When it came to light that Finland-based Rovio Entertainment’s addictive app Angry Birds generated more than US$100 million in pre-tax revenue last year, with a full 30% coming from numerous consumer products extensions, the licensing industry took notice. And at Licensing Show this year, non-traditional digital entertainment properties, namely characters culled from iOS apps, were everywhere. After all, the next Angry Birds would surely rise from the new crop of contenders, wouldn’t it?

“Angry Birds opened the gates,” says Larry Seidman, CEO of Dimensional Branding Group. The San Anselmo, California-based company previously worked as Rovio’s promotional partner and has since taken on a number of app properties for licensing and promotional representation.

Debra Joester, president, CEO and co-founder of New York-based agency The Joester Loria Group, agrees that Angry Birds changed the perception of the digital space for licensees, retailers and consumers alike. “The success of Angry Birds triggered immediate interest in apps and other digital media properties,” she says. “Retailers are now eager to identify another blockbuster that will deliver Angry Bird-like results.”

As the saying goes, nothing succeeds like success. And from the achievements of Rovio and its partners’ carefully planned and successful strategy, many in the industry have drawn conclusions.

“They got it out there fast,” says Ira Mayer, a licensing industry veteran and president of The Licensing Letter publisher EPM Communications, referring to Rovio and agent Striker Entertainment’s ability to put products on the shelf quickly to capitalize on the white-hot burst of the app’s initial popularity. “This was not an 18- to 24-month to shelf program,” he explains. “At first, they had only a handful of licensees, so they could react fast.”

Rovio focused on a few core categories with a specific retail strategy. For example, plush (the driving category) made by partner Good Stuff Toys was first earmarked for its online shop and eventually hit US speciality retail chains such as Hot Topic. Rovio also made a smart move in hooking Angry Birds up with Fox’s big-budget animated feature Rio to make a Rio-ized version of Angry Birds. The link with a more established traditional form of entertainment gave the new digital property another entry point at retail and increased its legitimacy in the minds of retailers and consumers. In addition, the use of interstitial and short-form content further invested the app property with credibility.

“Rovio has done some neat stuff [with Angry Birds],” says Mayer. “No one else was doing it then, and no one is really doing it now.” With its accessible game play, iconic imagery, relatable characters, deep interaction and multiple entry points, Rovio had a number of elements fall into place to make Angry Birds the first digital licensing blockbuster, but it’s not clear that similar properties can follow this blueprint to success.

The next big thing
A survey of the licensing world shows that more than a handful of digital properties are vying for lucrative licensing programs. According to The Market for Apps & E-properties, a new report published by EPM Communications, 76% of the top 25 apps are game-based (three of the top 25 are Angry Birds and its spin-off titles).

Of the top apps, 84% of the games titles have secured licensing programs or have recently found licensing representation, and only three have no licensing profile at all. Among the top 19 games, 58% are original to the medium,  including Fruit Ninja, Words with Friends and Doodle Jump.

While these original app-based IPs have picked up a number of licensees in traditional categories such as plush and board games, nothing has come close to matching Angry Birds’ appeal to retailers just yet. “There have been some offerings that we felt were doomed from the start,” says Rich Maryyanek, partner and CMO of New York-based licensing agency Big Tent Entertainment. He explains that licensed properties need to have a deep connection with consumers that goes beyond download numbers if they hope to make a mark in licensing.

“It seems to me that everyone with more than 200,000 downloads is trying to launch a licensing program,” he says. “While it is understandable from a revenue standpoint…there are a lot of costs that need to be considered before making an attempt.”

Maryyanek adds that a recent spate of non-starters,  including Moshi Monster’s US toy line at Toys ‘R’ Us, has proven that digital properties need to have distinct and likable characters and “brand-building beyond being a casual game or functional app” to succeed. “Big downloads do not equal a big licensing program,” he says. In fact, it’s a chorus many in the licensing business are singing.”It takes much more than a hot app to establish a property as a pop-culture phenomenon,” agrees Joester.

The crux of appeal
“The question is whether [Angry Birds] is a rogue hit or a sign of things to come,” says Mayer. In his decades spent in the industry, he has seen various copy-cat fads come and go and looks with a wary eye at digital properties promising to deliver Angry Birds-type returns based solely on app downloads and screen time.

“There is not going to be the next Beatles or Elvis or Bob Dylan either,” he contends. “Let’s stop thinking about what the next Angry Birds is going to be and let’s think about what is realistic to expect from the app world.”

Maryyanek agrees that pinning one’s hopes on a success of Angry Birds proportions is a sure-footed path to disappointment. “Angry Birds licensing is a phenomenon that will be difficult to duplicate,” he says. “The bar has been set so high by the success of the program that most others will pale in comparison.”

It’s a precarious position—on one hand, the unexpected and lucrative success of Angry Birds has undoubtedly opened retailer eyes to the potential of the digital environment. But on the other, it has also created sell-through expectations that are nearly impossible to meet.

There is another stumbling block facing the exploitation of digital assets. Just because there is a brand-new category of IP that is connecting with audiences, it doesn’t mean more shelf space has suddenly become available at mass-market retailers.

“Walmart and Target can only really take a couple of properties at a time,” says Mayer. “The bottom line is that there is still only a limited amount of shelf space for properties.” In fact, while Angry Birds might have attracted retailers in 2010, a number of subsequent digital IPs have failed to generate significant ancillary product sales and have already tempered retail buyer enthusiasm going into 2013.

“Retail is more hesitant now than it was six or eight months ago,” confirms Maryyanek. “A few less-than-stellar offerings will scare people off pretty quickly. I do think that there is still interest, but probably more moderate expectations.”

Execution is everything
Working with the full catalogue of digital assets from the online game hub MiniClip, Dimensional Branding Group is turning its attention to the popular game app Temple Run. The company believes the game has the potential to drive a multi-tiered licensing program.

Temple Run was developed by Raleigh, North Carolina’s Imangi Studios and released last August. It is currently available on both iOS and Android platforms. The app fits the bill for licensing in terms of download numbers, and it was included in the top-50 most-downloaded list of apps in December 2011. It went on to become the number-one free iOS app at Apple’s App Store. When Imagni released the Android version, the game was downloaded more than a million times in less than three days.

“Temple Run has an amazingly passionate audience and these are passionate fans,” says Seidman, adding that he believes the app has the necessary ingredients to extend its success beyond download numbers.

Taking a page from the Angry Birds playbook, Dimensional Branding Group established a partnership with Disney for the co-branded Temple Run Brave game, linking the app to traditional entertainment. The version incorporated plot and character elements from the Disney animated movie released in June 2012 and launched at the same time as the film. It ranked as the most-downloaded app at the US App Store immediately after its release.

Prior to Temple Run Brave‘s launch, Dimensional Branding Group inked a deal with Toronto, Canada-based toyco Spin Master to bring the app to traditional board game and card game categories this fall. As well, a number of apparel deals, including one with Li & Fung for pajamas and Gem for t-shirts, will round out the initial phase of the mass-market retail program for the popular app.

“I think it’s going to do well,” says Seidman. “Digital brands are just as legitimate as any other brand that builds a fanbase.”

While the company is hitting all the seemingly correct strategic touchstones for its Temple Run program, as well as readying a similar approach for other digital IPs, Seidman knows that there are obstacles ahead. He sounds a realistic note while discussing the outcomes of app-based licensing ventures thus far.

“Let’s face it, the odds on apps are narrow,” says Seidman. “It’s a crowded field.” He adds that while many agents over-sell programs and are left scrambling when retailers and consumers don’t react as expected, he is interested in steady and sustainable licensing extensions with reasonable expectations. “One thing about licensing is that everybody looks for the home run,” he says. “But there is nothing wrong with hitting a single or a double.”