Licensed to Thrill

Comic books and TV shows, blockbuster movies and video games: all provide a well of characters beloved by children and adults — a fact not lost on retailers. Whether it’s SpongeBob Squarepants sheets, a Spider-Man backpack or a Shrek T-shirt, products featuring licensed characters keep consumers flocking to the stores.

Sony Pictures’ 2002 Spider-Man helped fuel the entertainment/character licensing category, which reached $46.2 billion at retail in 2004, per the latest figures by the Licensing Industry Merchandisers Association (LIMA), New York. The web-slinging superhero has become one of the largest boy brands, reaching more than $1 billion in worldwide sales each year, says Tim Rothwell, president of the worldwide consumer products group for Marvel Entertainment.

“Everybody knows who Spider-Man is,” Rothwell says. “In virtually every category, [Spider-Man] is at the top of the food chain.”

And for those special characters that catch on, movie deals are a sure-fire way to open new licensing opportunities. From toys, bedding, apparel, electronics, packaged goods and health and beauty products, there are few categories Spider-Man hasn’t touched, Rothwell says. Already, Marvel is gearing up for Sony Pictures’ next installment in the film franchise, Spider-Man 3, which hits theaters in May 2007. More than 300 licensees will support the film’s release.

“Spider-Man is just an overall great character,” says Juli Boylan, senior VP, Sony Pictures Consumer Products. “The franchise is something that really appeals to boys of all ages. With new films coming out every two or three years, we are getting a whole new audience.”

The entertainment/character category — the largest of all licensed categories — took in $2.6 billion in royalties in 2004, accounting for 44% of the industry, says Charles Riotto, LIMA president. Toys and games make up the largest subsection representing 28% of all revenue, followed by software and video games at 14%, apparel (10.5%), food and beverage (7%), gifts and novelties (7%) and accessories (6.5%), per LIMA.

For some, action rings the bell; for others, old-fashioned comedy does the trick. In its 17th year on air, Fox’s The Simpsons maintains a stronghold in pop culture. Licensed Simpsons gifts, novelties, toys and apparel rake in hundreds of millions of dollars in retail sales globally each year, says Elie Dekel, executive VP-licensing and merchandising, Twentieth Century Fox. The network has renewed The Simpsons, which has more than 600 licensees, for two more seasons. Its first motion picture based on the show — The Simpsons Movie — hits theaters July 27, 2007.

Likewise, TV-based Teenage Mutant Ninja Turtles is making its way to theaters with its first-ever film in March 2007. The property, which debuted as a TV show in the late 1980s, relaunched in 2003. Since then, retail sales have totaled more than $1 billion worldwide, says Laurie Windrow, senior VP-marketing & licensing for 4Kids Entertainment.

“Any property requires constant refreshing and rebranding to keep in the mind’s eye of the consumer,” says Al Kahn, CEO and chairman of 4Kids Entertainment. “You have to give everybody a reason to jump back into the pool.”

Measuring star power

With so many characters, how exactly do potential brand partners find the right one? They will soon have a new tool to rate the popularity of licensed characters — the Davie-Brown Index (DBI).

The DBI, created by Davie-Brown Entertainment, Los Angeles, this year will score up to 100 licensed characters via a panel of 1.5 million consumers. The agency initially launched the service in February to test the value of some 1,500 celebrities.

“A big reason brands use one character [over another] is because they are very influential to a specific demographic,” says Jeff Chown, president of Davie-Brown Talent, Dallas. “Kids notice them, like them and trust them. Brands play into that passion.”

Not all licensed characters have ties to Hollywood. American Greetings’ iconic, sweet-smelling Strawberry Shortcake first emerged as a toy and greeting card property in the 1980s. The Cleveland-based company and licensing agent DIC Entertainment relaunched the brand in 2002 with a classic version and an updated doll featuring an older look and longer hair.

As a result, Strawberry Shortcake took in $1.3 billion at retail worldwide in 2005, up from $500 million in 2004. This fall, the property makes its theatrical debut with Sweet Dreams.

“We’re continuing to evolve the character and present her in new ways,” says Tamra Seldin, senior VP-consumer products for American Greetings Properties.

New properties that don’t have such residual equity find ways to stand out. Cartoon Network Enterprises — licensing arm of Cartoon Network — built an audience for its new alien action series Ben 10 via online games before the show debuted in January.

“A great way to seed a property is through games,” says John Friend, senior VP of CNE. “Kids experiment online. When you give them something new, they’ll test it out.”

For young males, Ben 10 passed the test. Cartoon Network will launch toys with licensed ties to the show at retail stores in June, followed by electronic games and T-shirts later this year.

Coming attractions

Upfront for movies lures marketers

Thanks in part to a red-caped super hero, some rabble-rousing pirates and wisecracking animated cars, experts predict box offices are headed for a rebound in 2006. And marketers are sure to follow.

Despite fragmenting tastes, a shrinking DVD window and the emergence of digital projection, experts at the second annual Insiders Ball in March had rosy predictions for the second half of 2006 and beyond.

The forum, hosted by Screenvision — a New York-based screen advertising firm that sells movie advertising on some 14,000 screens nationwide — served as an “upfront” for theater advertisers, mimicking the ad-sell tactics of TV networks’ for the coming season.

Cinema advertising is a medium that is being taken more seriously, as marketers looking for new ways to reach moviegoers, CEO Matthew Kearney said.

During the event, producer Joel Stillerman (Blow), one the five panelists, predicted a growing emergence of “microbranded studios” — entertainment companies like Walden Media that support films with a specific focus.

Likewise, producer Charlie Corwin (The Squid and the Whale) noted production companies that craft smaller budgets and spend more on marketing will boost box office dollars. He suggested grassroots campaigns and advertisement buys on community Web sites, including MySpace.com, may fare better reaching potential audiences compared to traditional TV advertising.

“Smaller productions with bigger marketing budgets yield…better results so long as the material is there,” Corwin said.

On another note, Focus Features Production President John Lyons predicted additional money for movies as global film distribution becomes more advanced. Lyons said overtime, big blockbuster films will decline while smaller films with a global reach will flourish.

Despite the allure of home entertainment systems, movie theaters still provide an enhanced entertainment experience when it comes to watching films, said Travis Reid, an AMC Entertainment board member. “[The theater] is still the best possible way to experience a film,” Reid said.

Going forward, fantasy films (think new installments of Harry Potter and The Chronicles of Narnia) are sure to please moviegoers, Entertainment Weekly VP Fred Nelson said.

For their part, horror flicks remain at the top of the list. Even movie remakes (nine which made the top 50 in 2005) are a sure fire to reach an audience, Nelson says. The message for producers? Make good movies and people will follow, he says.

When in doubt, “stick in a penguin or Dakota Fanning,” Nelson said.
— AJ