Licensing: Flatlining

Three trends put entertainment licensing in decline last year: The poor economy, skittish retailers, and a lack of hot properties (again). Licensing fees rose less than 1.0 percent to $5.8 billion, according to the Licensing Industry Merchandisers’ Association, New York City. Entertainment rights were flat, but “movie licensing will start to rebound,” says LIMA president Charles Riotto.

Overall, there seemed to be more activity in both the product and promotional licensing realms: About 45 percent of respondents to a survey of LIMA members (conducted by PROMO and the association in February) said they saw more deals in 2001 than 2000. Average royalty rates held steady at about 10 percent of sales, according to respondents.

Catchphrases like “classic” and “evergreen” will prevail in 2002 as studios use familiar properties to quell fears among retailers, who decide how much to stock. Many retailers would rather sell out than be stuck with excess inventory if blockbusters don’t translate into sales. Last year, sales of licensed goods fell five percent to $70.3 billion, per The Licensing Letter, New York City. Retail sales of entertainment/character-based products dropped 10 percent to $13.7 billion.

“Retailers were more than happy to be out of goods,” says Licensing Letter executive editor Marty Brochstein.

“It was a year of turning around,” says Tim Rothwell, senior vp-merchandising and marketing with Universal Studios Consumer Products, Universal City, CA. Steady declines marked the year until the third quarter, when “there was Jurassic Park III in the summer and we finished off with Monsters, Inc., Harry Potter, and Lord of the Rings.”

Harry Potter and the Sorcerer’s Stone sold $134 million worth of merchandise by year’s end despite an initial lukewarm reception at retail. “The definition of success is smaller than it was five years ago,” says Brochstein. Potter “did nicely comparatively.”

Riding Along

Licensors are also developing complementary vehicles such as TV shows, or offering properties with extended lifelines like Scooby-Doo (due in theaters this summer). Evergreen properties and exclusive retail partnerships will be big this year, says Josh Kislevitz, senior vp-domestic licensing at United Media, New York City.

Last month, Wal-Mart carried an exclusive toddler line based on United Media’s The Tale of Peter Rabbit. Retailers targeting kids “are sensitive about finding the right property for the right demographic, instead of one property that appeals to the universe,” Kislevitz says.

Retailers are more reluctant to tie-in with TV properties, says Cyndi Luther, vp-marketing for PROMO shop The Regan Group, Los Angeles. “A few years back they would jump on the bandwagon with the launch; now they seem to step back and allow awareness to build first.”

Licensing for trademarks and brands accounted for the largest portion of licensing sales, followed by fashion. “The American public feels a certain amount of comfort and reliability in buying recognizable labels and designer brands right now,” Riotto says. Sports will begin to grow again after three or four years of little growth and declines, he adds.

One 2001 phenomenon came from the real world: Hero worship. “2001 was a real difficult year,” says Ann Kearns, vp-licensing for Sesame Workshop, New York City. “There was no single trend except perhaps the recognition of rescue heroes.”

In Sesame Street’s season premiere, a group of New York City firefighters spent time with Elmo. Fisher-Price donated all post-Sept. 11 sales (more than $1 million) of Billy Blazes Rescue hero to the Fire Department of New York’s Fire Safety Education Fund.

Another positive trend is a willingness to collaborate. Although media commitments are becoming even more of a factor in securing licensing rights — according to 81 percent of respondents to the LIMA survey — property holders are becoming more involved in helping licensees develop marketing campaigns, according to 71 percent of respondents.

SNAPSHOT

• Rights fees inched up less than 1.0 percent.
• Merchandise sales fell 5.0 percent.
• Royalty rates held steady.