Digital platforms like Netflix and YouTube continue to expand their kids lineups, and as a result, the way children are consuming and embracing this content is shifting. With entire seasons of a series now available to watch all at once, the grace period between premieres and product launches is disappearing. Licensors are now scrambling to update their consumer product strategies to keep up with these changing timelines and capitalize on engagement before it’s gone.

“We’re sort of thrilled by all of the changes in the marketplace, because the way we see it, we have more customers, more ways to bring our brands to those customers and more options for us to bring those brands to life, ultimately leading to consumer products,” says Stone Newman, president of global consumer products, worldwide content sales and marketing at Genius Brands International.

Even a few years ago, Newman says, there was an accepted formula that everyone followed. A licensor made a deal with a major TV broadcaster, landed master toy, apparel and QSR partners, and based on that formula, it was possible to determine a property’s worth, It was then assumed additional categories would fall in line.

“That was the old way,” Newman says. “Things have changed.” Now, he explains, brand owners can no longer sit back while licensees take on the majority of the risk. Licensors are taking on more and more of the heavy lifting. For example, Genius Brands International secured nearly 20 licensees and promotional partners in advance of the launch of its music-driven tween girls brand SpacePOP, which circumvented the route of launching on traditional TV to bow on YouTube in June. “We had to make them believers of this new way of sharing content with consumers. We had to make them believers that we were going to build and market consumer awareness.”

It was no mean feat, says Newman, considering how skittish many in the industry remain about relying on digital platforms—including heavy hitters YouTube, Netflix, Hulu and Amazon—to drive a property. In a recent online survey from Nielsen of more than 30,000 people in 61 countries, 65% of respondents said they watched some form of SVOD programming.

And as these digital platforms continue to grow their kids lineups, and as distribution evolves, the ability to make believers of licensing partners is becoming more and more important.

“The term partnership means a lot more, because in a lot of cases, you are holding hands through the process in a much more meaningful way,” says Pam Westman, head of Nelvana Enterprises at Corus Entertainment in Canada.

Many licensees still see digital platforms as untested and unreliable in driving demand for a property, she explains, but their impact on the industry has been so profound that it has shifted the way licensors think about major linear broadcasters. In an effort to keep up with the success of SVOD platforms, Westman says, many feel major broadcasters are quicker to cut a show that isn’t moving the ratings needle. So, with no guarantees of airtime, consumer products programs based on TV properties with traditional distribution can also be seen as a risk.

“As a result, we choose our partners very carefully, and you form longer and deeper relationships,” says Westman. “You may end up partnering on multiple properties because you know these people and you can trust them.”

Corus Entertainment has worked to develop stronger partnerships with licensees for properties like Polly and the Zhu Zhu Pets

Hatching a new idea

These challenges make the choice of partner all the more important. As head of retail for Finnish video game developer and publisher Rovio, Darren Kyman understands this better than most. Developing consumer products based on the Angry Birds game app, and later, the feature film, Kyman has had to call on licensees to step up to the quickly shifting environment.

“Traditionally [licensees are] used to certain timelines,” he says. “And used to saying this is how long it takes to develop product, to create products overseas or domestically and to pitch product through their sales network to retailers. Now, we’re pushing them on those timelines, and I think it’s a scary proposition for them. But they also don’t want to miss out on what’s being created.”

Those relationships became crucial as Rovio was building its consumer products program for The Angry Birds Movie release in May. To start, it came with different production and distribution timelines than the everyday Angry Birds program. Then, something unexpected also happened. Rovio released a series of short videos to promote the film, which featured a group of baby birds called Hatchlings. The Hatchlings became such a hit with viewers that Rovio had to pivot quickly. It not only increased their role in the film, it also decided to give the baby birds their own CP program.

Rovio had to stay nimble to keep up with the way the Angry Birds brand was evolving based on real-time reactions from fans. “We had to figure out, what is our strategy for Hatchlings? Should this live within Angry Birds or should this be a separate program? We never thought those viral videos would take off as much as they did,” admits Kyman. “So we really wanted to react quickly to the interest in Hatchlings and build a program around that. Now we’re looking at how we continue to grow and build these new programs.”

Rovio plans to launch the first Hatchlings products in time for Easter 2017. The line will target girls three to seven, and in addition to key categories like toys and apps, it will focus on categories not covered by the Angry Birds brand, like swim and footwear.

Shifting strategies

The strategy behind building consumer products programs has had to change just as much as the relationship with licensees has. Jim Fielding, head of global consumer products and retail for DreamWorks Animation in L.A., says the shrinking timeline between the conception of a CP program to its retail execution has driven ingenuity among licensors and licensees.

Earlier this year, DreamWorks expanded its relationship with Netflix through a multi-year deal that will see its content—including its feature film library and a number of original series—stream in all Netflix markets outside of China. With such wholesale restructuring of its content distribution in mind, DreamWorks is also changing the way it approaches consumer products programs.

“I think what we try to do at DreamWorks Consumer Products is to be nimble and flexible,” he says. There’s a formula that needs to be followed when building a consumer products program, but that process can’t be so rigid that it doesn’t leave room to react to market shifts. Fielding says DreamWorks operates using an 80-20 rule, where the majority of work completed is regimented (80%), and that sense of order creates space for innovation (the other 20%). But the innovation space is growing in reaction to the current environment, he says.

“I would say that we’re taking more risks than we did in the past, but we’re taking calculated risks.” Fielding says his team has worked to mitigate those risks by increasing proprietary research on each brand. One method they trust is the “test and roll” approach, which involves testing out a given product or entire line before rolling it out on a small scale. This allows Fielding to get feedback from consumers quickly before proceeding accordingly.

Newman believes that only those who are willing to take risks and capitalize on change will be successful moving forward. He argues that, with more viewers moving to VOD-enabled digital platforms, consumption will only continue to grow. Those willing to rethink their strategies and take advantage of these changes will reap the rewards, while those who refuse to adapt will be left behind.

For SpacePOP, this strategic shift meant abandoning the traditional episode model and instead producing 108 episodes that run around four minutes each. Newman felt strongly that creating bite-sized content, which was made available on a regular basis, was the key to bringing in an audience. Ultimately, this change meant throwing out GBI’s old licensing model and bringing partners in at a significantly earlier stage.

Ticking timelines

Kids as consumers are changing, too. “It used to be that there was a sort of tolerance with children when a new show came out in terms of when they would expect to see a product. You probably wouldn’t see toys and other products for about a year after a show’s debut,” says GBI’s Newman. “Now, with the changing landscape, just as kids want immediate gratification with content, if they embrace a brand, they want to be able to embrace it across all levels as soon as possible.”

Toys, publishing and apparel are still widely considered to be the most lucrative and important licensing program drivers. But with timelines continuing to compress, some categories requiring long lead times like toys may have to be abandoned in order to achieve that day-and-date product release. In other categories, the materials used, and the level of detail involved, may need to be reevaluated in order to expedite the production process.

Skipping the traditional 12-month waiting period, DreamWorks released toys almost day-and-date with the premiere of Dinotrux on Netflix

For DreamWorks’ Dinotrux, the consumer products team worked with master toy partner Mattel and exclusive retailer Toys “R” Us to put toys on shelves as the series launched on Netflix. Because the property was so toy-focused, Fielding says, it made sense to forego other categories for the initial launch and focus solely on toys. Later on, the property branched out to other partners and categories.

“We’re all trying to shorten those timelines. We’re trying to be much faster because the cycle is running so much faster,” says Fielding. “I’d say the trend overall is shortening, trying to squeeze time, and it does certainly dictate to an extent what categories you’re going to do.”

For his part, Newman believes accommodating these timelines is entirely possible with a little patience. “We ensure that nothing gets compromised in our content development or our licensed products. If we are approached to be a part of an initial product launch but they require compromises that we feel would lead to a lesser product, we would prefer not to have that merchandise as a part of that initial launch,” he says. “We are prepared to wait to ensure the product quality meets our standards. We have the patience and understanding that those types of items will be released in a second wave.”

Federico San Martin, VP of global consumer products at The Jim Henson Company, is optimistic that technology will soon catch up to these fast-moving timelines. He says the big toycos have their fingers on the pulse of the ways in which technology is changing and are developing close relationships with innovators. The key, he adds, is making sure that the pressure to catch up with the speed of digital distribution platforms doesn’t compromise quality.
“What’s important is how technology has evolved to add value to toys,” contends San Martin. “We hope that many of these companies, as they do their reseach, will utilize the technology that will best serve the toy. We want technology that will enhance the child’s experience.”

And it’s here, San Martin says, that everything returns to the idea of partnerships and their importance—maybe more so now than ever before—to consumer products programs. Developing strong partnerships with licensees is crucial to ensure the meaning behind the products isn’t lost in the race to meet the speed of SVOD.

“We have a very human approach in the sense that it’s a relationship-driven business. We have found success in maintaining long-standing partnerships.”

Fielding agrees that the movement in the industry, paired with these strengthening partnerships and changing perspectives around consumer products, will result in serious progress.

“There’s more content than ever being offered for merchandising and licensing opportunities, so it’s a hyper-competitive market,” he says. “You’ve got retailers who are closing stores and shrinking space and that creates a premium on your retail relationships and on making sure you have the kind of product and properties that retailers want to carry, Fielding notes. “I think this environment is just going to continue to force us to be the best we can be. That sounds like a cliché, but I think it’s definitely an exciting time in our industry because there is so much going on. There is so much competition that I think truly, quality is going to win out in the long run.”