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Consumer Products

Cracking co-branding: The benefits and risks for entertainment licensing

In a risk-averse climate, co-branding can often be the answer to landing retail placement and driving revenue. And when it works, it really works - just look at February's The Lego Movie. But what about when it doesn't?
June 17, 2014

The Lego Movie is much more than a blockbuster film that has so far grossed more than US$450 million worldwide on a production budget rumored to be roughly US$65 million. Underlying the box-office receipts is the decade-long strategy that transformed the company from a construction toy-maker located in Billund, Denmark, into a global entertainment brand powerhouse.

In 1999, Lego was an established yet struggling business. However, its first-ever licensing deal signed with Lucasfilm that year marked the beginning of its tremendous turnaround. Fast-forward just a decade or so, and the toy-maker has become a US$4.5-billion concern whose revenues have quadrupled, thanks largely to its significant expansion into licensed products. And it now sits as the world’s most profitable toy company.

With the runaway success of its first big-screen entertainment project, the secret is out—the key to Lego’s success has been in perfecting the delicate balance required to co-brand successfully. There is no better proof than the film’s almost dizzying convergence of characters within the Lego universe on-screen, including Darth Vader, Teenage Mutant Ninja Turtles, Harry Potter and Batman. The mash-ups not only captured the attention of Gen X and millennial parents, but they also served to indicate that entertainment licensing is on an increasingly integrated and co-mingled path. In fact, the way ahead for IP owners could be determined by how well they execute co-branded programs.

One + one = three 

Taking a look at the tenets of a successful co-brand, and some recent examples, should shed some light on the looming mixed-up, mashed-up future of licensing. The basic concept is easy to grasp—take one brand with an established affinity and fanbase and add to it another with a slightly different following. Ideally, the pairing results in the successful extension of both properties’ reach with retailers and consumers.

The pro sports world has been rife with these types of licensing deals. Take a Garfield plush sporting a Manchester United t-shirt. “It’s a no-brainer,” says Rob Corney, Group MD of UK-based Bulldog Licensing. “Sports is advanced in this because the affinities are so strong and yet so open-ended.” He adds that it’s natural to mix a character-based IP with a sports brand because of the particular nature of sports’ allegiances.

Consider Sanrio’s Hello Kitty. Just when you thought she was already everywhere, the Japanese feline has continued to grow through innovative co-branding relationships. Her equity is such that the character is both open to interpretation and distinct enough so as not to get lost or overlooked when attached to another brand.

The L.A.-based branch of Sanrio struck a co-branding deal with US Major League Baseball three years ago. It was a concept that Dave Marchi, senior director of brand management and marketing, says initially met with some resistance from baseball executives who didn’t see the connection between the primarily girl-focused character and their male-dominated team sport. But a successful test launch in 2011 with Hello Kitty-branded Dodgers merchandise at the L.A. Dodgers’ stadium has helped the deal expand this year. All 30 MLB teams are distributing Hello Kitty co-branded plush and apparel at their stadiums and an assortment of US specialty retailers.

“It’s a bit surprising and different,” says Marchi. “But it works because the authenticity is there. There is a connection between the properties.” He contends the key to Sanrio’s co-branding success has been in carefully vetting deals, making sure that there are only a handful of them made available to consumers at one time, and establishing creative aspects that are tightly controlled. There are certain Hello Kitty attributes that are sacrosanct—her bow and eyes, in particular.

“Hello Kitty is a perfect canvas for collaborations because of how she is graphically represented,” he adds. “There is a Zen-like quality to it that can be invested with so much.”

Turning to Japan, again, we find Domo, the character created as a mascot for the country’s public broadcaster NHK in the late ’90s. He’s since emerged as a pop culture staple, guided by the licensing and marketing minds at New York-based Big Tent Entertainment. Partner and CMO Rich Maryyanek says Domo’s stewardship has been marked by the use of careful co-branding deals that have, like Hello Kitty’s, capitalized on the open-ended nature of the character itself.

“It’s instantly recognizable,” he says, explaining that Domo’s open mouth with four teeth located on top and bottom are his trademark. “But he’s an open book,” Maryyanek adds. “If I’m in a good mood, he looks happy. If I’m in a bad mood, he looks angry.”

The character’s openness makes Domo a perfect vessel for co-branding, but Maryyanek says there’s no guarantee that the character will work with everything. Much of the effort in producing success revolves around finding the right partnerships. “They have to fit,” he says. “We are a newer brand, so we want to connect with other more established iconic brands.”

For example, one of the most fruitful co-brands for Domo so far has been with DC Comics through Warner Bros. Consumer Products. The partners unveiled a plush and collectibles line in 2013 featuring Domo Batman and Domo Superman, among other characters.

“With Domo Batman, both IPs retain their own identity because they are both so strong,” says Maryyanek. “Batman’s suit and Domo’s face are so strong that they fit together to make something new without diminishing either character.”

Another Domo co-brand currently in the works is a short-term deal with Ghostbusters and its owner Sony Consumer Products. The deal is an example of a carefully planned extension that makes graphical and thematic sense. “It’s a mix of two iconic figures, one that is newer and internet-based, and one that is 30 years old and from the film world,” says Maryyanek. “But the connection is there. It fits, and it’s a lot of fun putting them together. A co-brand has to make sense beyond being a purely financially driven exercise. There has to be a symbiosis between the brands.”

Plush-driven Uglydoll is also building equity through a recent series of well-chosen co-branding programs. Somewhat new to the model, Uglydoll had its first collaboration with Sanrio, which was announced at San Diego Comi-Con last summer.

“Sanrio came to us and it seemed like a good idea,” says Teresa Fazio, licensing coordinator for Pretty Ugly, the Glen Brook, New Jersey-based owner of the property. “It took two years to get to market, but it was a big hit. From there, we started working with Warner Bros. Consumer Products on DC superheroes,” she says.

Fazio says owing to its recognizable look and open-ended quality, Uglydoll is constantly approached for co-branding opportunities, but the parentco is very careful when choosing partners. “We don’t want to work with all of them,” she says. “Uglydoll is about being unique and accepted, and that message and attribute has to be present in the partner brand.”

In a business driven by plush and accessories, Uglydoll’s latest innovative co-brand is with the iconic ’70s rock band KISS. “It just works well because each brand doesn’t overshadow the other,” she says. “It’s a great way for us to introduce ourselves to the KISS fanbase and vice versa.”

She says fans can suss out whether or not there is a true affinity between brands, and based upon that, if the creative output is worthwhile. “It really takes time on both sides,” she says. “Each side has to understand the other brand in order to make it work.”

From both the retailer and the brand owner perspective, co-brand deals are attractive. In a shaky retail climate, where buyers are leery of new, untested propositions, mixing two well-known IPs seems like a much safer bet. “The growth of co-branding that we are seeing during the economic downturn is a way for the licensing industry to breathe new life into an area that is very risk-averse,” notes Corney.

Sand in the Vaseline 

These examples work—they illustrate how to link two separate IPs with different fanbases to create a mutually beneficial product line. The IPs must have a connection, and the execution must be thoughtful in terms of placement and distribution. In these cases, the benefits of co-branding are easy to see—each IP extends its reach and everyone goes to the bank happy. The catch, however, is that they also represent a specific form of co-branding that revolves around design or fashion brands. When it comes to an entertainment-based IP, where more sharply defined characters and narratives enter the picture, the waters get somewhat muddier.

Take a look at the cover of any celebrity tabloid to get a whiff of the potential downside to certain co-branding deals. “You absolutely benefit from each other’s strength, but you suffer if there is any negativity,” says Corney. “The danger is that your brand—the one you have spent all your effort protecting—is now on the apron strings of another brand that you have absolutely no control over.”

Examples are plentiful in the world of sports and celebrity partnerships. Apparel and soft drink companies were fast to cut ties with the likes of Michael Jackson and Kobe Bryant when their personal lives suffered public degradation. But kids entertainment licensing characters may have a leg-up on this front, admits Corney. “You won’t find a Teenage Mutant Ninja Turtle disappearing with a Page Three model,” he jokes. But an element of risk certainly remains, he says.

“Theoretically, something could tarnish Marvel,” agrees Robert Porter, toys and games analyst at London-based market research and consulting firm Euromonitor International. “The result would have a knock-on effect on Lego at this point, too.”

Another potential problem is a growing number of faulty or poor executions purely driven by the bottom line that could spur a consumer backlash. “I look at some co-brands and wonder where the connection is,” says Maryyanek. “Some make sense, but others just look like they are solely financially driven.”

Corney agrees that mismatched properties can have a jarring effect. “I don’t want to see Tom and Jerry, for example, paired with Felix the Cat or something like that,” he says. “There can be some uncomfortable fits out there that would be the result of some accountants in the basement of a film studio somewhere saying, ‘Let’s do it, it’ll make money.’”

Perhaps the most ominous potential downside in the wake of the success of The Lego Movie is whether or not too much of a good thing can irrevocably harm a property. “Co-branding has grown exponentially,” says Porter. “The Lego Movie pretty much carpet-bombed the audience with it. There is a tendency when something is so successful to sell the hell out of it, and it could, in time, actually disenfranchise the audience.”

While Porter’s words might send chills up the spines of licensing execs, he is not alone in thinking there may be a negative reaction brewing to the “more is more” ethos. “There is a real danger that it could become fatiguing for the audience,” says Corney, explaining that if everything is everywhere, there is a danger that the key attributes of successful and relatable IPs could be lost.

“Star Wars is the absolute hero in the 20th century, the way that Dickens and Shakespeare were. They all created their own universes that expressed something about the human condition that everyone could relate to,” he says. The numerous intricacies and deep history of the Star Wars universe and its characters are exactly what gives the brand its equity. It’s possible that its self-contained aspect is being threatened with every new brand extension.

“There was a line of t-shirts from [UK-based] Chunk Clothing a few years ago that was brilliant,” says Corney. “It took Star Wars characters and de-contextualized them. For example, one t-shirt had Darth Vader as a DJ spinning records at a party.” Corney adds that the execution of the line was stellar and sees it as a great extension of the Star Wars brand. But he fears there could be a deleterious element of such licensing executions that might not be realized until much later.

“There is a danger that the exposure outside of the original context in an unexpected or inappropriate environment could lessen the effect of the IP on a demographic that is not familiar with it,” he says. “Is my son going to be scared, like I was, when he sees Darth Vader for the first time in the film? Or is he going to say, ‘Oh, there is that cool guy from the t-shirt’?”

It’s a sticky proposition. If everything is everywhere, does such ubiquity lessen the original appeal of a self-contained property?

Porter also wonders if this widespread flattening effect is on the horizon. “From a corporate point of view, these companies will keep doing these deals until they stop making money,” he says. “But you can overdo something and lose the magic that made it work in the first place.”

He says he holds out hope that privately owned Lego, for one, will wade carefully into the future of licensing based upon its good track record and excellent executions. However, Porter wonders whether or not public companies that answer to shareholders, such as Disney, will display the same restraint.

In the gaming space, the company has recently introduced Infinity, an immersive videogame system that leverages a roster of hundreds of Disney IPs by placing them all within the same universe. Currently, it can rightly be considered the Everest of IP convergence.

“It is the most heavily IP-bombarded product ever made,” says Porter. “It is a powerful proposition and it’s difficult to say when—or if—the public is going to say ‘OK, I’ve had enough of all these intergradations.’” Currently,  however, consumers don’t seem to be anywhere near that point when it comes to Infinity. The videogame platform and corresponding collectible figures have been selling like hotcakes. As of April 30, US sales of the US$75 starter pack had surpassed three million units.

Corney says that when striking these deals, businesses would do well to consider the long-term ramifications of the new form of IP over-saturation. “There is a danger that it could go too far and inappropriately disassociate characters from settings and stories,” he says. “It just raises the question, ‘What is next?’ Is it possible that Darth Vader will be considered nothing more than a Lego movie character to the next generation?”

About The Author
Gary Rusak is a freelance writer based in Toronto. He has covered the kids entertainment industry for the last decade with a special interest in licensing, retail and consumer products. You can reach him at garyrusak@gmail.com

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