. But unlike the US, landing a prime spot on terrestrial nets such as ABC Australia or Channel Ten is key.
Cable penetration currently hovers between 25% and 30%, and while nets like Disney and Nickelodeon are making headway, terrestrial rules. ‘The data we get from retailers simply shows how free-to-air exposure affects sales performance,’ says WP’s Mi-Kyoung. ‘If the program is on FTA, sales go up quite significantly 99% of the time.’
As such, big-budget features can have a tougher time in Oz. The newcomers don’t have proven staying power, à la Spider-Man, Shrek or Transformers, and retailers are quite risk-averse, says Tony Oates, MD of children’s products distributor Funtastic. Most retail buyers tend to strike a balance between popular new brands and evergreens such as Barbie and Winnie the Pooh. ‘The hot licenses, particularly movie-driven properties provide retailers with hype and excitement and the spark they all crave, but they do have a balance of traditional licenses.’
And make no mistake. The Australian retail market is as competitive as any. Target (274 stores), Kmart (182 stores) and Big W (148 stores), the latter owned by Woolworths, are fighting for the attention of a small population that sits just a touch over 21 million. Moreover, according to Merchantwise’s Alan Schauder, just three cities on the Eastern seaboard (Sydney, Melbourne and Brisbane) drive 80% of the country’s retail sales. So, as with many mature territories, mass-market licensing programs are continually duking it out for shelf space.
In fact, says Oates, the big-three discounters account for approximately 75% of the kids products sales. However, the retail landscape may be in for a bit of a shake up, he adds, as the Coles Group (owner of Target and Kmart) was acquired by conglomerate Wesfarmers in November for roughly US$17.6 billion, making it the largest deal in Australian corporate history.
In 2007 Wesfarmers generated revenues of US$8.6 billion, up 10% from 2006 numbers. That said, Oates explains most suppliers are still waiting to see a real change in the market as Wesfarmers has yet to make any big post-acquisition moves.
For now, licensors and their partners, especially toy licensees, continue seeking space, with spots at Target and Woolworths being particularly prized. Oates says Target remains the most aggressive when it comes to licensed properties. And it’s worth noting that Neil Kerry, Target’s merchandise manager of toys, books and sporting goods confirms character licenses and brands (i.e. Bratz and Barbie) account for 60% of the retailer’s children’s products sales. ‘If we go for a license, we have all departments on board,’ he says.
Target may also be changing merch patterns once again. Whereas the in-store boutique was quite a hot trend a few years ago, mass-market zeal for the concept has waned. ‘Generally speaking, [retailers] found that the consumer goes looking for the products in the parent department first,’ says Oates. So if consumers are searching for Thomas the Tank Engine sheets, for example, they’re more likely to start by checking out the bedding department rather than a Thomas-branded aisle.
More effective, says Oates, has been Target’s turn at instituting Kids Week in March and September chiefly through its print flyer that has a national circulation of approximately five million. The retailer chooses licenses that are topical or performing well at the time – last September’s issue featured H2O and High School Musical, for example – and pulls their merch together in a ‘story’ that pushes an entire range of products, including toys, footwear, bedding, apparel and more. Target then supports the event in-store with front-of-house displays in appropriate departments, sometimes adding character appearances. Kerry says that Kids Week is a good opportunity for licensors to showcase exclusives since it usually gives a strong boost to sales.
For the toy market in particular, another Target invention – Australia’s notorious Christmas in July – continues apace. Kerry says the push to sell toys though a layaway program, where consumers pick out their kids Christmas toys six months ahead of the event, is growing by at least 5% a year in sales volume. And like the mass-market holiday price wars launched a few years ago in the US, Christmas in July tends to drive prices and sales margins down on the top-200 or so selling toy SKUs.