IN these times of economic uncertainty, tight margins and increasingly frugal consumption, crafting a strategy that can best weather the tempest is pretty much priority one for the US licensing industry. There’s the obvious stress on churning out lower price-point product (See ‘Is the price right?’, p. 56), however, after surveying some licensing heavyweights operating State-side it’s apparent that hatching a one-size-fits-all solution is not realistic. The strategies and opinions are as varied as the market itself, but there is some common ground to be staked, particularly around seasonal merchandising and evergreen properties.
Just how bad is it?
This certainly isn’t the first economic slowdown experienced by the licensing business, but it’s arguably the worst. After all, the industry didn’t really start growing by leaps and bounds until the mid-1980s, and current figures show this recession as being much deeper than the last one experienced during the dot-com meltdown of 2000. In fact, according to the US Census Bureau, overall retail sales in December 2008 dropped 11% from the previous year and total sales for the entire holiday season (November 2008 to January 2009) were down 9.5%.
Martin Brochstein, SVP of industry relations and information at industry org LIMA, for one believes that the challenges faced by a consumer-driven business like licensing are indeed substantial. ‘To a great extent this is a business built on wanna-haves, not gotta-haves,’ he says. ‘At a time when so many consumers are thinking very seriously about which things they gotta have, you have to believe that business is going to be affected.’
At Cartoon Network Enterprises, VP of consumer products Christina Miller agrees that the downturn is forcing industry players to seek innovation. ‘Common wisdom is being re-thought,’ she says. ‘I think it becomes a question of what is going to make our goods one of the few things that consumers do purchase. People haven’t stopped purchasing, but they are becoming more selective.’ In other words, parents aren’t going to stop buying for their kids, but they’re going to be pickier and they’ll likely buy less. So how do you get your property into their basket?
‘Tis the season
There are two seasons that licensors are betting will withstand the pressure of the current economic downturn and remain sacrosanct to the consuming public in the US – Christmas and back-to-school.
Christmas shopping, in fact, holds such a high place in the psyche of US consumers that a number of licensors are refocusing their efforts on the post-Thanksgiving retail season. ‘We are looking at re-emphasizing the seasonal connections with our brands like Peanuts,’ says Josh Kislevitz, SVP of domestic licensing at United Media. ‘We see success in that area continuing.’
To that end, United is working to secure primetime slots on ABC for Q4 in 2009 for classic Peanuts toons and has further bolstered its home video deal with Warner Bros. to re-release seasonal Peanuts specials on DVD during the one time of the year that consumers are most willing to open up their wallets.
Back-to-school, while always a key buying season for licensed merch, has been made an even bigger priority. The idea being that just as consumers aren’t going to Grinch-out on Christmas, neither will kids go without new clothes and stationery supplies as they head back to class.
CNE’s Miller says that her business is going to zero-in on back-to-school this year. ‘We will be concentrating on apparel and especially footwear,’ she says. ‘Kids need new clothes at the beginning of the school year. If a child outgrows their shoes, they are going to get new footwear before their parents do.’ With this in mind, Miller says CNE will be focusing on making key properties like Ben 10 even more desirable to their target demo. ‘You have to be one of the properties that kids want,’ she says. ‘Now more than ever you have to be aware what is meaningful.’ Look for CNE to continue its promotional partnership with the National Basketball Association to further Ben 10′s visibility with its core boys demo.
Making the old new again
The licensing folks we spoke to also agreed that iconic properties are better suited to surviving and even thriving in tight times. Evergreens have a longstanding emotional connection with children and their parents that is reassuring when their environment, by and large, isn’t. However, keeping within the confines of an established program will not result in the growth that the bottom line and shareholders demand. ‘We can’t just sit back and wait for the royalty checks to roll in,’ explains Gary Hymowitz, VP of consumer products, Scholastic Media. ‘We have to be smarter about it and work with partners to make sure our marketing is new and our message is out there.’
For instance, Scholastic is shaking up its approach to classic Clifford The Big Red Dog, tying the preschool-centric canine property to a charitable cause while placing merch exclusively at specialty retail through the Be Big program with FAO Schwarz boutiques, which launched in February.
‘Clifford has been in mass market, specialty, drug, just about all channels,’ says Hymowitz. ‘We have taken it to Macy’s and FAO to make it special again. It’s a cause-related marketing overlay that will include plush, DVDs and books.’ And as part of the program, FAO boutiques will carry exclusive Clifford plush with 10% of proceeds earmarked for the HandsOn Network, a charity that stresses volunteerism.
While Ben 10 is a ways from broaching classic status, the boys action property had a breakthrough year in 2008 that CNE’s looking to build on by seeking out non-traditional product and promotional categories. The licensor has recently brought the popular property to the hardlines consumer products’ space with a slew of new licensing deals, including figural keychains (Basic Fun) and 2-D and 3-D projectors (Dynatech). As well, CNE is expanding the presence of its Ben 10 Multimedia Live Events to malls around the world. The live event strategy has proven a sell-out success with CN’s Adult Swim comedy duo Tim & Eric’s Awesome Show Tour, and Miller believes Ben will also benefit from it. ‘As opposed to staying within a standard model, we are realizing that there are different revenue opportunities,’ she confirms.
Launching new properties tough, not impossible
Both Scholastic and United Media are hoping to reap rewards from relatively new properties with a careful and deliberate roll out and retail strategy, contending success is possible.
Scholastic is continuing to build momentum for its 39 Clues publishing property, signing a deal with University Games last month for puzzles, board games and card games – all categories considered safer than many others due to their relative inexpensive price points and perceived educational value.
‘It’s a bit more challenging for something new,’ says Hymowitz. ‘But it’s coming from Scholastic and has an educational bent to it, so people can feel good about it.’ And with Steven Spielberg and DreamWorks committed to producing a 39 Clues feature-length film in 2011, Scholastic is taking its time to build an appropriate program that will ideally give the property a long shelf life.
United Media is focusing its efforts on retail exclusivity for book-based girls property Fancy Nancy, which entered the licensing arena roughly three years ago. ‘In this environment we are looking for a retail home that can create its own visibility,’ says Kislevitz. And in 2008, Target had an exclusive on Fancy Nancy dolls which proved successful enough for the mass-market giant to renew and expand in 2009. The retailer has also taken exclusive windows on Fancy Nancy apparel and domestic categories.
Making the property ‘a premium product at a premium location’ helped Fancy Nancy a achieve success when conventional wisdom dictates only safe iconic IP will sway consumers. ‘I think you’ll see more of that targeted approach,’ Kislevitz says. ‘The right product execution still has a home.’