The economic outlook for the so-called PIIGS (Portugal, Italy, Ireland, Greece and Spain) nations is as bleak as it’s ever been deemed in recent history. Teetering on the brink of default, much ink was spilled this summer on what exactly the European Union should/could do—or not do—to keep the struggling countries afloat. And while Spain and Greece have in the past been lucrative markets for licensed goods, sustained economic pressures have narrowed licensor expectations and shifted the retail landscape in both nations. With consumer budgets shrinking, retailers, broadcasters, licensors and licensees are all feeling the pinch. A survey of the licensing community in both countries reveals that times are indeed tough, tougher even than most realize, but optimism remains a valuable asset that is driving business forward.

Spain
With the unemployment rate hovering around 20%, there is reason to be concerned that consumer spending in Spain is only going to decline. Retail sales numbers are starting to bear this out, with a 7.2% drop in June and 3.9% in July over 2010 numbers.

“The economy is worse than bad, it’s awful,” says head of Nickelodeon Consumer Products for Iberia José Maria Cendra somewhat bluntly. “The economy really is going down and down,” he adds.

Cendra says that a country-wide 20% unemployment rate is actually a low estimate. Certain sectors are edging closer to the 30% mark, with young college-educated workers accounting for a big chunk of that statistic.

Warner Bros. Consumer Products director of licensing for Spain and Portugal Rosa Tevar, however, has taken a slightly more optimistic view. “Economic growth is projected to strengthen gradually, reaching 1% in 2011 and 1.5% in 2012,” she says. In addition, she notes that an unemployment rate of 19% could be in the cards as the economy picks up, meaning a slight bump in consumer spending. “We want to think the worst is over and there are some silver linings to the Spanish economy,” Tevar says.

Her optimism is echoed by Julian Barbier, head of licensing for Imira Entertainment. He concedes that things are rough, but not as bad as in other PIIGS nations. “The situation is not as bad as in Greece or Portugal,” he says. “We don’t need Europe to jump in just yet—consumers are still buying licensed goods.”

Seeking evergreen shelter
The rule of thumb is that in a crisis, consumers stick with what they know—in licensing that means classic or evergreen properties. And according to those on the ground, the rule has held up in Spain.

“All our classic properties continue to perform well,” says Tevar. “Retailers don’t want to take many risks and they prefer to carry our well-known properties.” She adds that the company’s Looney Tunes stable of characters is the company’s bread-and-butter in the region, with a wide-ranging program in terms of categories and demographics that start with infant-focused extension Baby Looney Tunes and go right on up to its adult vintage apparel line. Brand-new TV series The Looney Tunes Show, which debuted on the country’s top kidscaster Clan TV in September, is also bound to give the property a boost.

The continued dominance of Clan TV as a product-driving platform was also mentioned as the prime reason for the continued success of Nickelodeon properties Dora the Explorer and SpongeBob SquarePants in the territory. “SpongeBob and Dora are among the top-seven properties in the territory,” says Cendra. “Dora is still really booming.” He adds that the company is looking at a strategy similar to Warner Bros., broadening the demographic appeal of its top property in Spain.

“We are going to be enlarging the SpongeBob target age,” Cendra says. “The economy doesn’t look promising, so we are going to be more about marketing and promotional partnerships and will focus on our key accounts and the Clan TV platform.”

And according to Barbier, other properties currently performing well in Spain include Ben 10, Gormiti, Beyblade and Hello Kitty. He also cites Disney Channel as another strong platform on the broadcast side.

Retail realignment
With a fragmented retail market, Tevar reports that Warner Bros. has moved its retail efforts away from small Spanish outlets and is concentrating on international chains such as Inditex, Zara, Bershka, Oysho, Mango and Cortefile.

“In spite of signs of recovery, retailing continued its negative trend in 2011,” Tevar says. “The only retailers that are performing well are ones with international presence. We have a solid business with them and it is helping us to maintain sales in this tough environment.”

The current climate also seems to be favoring the adoption of direct-to-retail strategies—which Warner Bros. has executed with a number of the aforementioned retailers.

“Our DTR business has grown in scale and importance,” Tevar says. “DTR has a stronghold on apparel and has made it possible for apparel to continue to be a main driver for us.”

Generally, the retail situation is difficult. Many of the traditional independent outlets are disappearing and larger chains keep moving in. While the current landscape is defined by a glut of apparel and plush inventory, deep discounts and slim margins, there is hope that in the long-run the appearance of more organized and larger retail chains will be good news for the Spanish licensing business.

“It’s a pretty complicated situation right now,” says Cendra. “But I’m still optimistic. In the next 18 to 24 months, the economy will have to start showing some positive signs or it will be bad for everybody, not just licensing.”

Greece
If you think the news coming out of Spain isn’t great, it gets worse heading East. Greece has recently had the distinct dishonor of being singled out by Standard & Poor’s Credit Rating Service as being pretty much a sure thing to default on its debt before the end of the year. In 2010, the country’s estimated GDP or Real Growth Rate registered in the negative at -4.5%.

“Unfortunately it’s as bad as everyone thinks,” says Paul Berrington, CEO of Greek licensing agency Black & White.

While the unemployment rate reached a record high of 16.6% this summer, the number hides the scores of working poor who have had their wages slashed and their buying power muted. With an estimated 30% of the country employed by the government, cost-cutting measures enacted by government agencies have drastically reduced consumer spending. In fact, salaries and pensions throughout chunks of Greek industry have been slashed by an average of 25%.

The consequences for retailers have been substantial—in short, they are reeling. “According to the government, 23% of retail store fronts have closed so far,” says Berrington. “It’s reflected on the high street. It doesn’t look like a healthy environment for shopping.”

Over the past eight months, several key retailers including Atlantic Supermarket, Greece’s fifth-largest retailer with 800 employees, declared bankruptcy, as did the country’s second-biggest toy and infant products retailer, Kou-Kou, in January.

“The Greek economy overall is facing serious problems,” says Themos Sgouras, Warner Bros. Consumer Products agent for Greece and Cyprus and CEO of licensing firm  Hellas Press. “The majority of people are going to earn less than they have in the past and the purchasing power of the consumer, in general, has been diminished. We don’t even know how this story will end — we have not yet reached the bottom.”

Licensing at a standstill
Not surprisingly, in this climate the licensing business has taken a major hit. Berrington says he is telling all his clients to avoid placing any new properties into the market for the time being. “We aren’t even offering that service in the market at this point,” he says. “Media properties are hurting considerably right now.”

Sgouras agrees, but says that as with Spain, the properties still holding their own are the evergreens like Looney Tunes, Tom and Jerry, Scooby-Doo and Barbie. “People might not realize that Greece is a mature market for licensed brands,” he says. “The consumer understands the premium that has to be paid for a license. So even in a crisis, there is still hope and opportunity.”

Berrington confirms that the performance of some properties including Peanuts, Garfield and UK specialty brand Forever Friends have brought a modicum of stability to the licensed goods market. But to gain a clear view of the new normal in the Greek licensing business, one only has to look at the operations of Hellas Press. In 2005, its Athens office had 55 employees, but that number has been whittled down to eight. And starting this summer, all operations were split up between various home offices to cut down on overhead. “I think now is the time to say, ‘No more offices, we need more sales people instead,’” says Sgouras. “We have reduced our costs and right now are focusing on new business.”

Seeds of hope
Berrington points to the launch of Nickelodeon Greece in September 2010 as a small bright spot for the licensing business in the country. “I have been told that some broadcasters are down as much as 35% in terms of ad revenue,” says Berrington. “But Nick launched a successful channel that is really showing the locals a thing or two about how to present to children.”

Additionally, Sgouras reports that the Star Channel platform has succeeded in delivering children’s series to a wide audience in a tough TV market. The success of the platform has supported licensing categories that are still driving revenue in the beleaguered country, most notably back-to-school, publishing and food.

Another high point, much like Spain, is the rationalization of the retail environment. With the decimation of mom-and-pop shops and the diminishing old guard, bigger retailers are amassing more power. For example, the nation’s largest toy retailer Jumbo now has 41 stores in Greece and also operates locations in Cyprus, Bulgaria and Romania.

“Jumbo is doing very well, even in the crisis,” says Sgouras, noting that five new malls have opened in Athens this year despite the retail struggles. Ever the optimist, he says that he is looking at the export market as a way to mitigate the shrinking returns from Greece and is, above all, keeping his chin up.

“We have to see things from a different perspective now,” Sgouras says. “We have to look at exports to the rest of the EU and we have to look beyond the bad things. Everybody knows that good things come out of crisis.”