Welcome to Raugust Communications’ Coronavirus Resource Page. All of our writing on the pandemic, from its start in the U.S. in March 2020 through the end of that year, is collected here for easy access. Some articles are original to this page, while others were first published in other sources, such as RaugustReports, Raugust Communications’ monthly e-newsletter, or Publishers Weekly. See RaugustReports for continuing coverage of pandemic-related licensing trends, as well as other licensing developments, all seen through the prism of the COVID crisis.
Changes in Licensing Deal Types, COVID Era and Long-Term
December 15, 2020, first published as a Datapoint in the Raugust Communications monthly e-newsletter: New research from Raugust Communications confirms that the licensing landscape has become more reliant over time on short-term collaborations and limited editions, as well as experiential and related initiatives, and less dependent on traditional, long-term licensing deals. The data shows that the percentage of traditional licensing deals (defined here as two years or longer and including a physical product) done from April 2017 to December 2020 fell to less than half (48.7%) of total deals involving licensed IP. This compares to 66.6% in the period from January 2015 to March 2017 (the last time we published such research in this newsletter).
Note that these figures measure the number of deals done in each period, not retail sales. Traditional licensing deals continue to drive the bulk of the latter. The incidence of licensing versus collaborations also varies significantly by property type, product category, and geographic region.
The share attributable to collaborations and limited editions, meanwhile, rose significantly, from 13.1% in the earlier period to 29.9% in the more recent timeframe. Experiential, content, and promotional deals based on licensed IP saw their share rise from 20.3% in the earlier period to 21.4% more recently.
The numbers in this analysis are skewed somewhat, of course, by the coronavirus disruption, which has led to an inflated dependence on collaborations and limited editions over the past nine months. During that time, these sorts of less-risky deals accounted for 43.5% of total partnerships. The share of experiential, promotional, and content deals, meanwhile, plummeted to just 9.4%, due to the inability to hold live events; that steep drop impacted the percentages for the full period from April 2017 to December 2020. (Both traditional licensing and experiential deals have started to come back to a degree this fall.)
A more logical look at long-term change in the licensing business can be gleaned by examining the period from January 2015 to March 2017 versus April 2017 to February 2020, which excludes the pandemic from the analysis. In the latter timeframe, collaborations and limited editions accounted for 26.3% of all partnerships, still a hefty increase from the earlier interval, while experiential, promotional, and content-related deals rose from 20.3% to 24.5%. Traditional, long-term licensing agreements fell to just below 50% of all deals, at 49.2%, in the more recent stretch.
For the purposes of this research, the experiential/promotional/content sector includes content that would typically be within the realm of a licensing program, such as apps, but excludes pure entertainment such as TV and films; promotions include only initiatives that incorporate some sort of merchandise component.
November 19, 2020, first published in RaugustReports: One product category that has flourished during the pandemic is alcoholic beverages, including wine. From early March through mid-September, wine sales grew 19.3% in volume and 24.7% in dollar sales compared to the same period the previous year, according to Nielsen.
A number of new licensed and collaborative wines, some limited editions and others under long-term deals, have thrown their names into the mix since start of pandemic, with five of the new agreements mentioned below being announced just this month and last month:
- The Royal Horticultural Society is launching its first wine, a rosé, in time for the RHS Chelsea Flower Show, currently set for May 2021 in London. The product is being marketed in partnership with Babylonstoren, a South African vineyard and fruit farm. After its debut at the show, it will be sold through independent wine stores and the hospitality industry in the U.K., as well as through the online shop of The Newt in Somerset, a country estate and garden in England. This is the first wine for the RHS, although the organization has offered a wine club.
- Bravo paired with Nocking Point Wines for limited-edition red, white, and rosé wines in two-, three-, six-, or 12-bottle combinations, all tied to the Real Housewives franchise, marking the first wine deal for the brand. Consumers can order the product direct from Nocking Point. Nocking Point also offers a number of celebrity-based wines, and just launched a curated wine club with the NBA’s Cleveland Cavaliers last month.
- New Mexico State University teamed with Lescombes Winery for a cabernet sauvignon called Pistol Pete’s Crimson Legacy. Proceeds from the wine, which has been in the works since 2018, go to the university’s athletics department. The winery is a small business near the institution; the product can be purchased online in 40 states or at the winery.
- Hearst Magazines and its agent IMG teamed with Guarachi Wine Partners for a new label called Uncorked by Cosmopolitan. The brand consists of a selection of Guarachi wines curated by the publication’s editors. Hearst staffers also designed the labels. The partners noted that the young women who read Cosmo overindex on wine drinking and are rarely targeted specifically by wine labels’ marketing efforts. The brand, available on wine.com, includes a rosé, chardonnay, pinot noir, and cabernet sauvignon, all sourced from California. More varietals are in the works.
- Northlane, a Sydney, Australia, metalcore band, released a limited-edition line of wines called the Enemy of the Night collection. Its partner is Crowbar, a music venue and pub in Sydney and Brisbane that also has an online liquor shop. Crowbar has done a number of other “Crow-labs” with musicians and artists.
- Snoop Dogg is working with 19 Crimes on a line of wines, with the first, Snoop Cali Red, debuting in summer 2020. The multiyear deal will see other varietals developed in the future. This product represents the first foray into California wines by 19 Crimes, an Australian company that is known for its augmented-reality labels.
- Actress Cameron Diaz paired with fashion entrepreneur Katherine Power to launch a “clean” organic wine brand called Aveline. The label debuted with a Spanish white and a French rosé, and its products are vegan-friendly and sugar-, concentrate-, and additive-free. The line is sold through Wine.com and retailers in 43 states.
Meanwhile, a number of existing licensed wine ranges have introduced new products during the pandemic. E2 Family Winery expanded the Star Trek Wines brand with a new Klingon Bloodwine and a United Federation of Planets sauvignon blanc. Sarah Jessica Parker and New Zealand-based Invino & Co. released a second sauvignon blanc, after the successful debut of their first in 2019. And just this week British TV presenter Phillip Schofield introduced an Italian rosé as the third in his range of bag-in-the-box wines with When in Rome.
These new introductions represent just a tiny fraction of the licensed and collaborative wine market, of course, which has been a hot segment of the licensing business for several years and has shown no signs of slowing down. In fact, during the lockdown the segment seems to be heating up, albeit largely coincidentally, as these partnerships were in motion before the coronavirus hit. That said, their introductions were timely, given the current pandemic-fueled growth in wine consumption overall.
Brand Management Companies to the Rescue
November 17, 2020, first published as a Licensing Topic of the Month in the Raugust Communications monthly e-newsletter: The pandemic has accelerated the struggles of brands, especially in the retail and fashion sector, that were already facing steep challenges before the crisis began. Many have entered bankruptcy and/or shut down their operations. But some have risen from the ashes almost immediately after being purchased by one of the brand management companies that are scooping up distressed properties and relaunching them as licensing-driven and/or online-first businesses.
Some of the recent activity:
- Bluestar Alliance announced last week that it would purchase Justice from Ascena—which has been unloading many of its brands in recent months—for $90 million. The bankrupt retail nameplate will shut all of its physical stores by early 2021, but will continue to expand into new categories and distribution channels. Licensing deals and other partnerships are likely to be in the mix.
- Authentic Brands Group joined the effort to acquire JCPenney at the last minute in what is termed a minor role to lend intellectual property expertise. This suggests licensing may be in the future for JCP in some way. The possibility also exists of expanded retail placement for other ABG brands. The primary new owners are the mall operators Brookfield Properties and Simon Property Group, along with First Lien Lenders.
- Marquee Brands, which owns the Martha Stewart and Emeril Lagasse properties, among others, acquired Sur La Table in August, in partnership with CSC Generation (which bought One Kings Lane in April). Sur La Table announced the closure of 56 of its 121 stores when it entered bankruptcy in July, and the plan is to maintain some physical store presence while bolstering its online shop and cooking schools. Marquee’s Marquee-Direct division oversees the e-commerce presences of Motherhood Maternity, Body Glove, Ben Sherman, and other IP in its portfolio.
- Retail Ecommerce Ventures acquired Pier 1 Imports in July for $31 million, after the retailer closed all of its stores in 2019 as part of its bankruptcy plan. Last month, REV, whose strategy is to reposition its brands as Internet-first, relaunched Pier 1’s e-commerce site with a refreshed look, better search functionality, more robust mobile capabilities, and a plan to expand the assortment. REV also acquired the IP and ecommerce operations of Linens ‘n Things, Franklin Mint, and Modell’s earlier this year, and made a $4 million stalking-horse bid on Stein Mart last week.
Of course the fast progression from bankruptcy to new life under a brand management portfolio does not necessarily mean smooth sailing ahead. Sometimes licensing deals go awry, as happened with Marquee Brands when it had to take back its deal with Centric for BCBGMAXAZRIA and BCBGeneration in May following the bankruptcy of the licensee.
In addition, while the licensing- and ecommerce-forward business model of the brand management groups makes sense in the current risky market, some companies end up being overleveraged and see their financial results suffer. Iconix Brand Group, which owns, manages, and licenses a wide range of properties, from Danskin and Mossimo to Ed Hardy and Ocean Pacific, said in July it would add selling itself to the potential alternatives being considered to enhance shareholder value. It is also looking at refinancing, recapitalization, sale of equity, and divesting itself of some of its brands. It has already taken steps in the last direction, selling the rights to Umbro and Starter in China to a local investor for $16 million.
Finally, a refreshed online presence is no guarantee of survival. Many experts agree that it is a good thing for an “overstored” retail landscape to be winnowed down, and that many of these brands retain strong IP value. But the online landscape is also crowded and competitive and not all IP under new management will succeed.
Reexamining Contract Terms
November 12, 2020, first published in RaugustReports: One of the themes noted across all four weeks of the Festival of Licensing, organized by Informa Markets in partnership with Licensing International, was the need to restructure and rethink the terms of licensing contracts, both new and existing, as a prerequisite for success of a licensed product line. Some of the configurations that were noted by presenters throughout the event, which took place October 6-29, included:
- Lower or even no minimum guaranteed royalties, typically in return for contractually guaranteed marketing or promotional initiatives, promises of timely product introductions, investment in product development, expansion into untapped channels, or other contributions of value.
- Spreading payment of minimum guarantees over a longer period of time, especially for existing contracts that were closed prior to the pandemic when conditions were different. This has become almost a standard step during the crisis.
- Terms absolving licensees of the requirement to remit royalties when a key retail customer does not pay. The precarious position of many retailers during COVID, as well as failures (e.g. Toys ‘R’ Us) pre-COVID, puts a priority on this issue and, while restructuring a contract in this way is certainly not a given, it is a topic of conversation. Even without a contractual promise, licensees can approach licensors on a case-by-case basis; if a licensor wants merchandise on store shelves and permits the licensee to fulfill an order from a retailer in danger of failing, it may be willing to forgo royalty payments if the worst comes true.
- Removal of caps on deductions from net sales and/or allowing uncollected retail payables to be deducted. This is something that licensors have been resisting for the most part so far, but licensees believe it will be allowed in the future as the risks of nonpayment rise, through no fault of the licensee.
- Clauses addressing pandemics inserted into the traditional boilerplate, so the partners do not need to rely on the less-specific force majeure clause.
- Requirements for licensee adherence to sustainability and other ethical guidelines (e.g., workers’ rights, diversity). These issues are often part of a licensor’s due diligence in the licensee selection process. Some observers believe they will increasingly be contractually required as consumers’ purchase decisions are influenced more often by the steps marketers are taking to make a positive impact on the world. Some contracts already contain such provisions.
You can view our deep dive into the trends spotted at the Summit, and the entire Festival, here.
Looking Beyond Face Coverings
November 2, 2020, first published in RaugustReports: Properties of all types have gotten into the face covering game in a big way since just after the start of the pandemic, with cloth masks, gaiters, balaclavas, and other protective facewear quickly becoming a standard category for licensing. Meanwhile, the pandemic has also given rise to other new opportunities related to avoiding the COVID-19 virus. While nowhere near as ubiquitous as face coverings, licensors are starting to enter some of these arenas:
- Hand sanitizer. Spin Master licensed Rose Paige Distribution for Bakugan-branded hand sanitizer, while Crayola teamed with C+A Global for a line of four tinted sanitizers—forest green, blue bell, golden yellow, and razzmatazz red—in crayon-inspired 2-ounce bottles that come in three pack sizes. Larger bottles are also being introduced. The American Red Cross, represented by Seltzer Licensing Group, also offers hand sanitizers; that launch predated the pandemic.
- Antibacterial and disinfecting wipes. Church & Dwight and its agency Brandgenuity debuted a line of Arm & Hammer Essentials disinfecting wipes, as an extension of its existing licensing deal with CR Brands. CR launched an Arm & Hammer fruit and vegetable wash in early 2019 and also offers a garbage disposal cleaner. Spin Master’s deal with Rose Paige for Bakugan also included antibacterial wipes, while the American Red Cross continues to offer disinfecting wipes, as it did before the crisis.
- Desk shields. Crayola paired with The Beistle Company, a party goods, educational supply, and premium marketer, for two three-sided desk shields—in color-your-own and carry-with-you versions—that students can personalize and use as a protective barrier at school and elsewhere. The products are sold online through Amazon and ColorYourShield.com. Beistle also sells Crayola face coverings, as well as other Crayola party and school supplies.
- Social distancing kits. One Animation licensed Brampton Nameplate, a Canadian printer, for Oddbods “social support devices” including social distancing kits, stickers, and printed materials to help children learn about and remember spacing and one-way traffic rules, so they can maintain distancing in schools, nurseries, hospitals, and other closed environments. The deal also includes face masks and visors.
New ideas to protect consumers from the coronavirus continue to emerge, from long-handled distancing-friendly Halloween bags to a device that allegedly allows birthday candles to be blown out safely. Some of these, along with other products not yet envisioned, may have potential for licensing in the future as the pandemic endures. Beyond that, consumers’ heightened awareness of the possibility of future pandemics could give some of these new categories life even after the world conquers the current health crisis.
See also our coverage of COVID-specific potential licensing opportunities in the apparel and accessories industries here.
Experiences to Go
October 22, 2020, first published in RaugustReports: Organizers of location-based events are experimenting with new configurations to give their fans something of the original real-life experience in a safe way during the pandemic. Typically this has meant taking the event virtual in some form. But several marketers have gone the physical route recently, by boxing up real-life experiences and shipping them to their fans. Some recent examples:
- Stadium in a box. Heineken paired with Major League Soccer for a sweepstakes where fans have a chance to win an “at-home stadium experience” that includes a real stadium seat from their favorite MLS team, stadium food, and a Heineken 0.0 beverage refrigerator, all of which give them a stadium-like experience while cheering on their club on television. Fans in some markets will receive a free six-pack of alcohol-free Heineken 0.0 for entering.
- Vacation in a box. IKEA in the United Arab Emirates created in-home travel kits for Paris, Tokyo, Turkey, and the Maldives. Each included IKEA home goods such as glassware, rugs, pillows, and decorative accessories that are inspired by the destination in question, along with a downloadable booklet with recommendations for recipes, movies, activities, and music that help set the scene. Each had a theme, such as teatime in Tokyo or a romantic date in Paris. The boxes were available for purchase in store and online.
- Tailgate in a box. Pepsi’s initiative, like Heineken’s, took the form of a sweepstakes, this one aimed at football fans. The super-sized 16-square foot box, with an estimated value of almost $5,000, included an outdoor projector for the big game, a range of Pepsi products, and customized cornhole sets. One couple won a 1,500-square-foot parking lot paved into their front yard, along with lighting, a grill, a painted end zone, and more; the two fans of the NFL’s New York Jets were featured in Pepsi’s social media feeds.
- After-school in a box. The YMCA offers a box full of educational enrichment supplies on topics such as STEM, music, dinosaurs, comic books, Spanish, and physics, distributed as part of its weekly virtual after-school enrichment programs. The Y also offered a camp in a box last summer, available for pick-up by families who normally would have enrolled in the group’s live camps. (Several licensors and other marketers created virtual camps.)
- Oktoberfest in a box. Giant Jones Brewing Company, a women-owned organic craft brewer in Madison, Wisconsin, offered German Fest kits for Oktoberfest in late September and early October, featuring a six-pack of beer, bratwurst, sauerkraut, and beer mustard. A number of other breweries and pretzel companies offered similar kits. Lone Star Brewing gave away five deluxe beer-garden boxes for the holiday that included décor appropriate for a beer garden, video guides for pretzel and cocktail making, and recipe ingredients, as well as supplies for flunkyball, a German drinking game that is something like beer pong.
So far the corporate world seems to have taken to this strategy more than any other sector, often with sights set on the marketing benefits rather than revenue generation. But there would seem to be opportunities for similar initiatives tied to licensed properties of all types, as long as they logically lend themselves to some sort of specific experience.
October COVID-19 Update: Two Steps Forward, One Step Back
October 20, 2020, published exclusively on this page: In our last monthly wrap-up, a few positive trends had started to emerge in the sixth month of the U.S. lockdown, such as a bit of relatively upbeat economic news and a growing number of careful reopenings in progress. But since then there has been a turnaround to a more pessimistic outlook along many measurements, both in the U.S. and in some other territories:
- The number of people infected with the virus is rising again in most U.S. states and a number of countries around the world, with some of the highest numbers to date occurring in October and expectations that things may get worse as the holidays approach.
- Theater chains such as Regal Cinemas were starting to reopen in the U.S. but that turned out to be short-lived after the release of the next James Bond movie was delayed indefinitely and Soul went straight to streaming.
- Retail is on pace to achieve a record number of bankruptcies this year, according to BDO.
- A number of companies extended their employee furloughs, while others converted furloughs to permanent layoffs, especially in industries with close ties to licensing and experiences, such as travel, theme parks, retail, sports, celebrity management, and colleges.
- More trade shows and consumer conventions have been delayed, moved online, or cancelled altogether for the rest of this year and the first of half of next. (Virtual conventions, on the other hand, are getting more sophisticated and are increasingly being embraced as acceptable substitutes for the real things.)
There has been some positive news in the last month. A few of the economic numbers released by the U.S. federal government have been better than expected. A handful of companies, such as licensees Rubie’s and Centric Brands (which is also a licensor) and retailer Nieman Marcus, emerged from bankruptcy. And the pace of deal-making has certainly accelerated, particularly for short-term collaborations but also for long-term licensing deals and even experiences such as restaurants and theme parks that will open at a future date .
Within this context, the licensing business is already in the midst of a long and largely digital holiday sales period, as many retailers have begun offering discounts, releasing exclusive products, and taking other steps to launch the season, with Amazon Prime Day serving as the de facto opener. In the near-term, the licensing business is also waiting to see what happens with Halloween spending. The Centers for Disease Control and Prevention in the U.S. has cautioned against trick-or-treating and Halloween parties, as well as end-of-year holiday gatherings, even with relatives.
Home, by Necessity, for the Holidays
October 20, 2020, first published as a Licensing Topic of the Month in the Raugust Communications monthly e-newsletter: The fourth-quarter holiday season will be upon us very soon and is, like so many things these days, fraught with uncertainty. Here is what we know so far, along with some of the considerations and questions licensing executives have been pondering as they prepare for another never-before-faced hurdle in the progression of the pandemic:
- The sales window will be long. The holiday selling season has already kicked off with Amazon’s delayed Prime Day earlier this month and simultaneous efforts by Best Buy, JCPenney, Kohls, Target, and others. Prime Day sales grew an estimated 36% (per Edison Trends) to 45% (per Digital Commerce 360) over last year. The goal of the early start is to spread out the season and hopefully maintain safe distancing in bricks-and-mortar stores, but the longer time period takes away some of the excitement and promotional clout of Black Friday and the holiday season in general.
- Online platforms will drive more volume than ever before. Many consumers are likely to opt for e-commerce rather than bricks-and-mortar, hastening a trend that has been ongoing for several years. Deloitte predicts e-commerce sales during the holiday season will increase by 25% to 35% in 2020, year-over-year, compared to 14.7% in 2019, while CBRE predicts growth of 40%. PwC found 61% of consumers plan to do most of their shopping online. Online platforms will enable consumers to shop for specific items at a time when physical shopping is uncomfortable for many, but it also raises discoverability issues and requires different marketing messages and channels.
- The battle for toy share will be intense. A clear winner has not yet been declared in the competition for who will assume the market-share mantle formerly held by Toys ‘R’ Us, with Amazon, Walmart, Target, and others in the mix. Each is taking steps to position itself for toy sales; Kohls launched an online toy shop, Amazon is now handling fulfillment for the new TRU, and Target has 600 recommended toy exclusives, its most ever, and is debuting a 70-piece FAO Schwarz collection.
- Shopping patterns may change. In addition to more online purchasing, 60% of shoppers said they would do more targeted shopping at fewer stores, according to PwC. Another 46% said they planned to shop local and indie, driven by a desire to keep their favorite neighborhood shops, whose livelihoods are threatened by the pandemic, in business.
- There will be winners and losers. All signs point to continued strong sales for the categories that have been thriving during the pandemic, such as puzzles and games, children’s books and educational products, sporting goods and gym equipment, toys, health and wellness products, hobbies and crafts, and the like. Observers are not expecting categories that have been suffering to see much of a turnaround, however. One notable example: apparel, accessories, and footwear. This sector is unlikely to benefit too much from gift-giving, aside from the athleisure category, as the stay-at-home era continues.
- The virus is unpredictable. After declines in the magnitude of the virus and a gradual trend toward reopening, many territories—especially the U.S.—are seeing spikes, with health experts predicting that some of the worst days are coming in the next six weeks or so, during prime holiday shopping time. Meanwhile, the U.S. Centers for Disease Control and Prevention is encouraging people not to celebrate with others, even family members who do not live the same house, as small group transmission has become a problem. Will that put a damper on sales or will people spend more as compensation?
All of this makes forecasting difficult to say the least. Forty percent of consumers told PwC they will spend less than they did last year on the holidays and 42% said they will spend the same, leaving only 18% who expect to spend more. Deloitte predicts holiday sales growth of 1% to 1.5%, an estimate it came to by splitting the difference between two potential scenarios, one showing flat growth of 0% to 1% and the other with a more significant increase of 2.5% to 3.5%. CBRE also projects an annual holiday sales increase of less than 2%.
September COVID-19 Update: Looking Ahead to the Holidays
September 15, 2020, published exclusively on this page: As we hit the six-month mark of the coronavirus, with no end in sight, companies continue to struggle, while also finding ways to move forward. Here are some of the developments noted over the past month.
The licensing community is looking ahead to the coming holidays, which will be unlike any other. Forecasting is difficult, to say the least. A debate is ongoing in communities across the U.S. and elsewhere about whether trick-or-treating and Halloween parties of any type are safe, and families are considering how or whether to participate. What will this mean for sales of licensed costumes, treats, and décor? As for Christmas and other end-of-year holidays, will families cut back as they feel the pain of furloughs and layoffs, or will they spend to compensate for a tough year where celebrations were few and far between?
Will sales start early, as many experts believe? Will Black Friday and Cyber Monday be meaningful? Companies have announced Black Friday deals, but they are not necessarily pegged to a single day. As with all things during the pandemic, we are in for a period of experimentation as retailers, licensees, and licensors try to find a balance that works.
One company that is bullish on the holiday season is 1-800-Flowers, which plans to hire 2,000 more seasonal workers than last year. Michaels also has robust hiring plans, expecting to take on 16,000 seasonal employees in 2020, compared to 15,000 in 2019.
Live Events Rescheduled and Reconfigured
In 2020, trade show organizers have seemed to hold off until the last minute before cancelling their live iterations. Fall events such as Cartoon Forum, Mipcom, and Frankfurt Book Fair have just abandoned their plans for live events after holding fast for as long as possible, due to exhibitor and attendee fears, while Paris Fashion Week is at risk as COVID cases in France climb. Cancellations and postponements for 2021 are already happening, however, with Consumer Electronics Show going digital and Toy Fair postponing its February event, to name two recently announced examples.
Trade show organizers and exhibitors persevere in a quest for innovation, as they try to find the best way to make their events work virtually and/or show their wares in the new environment. New York Fashion Week this fall consists of everything from films accessible online to small runway shows, often on rooftops, that are streamed to the wider public. London Fashion Week teamed with Amazon Fashion for a digital boutique allowing small to mid-sized British designers to highlight and sell items from their collections. Exhibitors are also getting creative; Burberry plans to livestream a runway show in a deal with Twitch.
Consumer-facing live events are dealing with similar issues as the country starts to reopen. Some movie theaters are back in business, for example, but consumers are not flocking in. Many films continue to be delayed or are premiering on streaming platforms rather than in theaters. Warner Bros.’ Tenet was one movie that debuted in the traditional manner, but Warner Bros. chose not to follow convention and release box office numbers, suggesting the strategy was not as successful as hoped. After the release of Tenet, the studio delayed the premiere of Wonder Woman 1984.
Similarly, consumers are tentatively coming back to restaurants, although sales remain way down year-over-year. The level of concern is illustrated by a recent Coca-Cola survey that found only 45% of restaurants felt confident that they would be in business a year from now.
Sports are also coming back, mostly with limited or no fans and often in a truncated form. Will fan interest be enough to drive merchandise sales? The challenges faced by sports entities are steep. FIFA expects revenues in the current four-year cycle to be $120 million less than the last go-round, while the Borussia Dortmund club reported a net loss of more than $52 million in 2019-2020. In collegiate licensing, the NCAA furloughed its whole national staff.
Mixed Results at Retail
We all have seen how many retailers continue to face hard times, especially in the department and apparel specialty store tiers. In the second quarter, among fashion-related retailers and properties, L Brands (including Victoria Secret) saw net sales down 20%, revenues at Guess? were down 41.7%, G-III experienced a 53.8% drop in sales, and PVH’s sales were down 33%, although it showed a profit. Marks & Spencer plans to cut 7,000 jobs; Gap and Banana Republic will close stores, both this year and next, with Gap losing 225 in 2020; and Tailored Brands plans to shutter as many as 500 stores and lay off 20% of its corporate employees. Other sectors outside of apparel are also challenged; GameStop plans to eliminate as many as 450 stores this year.
But there has also been good news on some fronts in the past month or so. Ecommerce continues to grow rapidly for almost everyone, and mass and value retailers are staying strong, with some exceptions, such as TJX, which saw same-store sales down about 3%. Certain specialty categories are doing well, with one example being the sports and outdoors space. Retailers and brands including JD Sports, American Outdoor Brands, and Duluth Trading, among others in this sector, announced results that were up significantly. Consumers are also paying a lot of attention to their pets during the pandemic, which is reflected in the results of some key players in the segment: Chewy has added more customers in 2020 than all of 2019 while seeing sales and margins grow.
Meanwhile, several chains that have gone into bankruptcy or closed entirely since the pandemic began are making comebacks. Payless Shoe Source plans to open again with an ecommerce operation as well as 300 to 500 physical stores over the next five years, including 40 by the end of 2021. Sur La Table received financing and will stay in business, including with a limited number of physical stores. Two mall owners invested in J.C. Penney, saving it from the brink of extinction for now. Bankrupt Modell’s Sporting Goods was purchased and is expected to come back as an online operation, while Long Tall Sally and Coldwater Creek were also acquired and are expected to live on in some form.
That said, the list of closures is still growing. New York discount chain Century 21 and Lord & Taylor were added to the list in recent weeks, while Onuma, one of the oldest department stores in Japan, declared bankruptcy.
The Rise of Anti-COVID Soft Goods
September 3, 2020, first published in RaugustReports: Since April, when it started to become evident that the coronavirus would likely stay around for a while, technology companies, fabric suppliers, and research institutions, as well as soft goods brands, began introducing anti-viral fabrics to repel SARS-CoV-2—the virus that causes COVID-19—for use in apparel and home textiles.
Anti-viral, anti-microbial, and anti-fungal fabrics have been used in medical settings for years, and more recently have become a trend in certain consumer categories such as athleticwear and bedding. But the number of new products on the market has accelerated during the pandemic. Some of the introductions involve recently developed technologies. Others are existing anti-viral processes that have now been tested specifically for SARS-CoV-2 and submitted for approval to the FDA and similar global bodies, so the marketers can advertise their anti-COVID-19 properties.
Some of the companies offering these sorts of fabric technologies—which are being used in or considered for licensed and collaborative products in some cases—include:
- HeiQ, a Swiss company, which has developed the HeiQ Viroblock NJ J03, an anti-viral and anti-bacterial textile treatment. It combines silver-based technology, to deactivate and inhibit the replication of viruses and bacteria, and vesicle technology, to provide for rapid destruction of coronavirus and some other viruses. The Albini Group, an Italian luxury fabric company, uses HeiQ’s Viroblock for a range anti-COVID fabrics under the Viroformula name; Albini produces products for Armani, Prada, Kering, Ermenegildo Zegna, and other luxury labels. Similarly, Arvind, the Indian partner for Arrow, U.S. Polo Association, and other properties, is using fabric developed with HeiQ and Jintex of Taiwan for products under its Intellifabrix brand. Several other global apparel brands are working with HeiQ.
- Crypton, a performance fabric maker, which offers an engineered textile made of fibers coated with a moisture barrier that will reportedly never “delaminate.” The material is billed as easy to clean and disinfect, as well as durable, and prohibits the growth of molds, bacteria (e-coli and MRSA), and viruses (HIV, hepatitis, and now COVID-19). In August, West Elm’s contract division and fabric supplier Designtex collaborated, along with Crypton, on a line of four fabrics made with the latter’s bonded fabric system, designed for residential luxury and commercial spaces. The fabrics are sold through Designtex to contract and residential designers, as well as being used in West Elm’s contract line, Work, which is distributed and designed by partner Steelcase.
- Intelligent Fabric Technologies North America, a Canadian company, which markets a treatment called Protex that it says can kill 99.9% of SARS-CoV-2 particles within 10 minutes. UnderArmour used the treatment to coat its Sportsmask face covering (the first run sold out in an hour), while The North Face and Careismatic Brands (the licensee for Dickies and Cherokee medical scrubs and some retail clothing categories) are launching apparel made from Protex-treated fabrics. IFTNA also is planning to offer its own line of activewear under the Underit brand next year and to sell its treatment in spray form.
- A Bangladeshi firm, Zaber and Zubair, which launched a Corona Block-branded anti-virus fabric that it hopes will be used for PPE and masks as well as consumer apparel globally. The company sent an order of half a million masks using the fabric to United Holdings in Dubai and says it has received inquiries from more than 100 brands around the world, including H&M, Marks & Spencer, and Tesco.
- Swedish company Polygiene, which offers a finish it calls ViralOff. Marzotto Wool Manufacturing paired with the company to develop a new version of ViralOff that works with fabrics made of natural yarns, including cotton, linen, and wool. It is made from titanium dioxide and silver chlorine ions and is touted as eliminating 93% of viruses in 30 minutes and 99% within two hours. Marzotto hopes to use it on stretch and washable wool fabrics, as well as standard wool. Denim brand Diesel said in July that it would integrate ViralOff into some of its styles.
Other organizations that have developed or are developing anti-COVID technologies and processes for fabrics include Promethean Particles, Rudolf Group, the Indiana Center for Regenerative Medicine and Engineering at Indiana University, Proneem, Sonovia, Trajet, Copper Clothing Co., Grasim Industries, Ruby Mills, and Donear Group, among many more.
Some apparel and home goods firms are also developing proprietary processes (often in collaboration with a technical partner). These range from Siyaram’s, an Indian brand known for its men’s suits, which in June launched a range of anti-coronavirus fabrics developed with the Australian healthcare firm Healthguard, to Style Group, a U.S. supplier of window blinds to the home, business, and hotel sectors, which launched two fabrics under the Antiviraltex and Aircleantex labels. Antiviraltex eliminates viruses on contact, while Aircleantex purifies the air by transforming ultraviolet light to give it COVID-neutralizing properties.
Medical professionals have been skeptical about whether such products are effective or needed. Transmission is currently believed to be mostly from person-to-person contact, via droplets caused by talking, sneezing, or coughing, rather than from surfaces, meaning that anti-COVID fabrics are addressing just a miniscule part of the problem. Even the companies that are making these products stress that they are meant as an added layer of protection rather than a failsafe against COVID-19, and that customers would need to continue hand washing, sanitizing, and social distancing even while wearing items made from their fabrics.
That said, there is likely to be some consumer demand, and it may continue beyond the current crisis. No vaccine that is developed, whether later this year or in the future, will be 100% effective, and many public health experts believe there could be more global pandemics ahead. Therefore, consumers may seek out fashion and home décor made from these fabrics for some additional peace of mind, even realizing that they are simply one more precaution beyond what they are already doing to protect themselves.
Merchandise To Support Mental Health
August 31, 2020, first published in RaugustReports: The consumer products community’s embrace of mental health as a theme for licensed products and promotions, which we last covered in February, continues through the pandemic. This is not surprising given COVID-fueled stresses such as working and learning at home, experiencing financial suffering, and dealing with a lack of in-person connection, along with the feeling that there is no end in sight. Political divisions and social unrest also contribute to anxiety levels for many.
A few licensing initiatives that have taken place over the last few months illustrate how IP owners and their partners are raising awareness and funding for mental health, and/or offering tools for addressing mental health issues:
- Mr. Porter, the online retailer, and Rapha, a cycling brand, announced last week that they were joining for a product collaboration, along with content and influencer marketing, to raise awareness and funding for mental health. Central to the effort is an exclusive sports capsule encompassing three Mr. Porter Health in Mind x Rapha cycling jerseys, with net profits going to Mr. Porter’s Health in Mind initiative. Health in Mind is a partnership with Movember, a group supporting men’s physical and mental health.
- Smiley partnered with Desert Dreamer in May (Mental Health Awareness Month) for a Peace of Mind capsule. One of the goals of the effort was to normalize mental health as a topic of conversation. The collection was comprised of four vintage-style items (sweatpants and oversized t-shirts), featuring phrases such as “Mental Health Matters” and “Happy Mind, Happy Life—Take It One Step at a Time.” Ten percent of proceeds went to a nonprofit focused on depression, addiction, suicide, and self-harm called To Write Love On Her Arms.
- Corey Paige Designs, led by collage artist and influencer Corey Paige, paired with YourMomCares, a nonprofit that consists of celebrity and influencer moms who work on behalf of kids’ mental health, for a collection of leggings and bandanas. The items feature Paige’s colorful patterned artwork and phrases such as “It’s OK to Not Be OK” and “Burn the Stigma.” Of each purchase, 25% of proceeds go to YourMomCares. The partnership also includes kids’ coloring sheets and a billboard in New York City.
- Popsugar, the media brand, launched Mental Health Matters in May as a destination for articles on personal mental health and broader mental health topics, as well as essays written by celebrities. The destination itself has not been the focus of any licensing deals to date, but Popsugar has been extensively licensed; a tween apparel deal with Old Navy is one recent example. The brand launched an experiential fitness and wellness event in February called Grounded, which is a spin-off of its Play/Ground lifestyle event, produced with Reedpop.
- Disney got into the mental health game by bringing some of its characters into a 10-episode new series on Disney-Plus called Zenimation. The series, billed as a “soundscape experience,” features clips from Disney films, both classic and new, that incorporate calming sounds such as wind or water. Disney is one of several children’s licensors and producers that have been working on soothing content to help kids manage stress, especially during the pandemic.
These are just a few recent examples of initiatives pairing licensed properties with mental health messaging. The landscape of such efforts is varied, ranging from content and products that specifically address serious subjects, such as depression and suicide, to those promoting general mental wellness topics, such as ASMR, meditation, or self-care.
Cannabis Deals Continue During COVID-19
August 27, 2020, first published in RaugustReports: The cannabis industry—encompassing both intoxicating THC-based and non-psychoactive CBD-based products—represents one area of the licensing business that has not seen much of a decline in new deals during the coronavirus crisis. In fact, the oft-touted benefits of cannabis-based products, both ingestible and topical, for stress reduction and general wellness are likely bigger selling points during the COVID-19 era than they were before.
While at least some of the deals below were likely in the works prior to the pandemic, all have been announced since the lockdown began in the U.S. in mid-March:
- Former NFL quarterback Brett Favre paired this month with CBD specialist Green Eagle, signing on as a brand ambassador. A focus is touting the company’s products’ role in pain management. Green Eagle offers topical creams and sprays, among other CBD items.
- Jenelle Evans, a reality star known from her role in Teen Mom 2, reportedly partnered with Burnt River Farms Cannabis Company earlier in August for a cannabis moisturizer, with no release date mentioned. Evans has a cosmetics line, of which this product would be part, that has been controversial and has experienced several ups and downs in its short time in existence.
- Magic Johnson paired with Uncle Bud’s Hemp & CBD in July in an endorsement deal that will see the retired NBA great promote the company’s range of products, which are sold at Kohls, Urban Outfitters, Bed Bath & Beyond, the Vitamin Shoppe, and online, as beneficial for pain relief and general wellness.
- High Times, the cannabis-specific media property, announced in June that it had signed an agreement with Red White & Bloom to launch High Times-branded dispensaries and products containing both CBD and THC. The deal covers Michigan, Illinois, and Florida. Red White & Bloom will rebrand 18 existing and planned dispensaries in Michigan (which hold a 20% market share in that state) to the High Times name, as well as opening new locations in the other two states.
- Billy Ray Cyrus paired with Lowell Herb Co. in April for a limited-edition range of pre-rolled cannabis joints. The branding on the pack is tied to the country singer’s Mama Kush project, which encompasses new music releases, animated videos, and cannabis-related products.
- Garrett Leight California Optical, a brand of handcrafted, premium eyewear, paired with Pure Beauty in April for a limited-edition gift pack that included 10 pre-rolled cannabis mini-joints—to mark the 10th anniversary of the eyewear brand—along with a pair of sunglasses in a hue designed specifically for the initiative.
- Easyriders magazine signed five-year licensing deals, announced in April, with two hemp suppliers, Hemp2Lab and Big Top Farms, for a range of branded hemp-based products. They will include items containing both CBD (cannabidiol) and CBG (cannabigerol), two non-psychoactive cannabinoids contained in the hemp plant, both billed as having therapeutic properties.
Not surprisingly, all three of the April examples were timed to April 20, the unofficial holiday of marijuana lovers and counterculturists around the world.
This list of recent deals hints at the breadth and depth of possibilities in this space, as it encompasses a wide range of products, deal types, and highlighted benefits, from pain management to supple skin to relaxation. The roster also includes a variety of property types, albeit dominated by celebrities, who join a seemingly unending list of their peers in this category.
The cannabis industry is certainly not without its challenges. But the movement toward wider legality for non-medical uses of THC and CBD continues around the world, creating more opportunities for brands and properties. And the category has a growing reputation for promoting general wellness and stress relief, a consumer priority during the pandemic. These characteristics would seem to predict more licensing and other types of deals involving licensed IP ahead, both in the near term and in the years to come.
Pandemic Products with Partnership Potential
August 20, 2020, first published in RaugustReports: The COVID-19 crisis, for all the disruption and challenges it has brought to the licensing business, has also given rise to some wholly new opportunities. Face coverings are a notable example, of course, with the category going from zero to ubiquitous almost instantaneously. As the pandemic has worn on, additional brand-new categories are springing up to meet evolving consumer needs and desires, offering potential for licensors to jump in while there is still white space.
Examples noted recently include:
- Maskne. This is the facial irritation and acne caused by frequent mask-wearing, especially in warm weather. Celebrity facialist Sophie Pavitt has introduced an anti-irritation face mask made from satin, while a number of cosmetics marketers are touting the effectiveness of certain of their products for this new malady. Hero Cosmetics is selling a “maskne bundle” including three of its acne-fighting products, for example, while Swiss Line by Dermalab collects 16 “maskne essentials” on one page of its e-commerce site.
- At-home vacations. Although travel is starting to come back to a degree this summer, particularly driving excursions to nearby locations, many consumers are still leery of flying and staying in hotels and are missing the travel experience. IKEA launched Vacations in a Box, which combines themed IKEA home décor items such as pillows, rugs, and glassware with a downloadable booklet featuring music, recipes, activities, and movies designed to make the recipients feel like they’re at a specific vacation hot spot. Tokyo, Paris, the Maldives, and Turkey are the first destinations available. There have long been niche subscription boxes containing themed products along these lines, such as Vacation Crate, available on subscription box platform Cratejoy, but the current situation has expanded their mainstream appeal.
- Drive-ins. Drive-in movie theaters have made a big comeback as they allow the enjoyment of films, concerts, and other entertainment in a socially distanced way. Walmart is turning 160 of its parking lots into free drive-in movie theaters from August 14 through October 21, with a total of 320 showings of popular family-friendly films—from E.T. to The Lego Movie—each paired with a short film, curated through a partnership with the Tribeca Film Festival. Drew Barrymore is the virtual host; live appearances from celebrities are scheduled at some of the events. Meanwhile, author Stefenie Meyer is supporting the release of her new book in the Twilight franchise, Midnight Sun, with select appearances at drive-ins, in partnership with local bookstores. Each has slightly different components and fees; one costs $62 for one vehicle with up to four occupants, including a copy of the book with a signed bookplate, three additional bookplates, a Twilight-themed face mask, and a showing of the original Twilight film.
Another opportunity that has been evident almost since day one of the crisis but has taken until now before a licensor made a move into the category: Disinfecting wipes. Arm & Hammer paired with CR Brands for Arm & Hammer Essentials Disinfecting Wipes, in a deal announced this week. The citrus-based product is EPA-certified to kill 99.9% of viruses, including COVID-19, as well as bacteria, without harsh chemicals. The product is an extension of licensor Church & Dwight’s existing deal with CR Brands, which already includes a fruit and vegetable wash launched in January 2019. Brandgenuity represents Arm & Hammer for licensing.
This category was plagued by shortages due to high demand at the beginning of the pandemic and will continue to be sought-after throughout the coronavirus era and probably beyond, making it ripe for licensing. While there have been deals for various types of licensed cleaning wipes over the years, typically as part of a broader agreement in the cleaning category, this is one of the first examples specifically addressing COVID-19.
Only a few brands are positioned to really bring added value to a category such as disinfecting wipes, no matter how in-demand. This is a reminder that even when new opportunities arise post-COVID that seem to have partnership potential, such as those listed above, licensing fundamentals such as the fit between property and product remain as important as ever.
August COVID-19 Update: Digging in for the Long Term
August 18, 2020, published exclusively on this page: Regions around the world are attempting to reopen their economies and daily lives after largely conquering COVID-19—or not, in the case of the U.S. The resulting spikes in the virus at gathering places like schools, colleges, workplaces, and leisure activities have meant that some openings have been short-lived. Even countries that had things well in control, like New Zealand, have seen their progress reversed. Meanwhile, McKinsey and others have found that consumers are still uncomfortable going back to “the way things were,” and may, at least in some cases, remain so even after a vaccine is developed.
Within that context, here are some observations about the licensing business since we last assessed its status during the COVID era, a month ago:
Enthusiasm for e-commerce is here to say. No matter how poor their financial results otherwise, almost everyone is still seeing sales increases, often significant, on the e-commerce side of their business, whether established or emerging. And e-commerce-only organizations, from Farfetch to Wayfair, have seen strong financial results. Amazon’s profits nearly doubled in the last quarter, growing 48% to $5.2 billion, much better than expected.
The bricks-and-mortar landscape is still contracting. Store closings continue, with a variety of retail categories affected. Neiman Marcus is shuttering its Hudson Yards, New York, experiential store, just 16 months since opening with great fanfare. Ben Sherman, a men’s fashion retailer in the U.K., which is in danger of ceasing operations, is shutting a third of its stores as a cost-cutting measure. Quick-service restaurant chain Dunkin is closing 800 locations in the U.S., representing 8% of the total.
COVID-friendly categories stay strong. Companies selling products that help consumers make it through the crisis have been outpacing the rest of the business, and remain bright spots. These include, for example, grocery retail (Albertson’s and Ahold Delhaize saw positive results in the last quarter), DIY (Tractor Supply Co.), low-priced, casual apparel (Uniqlo, attributing its success to loungewear), video games and other leisure activities (Zynga, Dick’s Sporting Goods), and health and wellness (Nautilus). Other companies, from Foot Locker to Canadian Tire to Dr. Martens, also bucked the mostly negative industry trends in the last quarter.
Struggles continue for many. The positive results experienced by some are certainly not universal. Many organizations have continued to see declines, often steep, in revenues and/or profits in the last quarter, with examples including Adidas, Ferarri Formula One, Hasbro, Hugo Boss, LVMH, Scholastic, and UnderArmour, among others. The pace of bankruptcy declarations has not slowed down, especially among retailers, with Lord & Taylor and new parent Le Tote, California Pizza Kitchen, Steinmart, Ascena, and Tailored Brands adding their names to the list in the past month. Companies announcing mass layoffs in recent weeks include CAA, Hudson, Walmart, and Nike.
Post-COVID consolidation begins. Merger and acquisition activity among licensing-centric and adjacent companies has picked up as buyers and sellers alike try to position themselves to thrive, or simply survive. Authentic Brands Group and Simon Property Group plan to acquire Brooks Brothers; Logo Brands purchased Boelter Brands, bringing together two sports licensees; and Marquee Brands and CSC Generation, an e-commerce investor, took on Sur La Table, enabling the latter to keep 50 or more stores open.
Business models are further evolving. Streaming continues to be a viable option to reach consumers with new entertainment, even for first-run movie releases. Theater chains such as AMC are reopening and drive-ins are making a comeback. But studios are still delaying releases or opting for streaming instead, with Disney a prime example. It is debuting its highly anticipated live-action film Mulan on the Disney+ platform, for a price of $29.99 above the service’s subscription price. Meanwhile, some trends that were strengthening pre-corona have reversed. In the past month, subscription box services and other online brands, which had been quickly transitioning toward a hybrid e-commerce/bricks-and-mortar model, are shuttering their retail operations, with Rent the Runway and Glossier two recent examples.
Better than expected news on the economy but…. The U.S. Census Bureau said overall retail sales were up 2.7% in July, year on year, on an adjusted basis, while the National Retail Federation estimated sales of retail consumer products were up 10% year-over-year in July, unadjusted, with sales for the first seven months of 2020 up 4.7%. Sales in the 19 countries of the Eurozone were up 5.7% in June, according to EuroStat, bringing that region back to pre-coronavirus levels; some of the hardest-hit segments, such as fashion, helped drive the increase. The U.S. added 1.8 million jobs in July, better than expectations. That said, U.S. unemployment still stands at a high 10.2%, and GDP fell by a record 9.5% in the second quarter. How the mixed economic results are interpreted depends largely on political affiliation.
There are growing indications that any recovery of the licensing business—and business in general—will be much further away than once anticipated:
- Trade shows further into 2021 are going all-digital (Consumer Electronics Show) or moving to later in the year (The Inspired Home Show). Events that have tried to return to business as usual this year (Mipcom) had to reverse course and go virtual when key exhibitors bailed.
- Fashion labels around the world are reportedly reducing marketing budgets by as much as 80%, which may decrease costs but is also likely to impact sales long-term. Fashion industry experts also expect retail purchase order cancellations to continue at least through this year’s third quarter.
- Organizations in other segments are winnowing their roster of active brands; Coca-Cola, which saw sales fall 28% in the recent quarter, announced it would eliminate its less-popular names and put its efforts into those that perform best on an ongoing basis.
- More companies announced permanent work-from-home schemes, such as Tribune Publishing, which closed five offices around the country including The Daily News in New York. This trend, if it continues, is likely to cause massive ripple effects for already-suffering restaurants and retailers in downtown business districts.
All of this and other concerning signs are likely to have long-term if not permanent implications. Collectively, they have turned the licensing business away from figuring out how to survive until things get “back to normal” and toward a realization that they will need to be ready to succeed in a new paradigm and that now is the time to begin moving forward on the long road ahead.
Experimenting with Experiential
August 18, 2020, first published as a Licensing Topic of the Month in the Raugust Communications monthly e-newsletter: As time goes on, it seems increasingly evident that the licensing community will probably never go back to experiential initiatives as they were, disrupting one of the most important facets of the business over the past several years. Not only will safety concerns remain for some time, but consumers and businesspeople alike seem to want some sort of hybrid of digital and live elements long-term.
In the past few months, licensors, licensees, and allied companies have by necessity been experimenting with ways to create virtual experiences while trying to integrate components that add a bit of the old live/physical vibe to the effort:
- Bringing the experience home. A large local craft beer fest in the midwestern U.S. called the Beer Dabbler was canceled, instead launching a $60 Beer Dabbler in a Box with 12 seasonal beers and ciders from different breweries, combined with digital access to video interviews, tasting notes, music, virtual brewery tours, and other elements. JW Anderson did his spring runway show online, as most designers did, but sent out “show boxes” to key media to add a sensory element. The boxes included fabric swatches, cut-outs of accessories, printed images on different kinds of papers, inspirational embossed cards, and dried flowers. Online, he featured hologram images of models wearing his designs to try to mimic the live experience.
- Adding personal touch. Informa Markets’ Festival of Licensing, the four-week global, virtual trade show that is replacing Brand Licensing Europe this fall, is hoping to include small, local, live group gatherings to enhance the mostly digital content, where and/or if that can be accomplished safely. Wimpy Kid author Jeff Kinney is doing a reimagined book tour involving curbside signings, while author Stefenie Meyer of Twilight fame is doing her tour as a mix of digital events and live appearances at drive-in theaters, combined with a showing of the Twilight movie. The Las Vegas Market, a home furnishings show, has been reconfigured as a more safety-friendly showroom-focused event, supplemented by digital educational programming.
- Fan-generated content. While fans cannot attend large-scale conventions, they can participate digitally through art competitions, cosplay competitions, and the like, as was done in conjunction with San Diego Comic Con this summer. Registered fans could also print a physical badge and print a PDF of a souvenir book (with schedules, exhibitor lists, ads, etc.). These components allow fans to replicate certain elements of the real thing, albeit primarily digitally and at home.
- Digital live experiences in new environments. Musical acts including Marshmello, Diplo, and Travis Scott have streamed live concerts inside the video game Fortnite. Fanatics has set up personal experiences for fans; one NFL aficionado who purchased a Saquon Barkley jersey got the chance to participate in a short Facetime session one-on-one with the New York Giants athlete.
It is still early days, but some of these initiatives, which represent new experiments in creating hybrid live/digital experiences, may pave the way for a post-COVID future.
A Sporting Chance
July 30, 2020, first published in RaugustReports: One of the main topics of conversation in licensing, almost since the pandemic began, has been whether and how contracts could be renegotiated to better share risk between licensors and licensees. The sports industry is one sector in which a number of contracts are currently being questioned, reconfigured, or discontinued in the wake of the financial troubles brought on by the coronavirus. These hard conversations center around not only licensing deals but also other types of partnership. For example:
- Under Armour said it planned to end its $280 million apparel deal with UCLA and University of California-Berkeley (Cal). The deal with UCLA began in 2016, was intended for a term of 15 years, and was billed as the largest collegiate sportswear deal ever at the time. Under Armour has also been reworking athletes’ endorsement contracts, as well as asking for extended payment terms from its endorsers, some of which include the NBA’s Stephen Curry, NFL’s Tom Brady, and MLB’s Bryce Harper.
- Learfield IMG College reportedly told the same two universities, UCLA and UC-Berkeley, along with seven other schools, that it wanted to renegotiate or end its sponsorship deals. The initial offers put on the table are said to eliminate minimum guaranteed rights fees to the schools and replace them with a revenue-sharing structure. Learfield IMG’s contracts with UCLA and Cal are estimated at a value of $130 million together. In both this case and the Under Armour situation above, many of the colleges have been resistant to the proposed changes.
- Nike’s contract with the Board of Control for Cricket in India (BCCI), signed in 2016, ends in September, and Nike is reportedly uninterested in renewing under the same terms. It is estimated that the new deal, with Nike or another partner, will be valued at a level 31% lower than the current contract. The company reportedly pays $117,000 per match now, as well as a 15% royalty and a base fee of $804,000. The new structure may involve two partners, with one providing the kit and replicas and the other selling fan merchandise.
- Emirates airline renewed its shirt sponsorship deal with football club AC Milan, which has been ongoing since the 2010/2011 season, with the new deal running through 2022/23. The current contract is worth €10 million ($11.75 million) per year, compared to €14 million ($16.45 million) a year for the previous pact. The women’s club and training kit rights, formerly part of the agreement, will now be sold separately.
- Pro and collegiate headwear licensee New Era wants to get out of its stadium naming rights and sponsorship deal with the NFL’s Buffalo Bills. The team announced it was in the process of starting to look for a new naming rights partner. New Era was set to pay $35 million over seven years for the New Era Field name, which debuted in 2016.
- Telecommunications company Dialog Axiata extended its sponsorship deal with Sri Lanka Cricket, the national governing body for the sport in that country, in what is described as a reduced-value contract.
These are all big-money contracts whose details are public, at least in part. But similar negotiations are ongoing throughout the licensing business. Licensors and licensees are reconfiguring their contracts, or discussing doing so, in a number of ways, from reducing or eliminating minimum guarantees, to extending current contract periods to allow licensees more time to meet minimum sales or royalty requirements, to incorporating additional non-financial commitments from the licensee in lieu of some monetary payments. Creativity, flexibility, and an understanding of each other’s needs are all essential, as successfully renegotiating existing agreements may be the only path forward in the current environment.
Sitting Pretty in the Pandemic
July 23, 2020, first published in RaugustReports: Almost since the beginning of the lockdown, pundits have been saying that demand for cosmetics would likely decline, as most of consumers’ time has been spent at home and, even as society re-opens to a degree, mask-wearing hides much of the face. This prediction has come true in many cases, as a large number of players have reported significant sales drops since the crisis began. But you would never know it from the number of licensing and collaboration deals being signed in the cosmetics and beauty category—already a crowded landscape—in the past three months.
Most of the recent agreements, as is the pattern in this sector, are for limited editions, creating an incentive for immediate purchase while, importantly, reducing risk. The following property groups have been particularly active, with all of the initiatives mentioned below having been announced during the pandemic:
- Influencers of all types. Teen dancer Maddie Ziegler, who has a popular YouTube channel, has a new Imagination Collection with Morphe consisting of three lip and cheek color sets, a highlighter stick, and a palette of eye shadow. The tween sisters and TikTok creators known as WeWearCute are working with Taste Beauty on a line of hair, nail, and beauty products. Beauty influencer Jkissa and E.L.F. launched a makeup collection featuring an affordable and glittery brush set, eye shadow palette, and eye topper. Teyana, an R&B singer, dancer, actress, and model, collaborated with M.A.C on a makeup collection. And Courtney Shields, a lifestyle influencer, paired with TULA Skincare on an eye balm, marking TULA’s first product collaboration with one of its roster of influencers.
- Classic characters. Nintendo’s Kirby and Lovisia partnered for a line of lipsticks and eyeshadows, in a range of pink shades, plus a mirror, for distribution through stores such as Village Vanguard, Lawson, and Its’Demo in Japan. The upcoming film Wonder Woman 1984 inspired an eight-piece collection of eyeshadow, eyeliner, and lipstick from Revlon. Wonder Woman’s licensor, Warner Bros., also did a deal with Mad Beauty—which has been adding other character properties to its portfolio lately—for collections tied to a range of IP including Friends, Looney Tunes, and DC Comics; the first collection, for Friends, includes eye shadow, lip glosses, face masks, brushes, and other items.
- Celebrities with big LGBTQ+ followings and a focus on inclusivity. Drag artists KimChi and Naomi Smalls, best known for starring on RuPaul’s Drag Race, paired for a limited collection of eye and cheek palettes and liquid eye shadows called 2 Queens in 1 Desert, marketed by KimChi’s KimChi Chic Beauty brand. And Patrick Starr, a professional makeup artist known for his own dramatic styles and his 12 million followers, teamed with Luxury Brand Partners for a cosmetics brand called One/Size, exclusive to Sephora, that is promoted as welcoming to all underrepresented consumers. Teyana, mentioned earlier, is also a well-known LGBTQ+ advocate.
- Corporate brands. Chipotle collaborated with E.L.F. on a 10-piece collection of eye shadows, exfoliator, lip color in four shades, blush, putty primer, and brushes inspired by its menu items and contained in a silver bag reminiscent of the restaurant’s burrito foil, with quantities limited to 100 kits. Coca-Cola worked with Morphe on a collection of eye palettes, lip glosses, highlighters, sponges, and brushes. And Chupa Chups is the inspiration for a collection of cosmetics, including lip tattoos and blusher puffs, from Polka for sale in Indonesia.
- Latina musicians. Late Tejano singer Selena Quintanilla is the focus of a second collection from M.A.C., encompassing an eye shadow palette, lipsticks, and powder. Meanwhile, Thalia is promoting a limited-edition eye and cheek palette in 11 shades with Motives Cosmetics by Loren Ridinger.
- Kardashians. Already well-known for their beauty collections, the Kardashian-Jenner sisters have been making news in this category during the pandemic. Kim Kardashian announced that Coty would purchase a 20% stake in her KKW cosmetics company for $200 million, with plans to expand into new categories such as hair care, skin care, personal care, and nail products. (Coty purchased a majority share of Kylie Jenner’s Kylie Cosmetics brand for $600 million last November.) Speaking of Kylie Cosmetics, it launched a collection of lip color, eye shadow in 15 shades, bronzer, blush, and blotting powder with another of the sisters, Kendall Jenner, last month.
Note that a number of the celebrities on this list are people of color, furthering a trend for diverse, often celebrity-backed, assortments in the cosmetics industry. This movement has only grown stronger in the wake of the protests supporting racial equality that have been top of mind since May.
The deals mentioned in this post have taken place almost since the start of the COVID-19 lockdown, but the pace has accelerated in June and July, as have licensing and collaborative deals in general. For other coverage of the latest pandemic-driven news, see our Coronavirus Resource Page, which has just been updated with a recap of how the licensing business and its approach to the current landscape have evolved over the past month.
July COVID-19 Update: Rethinking Business Models
July 21, 2020, published exclusively on this page: In some ways, the licensing business is starting to come back from the coronavirus lockdown, even as the country strives to reopen (with many hiccups, at least in the U.S.). Licensing executives are sealing deals again and testing new models as they figure out how to position themselves for the future. Times are still tough, however. Here’s a look at how the business has coped since our last update one month ago.
Retooling Business Practices
Since the pandemic began there have been discussions about the need to restructure contracts to distribute risk more equitably between licensee and licensor, among other objectives. This has started to happen, with the sports and collegiate licensing sector being a notable example. Players in sports licensing and related functions have been reworking or discontinuing licensing, sponsorship, and other contracts that seemed sound at the beginning but are not sustainable post-COVID.
Under Armour ended its 15-year, $280 million apparel agreement with UCLA, which was highly touted and record-setting when signed in 2016. Learfield IMG College similarly said it wanted to discontinue its sponsorship agreements with both UCLA and University of California Berkeley, together reportedly worth $130 million. New Era, which recently reported it would lay off 187 employees, announced it was working with the NFL’s Buffalo Bills to be released from its naming rights and sponsorship agreement with the team, which began in 2016 and was worth $35 million-plus over seven years. Sri Lanka Cricket extended its agreement with sponsor Dialog Axiata, but with a contract of reduced value.
Licensees and licensors are also figuring out how to move forward in the experiential space, as live events remain unworkable in the short term and may not get back to normal any time soon, if ever. Many events, from fan fests to trade shows, have moved online through a variety of platforms, and organizers are thinking about how to integrate some digital components alongside live elements in the future.
Conversely, marketers are trying to add some live experiential elements to their digital events. In lieu of a runway show, fashion designer JW Anderson held what was essentially a webinar to unveil his latest collection, having pre-delivered to key reviewers and editors a box containing fabric swatches, photos, illustrations, and other touch-and-feel elements. In sports, Formula One is working with Zoom to create a virtual hospitality product that allows fans to take part in online experiences during its 2020 European races, and expects to incorporate some of its partners and teams into the platform.
Licensing executives are also streamlining operations, as well as doubling down on growth areas, of which China is one. Belgian designer Dries Van Noten is launching a flagship store in China this summer, while Nike is introducing Nike Rise, one of its digitally enabled formats, in Guangzhou. The Diane Furstenberg label laid off most of its staff, with plans to concentrate on the China market as well refocusing on digital sales and marketing. Gucci announced significant cuts to its roster of retailers—a trend across fashion, especially on the luxury end—decreasing its wholesale network in Italy by 70% and putting its attention on its best customers.
Picking Up the Pace on Deal-Making
The number of licensing and collaborative deals being announced is growing significantly each month after a post-lockdown hiatus, and that has certainly been true in the past 30 days. Many deals continue to focus on COVID-specific products, or merchandise that supports the quest for social justice and equality in some way.
On the virus side, some licensees are still creating goods designed specifically to help consumers deal with the pandemic, such as Hi-Tec Sports’ performance apparel with built-in face masks. Others are identifying categories with growth potential both during and after COVID and concentrating some of their efforts there. For example, River Cottage and its agent The Point.1888 signed Equinox for a branded organic kombucha, known for its immunity-boosting properties. And a sports marketing agency, Genesco Sports Enterprises, identified homegating (tailgating at home) as an opportunity that 76% of consumers say they would embrace. This category has been a focus of the NFL for several years but could be increasingly relevant to other leagues and properties as well.
A similar pattern is true for social justice initiatives. Some marketers are creating products tied overtly to the fight for racial equality. Puma and the Mercedes-AMG Petronas Formula One team unveiled a line of black racing gear with messaging supporting both the team’s and Puma’s commitment to diversity and inclusion. Other partnerships are focused on trends that are likely to grow in an environment of heightened awareness about racial equality, such as celebrities of color launching beauty lines (à la Patrick Starr’s new brand at Sephora, announced July 10). This has been a trend in this industry for some time, but recent events have accelerated the pace of announcements.
Deals not tied to current events are also starting to come back. In recent days news has come in about Walmart launching a line of Queer Eye furniture based on the Netflix show, Warner Bros. pairing with Vera Bradley for a collection of Harry Potter bags, Mattel partnering with watch company IWC Schaffhausen for IWC Racing-branded Hot Wheels collectible die-casts, TikTokers WeWearCute licensing Mad Engine for apparel and accessories, and JelSert and Lisa Marks Associates collaborating with DGK on a 50th anniversary Otter Pops capsule. These examples just scratch the surface.
It should be noted that many of these programs are limited and thus carry lower risk, and that many are likely to be governed by contracts containing creative deal terms to make the efforts viable.
Bad News Keeps Coming
Of course, all of these mostly positive trends are occurring in a context in which, despite some more-positive-than-expected economic news, things are still dire for the majority of retailers and for many brands. A smattering of news from the past month:
- Job cuts. Furloughs are turning into permanent layoffs. Swarovski said it would cut 600 jobs, Macy’s headquarters is losing 3,900 white color workers, beyond the store layoffs already announced, and UK retailer Boots is letting 4,000 people (7% of its UK workforce) go. Stella McCartney business is restructuring and plans layoffs, salary cuts, and store closures. U.K. retailers Harvey Nichols, Marks & Spencer, and Ted Baker are collectively letting more than 1,000 employees go.
- Precarious financial status. Mall of America, recently reopened, could not manage its loan payment for the third month in a row. Nordstrom said it would pay only half of its rent for the rest of 2020. LVMH shrank its dividend by 20% as its sales fell 15% in the first quarter and as it expects a slow recovery.
- Continued store closings. Stuart Weitzman is ceasing the operations of all of its Japanese stores. Bed Bath & Beyond is shuttering 200 locations over the coming two years, as its net sales in the first quarter fell by almost 50%. UK department store John Lewis is closing eight locations, or 16% of its 50 stores. In the first two weeks of July, 100,000 restaurants closed.
- Chapter 11 declarations and business shutdowns. Some of the chains finding themselves in one or both of these situations in recent weeks include Long Tall Sally, the Microsoft Store, Sur La Table, Brooks Brothers, Muji USA, and RTW RetailWinds (owner of New York & Co.)
On the positive side, some of the brands that faced Chapter 11 earlier this year are seeing new life (or potential new life) through new ownership. Just as it was about to come out of its bankruptcy, Gold’s Gym announced its purchase by Berlin’s FSG Group, the largest fitness center chain in Germany and several other European countries. Meanwhile, Retail Ecommerce Ventures acquired the IP and e-commerce business, for $31 million, of Pier 1, which had entered Chapter 11 and then shut down earlier this year. Perhaps another defunct retailer to make a comeback via licensing?
Foodservice: Resetting the Table
July 13, 2020, first published in the July/August 2020 issue of Produce Blueprints magazine: The precipitous decline of the foodservice channel during the coronavirus pandemic has been a massive challenge for many fresh produce suppliers. Restaurants and bars lost more than $80 billion in March and April alone, according to the latest figures from the National Restaurant Association, which projects losses of $240 billion for the year. The closures, temporary or otherwise, have wreaked havoc on fresh produce suppliers. “Foodservice just dropped off a cliff,” says Lauren Scott, chief marketing officer at the Produce Marketing Association (PMA) in Newark, DE. “Trucks on the road had to turn around because states were closing. The magnitude of the loss has been almost incalculable.” Read more here.
Clothing for the COVID Era
July 6, 2020, first published in RaugustReports: Populations around the world are slowly starting to test a post-COVID daily routine that involves some form of work, school, shopping, and leisure. But the reopening of society has shown that the coronavirus is still a threat, as illustrated by the recent spikes in the number of cases in the U.S. and some other countries. Consumers are therefore looking for solutions to help them balance their wish for a somewhat normal life with their desire to stay healthy.
The apparel and accessories industry is responding by developing designs that address the potentially long-term need to social distance, mask up, and sanitize. Their efforts take a number of forms:
- Adding antiviral properties. Antimicrobial and antibacterial apparel, especially in the athletic and athleisure space, has been a trend for some time. But these items do not protect against viruses. An emerging area is antiviral fabric that can help protect against COVID-19. The Canadian firm Intelligent Fabric Technologies North America is one company that has developed a chemical treatment specifically for the SARS-CoV-2 virus that is at the center of the pandemic; other companies have been developing more general anti-coronavirus or anti-virus treatments. IFTNA’s invention could be integrated into apparel items as soon as the end of 2020. It is introducing its own travel lifestyle line called Underit that will be treated, while its customer Careismatic Brands, licensee for Cherokee, Dickies, and ELLE scrubs, will launch it into the healthcare market. A caveat: It is likely that many companies will introduce apparel billed as having antiviral properties, but there may be questions about efficacy. In addition, most apparel does not cover the hands or face, both of which play a big role in transmitting the virus.
- Elevating facial protection. A number of designers and others have been marketing fashionable face masks almost since the beginning of the pandemic. But as it increasingly looks like face masks or other coverings will be encouraged or even mandated for some time to come, companies are creating products with built-in face masks. Hi-Tec Sports, a subsidiary of Apex Global Brands, has done this in its Venture Series of performance t-shirts, sweatshirts, and jackets, set for a fall launch from Hi-Tec’s North American licensee Tharanco Lifestyles. The face covering is flexible so it can be raised as needed and look good whether in use or not; a filter screen can be inserted for additional protection. Separately, Italian label Elexia Beachwear is marketing a “trikini,” which is a bikini with a matching, waterproof facemask.
- Designing for distance. Some fashion labels are touting garments or accessories that have physical properties to keep others from coming too close or otherwise protect the wearer. Chinese architect Dayong Sun and his company Penda designed a wearable and design-forward plastic shield; U.K. designer Harris Reed created very wide hats and skirts; a Romanian shoe maker, Grigore Lup, came up with extra-long shoes (size 75 European, about three-quarters of a meter); and San Kim, a student designer in the U.K., introduced protective suits that look like puffy robots out of plastic bags from retailers Marks & Spencer and Poundland. Many of these and other examples are too avant-garde for the average consumer, at least at present, but it is possible they could inspire more mainstream designs with some of the same properties.
- Integrating technology. A number of wearable technologies are being developed to warn consumers if someone is getting too close, serve as an early warning system by measuring temperature and other vital signs, predetermine how many people are in a store before entering, or monitor whether someone is violating quarantine. The last would typically be a mandated rather than voluntary accessory; the first is also being tested on a corporate level to protect employees in the workplace. But all four could have consumer potential. While many of these technologies are still in development, they could, like other wearables, be integrated into accessories such as bracelets or earrings, as well as directly into apparel or footwear.
- Uplifting spirits. Rather than focusing on functional, protective properties, some designers are turning their attention more toward attitude and mental health by creating designs that are simply meant to raise consumers’ spirits during difficult times, as well as being casual and comfortable and often contributing to COVID-related charities. Italian label TL 180 launched a series of collaborative items involving celebrities including journalist and style icon Monica Ainley, fashion influencer Reese Blutstein, fitness guru and dancer Mary Helen Bowers, actress and model Clémence Poésy, and actress Kelly Rutherford. The launches of each item in the capsule, one designed by each partner, are 10 days apart—the series is currently scheduled to end on July 31—and each is available for no longer than 90 days. All of the proceeds go to Sapienza Università di Roma for coronavirus research.
Most of the items cited here are innovative and functional—if not always entirely practical for mainstream apparel shoppers—and consumers may embrace some of them, at least to a degree. But it should be remembered that the fashion industry has much deeper issues in front of it. This sector has been affected by the pandemic as much as any. It must deal with the current struggles of department and specialty stores, inventory and sourcing issues, and shoppers not needing as many clothes as in the past as they maintain a still-mostly-at-home lifestyle. It also must face longer-term issues, such as sustainability, seasonality, and changing shopping patterns, all of which have been on the radar for some time but have been highlighted and/or accelerated during the crisis. Facilitating a safe and stylish post-COVID lifestyle for consumers is just one small part of the solution.
June 22, 2020, first published in RaugustReports: Toys and collectibles depicting police officers have taken a hit since the protests against police brutality began almost a month ago with the killing of George Floyd. Lego temporarily stopped marketing its police-centric building kits (but did not stop selling them), while Paw Patrol has come under scrutiny in some quarters for portraying the police in what critics say is an unrealistically positive light. On the adult side, TV shows such as Cops and LivePD have been cancelled and others have disappeared from the schedule temporarily and/or prompted discussions about their future direction.
This is a big change from a month ago, when a notable emerging trend was the creation of collectible and toy lines that featured first responders and essential workers—including police officers—as the heroes of the pandemic and beyond. Some of the examples set for release this year:
- Mattel announced a #ThankYouHeroes line of products that started with Fisher Price and quickly expanded to the company’s Matchbox, Mega Construx, and UNO brands. The initiative is part of Mattel’s Play It Forward charitable platform, and net proceeds will go to #FirstRespondersFirst. The Matchbox gift set includes an ambulance, garbage truck, grocery delivery van, news helicopter, mobile hospital, package delivery van, and police car. One Mega Construx building set includes a police cruiser, delivery cart, and medical lab as well as a police officer, scientist, two EMTs, and an ambulance driver, and a second features a food delivery truck and kitchen, plus a firefighter, cook, and food delivery worker. A tinned set of UNO cards portrays Mattel characters as frontline heroes (e.g. Barbie as a scientist and He-Man as a grocery delivery worker). And, from Fisher-Price, 16 action figures include delivery drivers, EMTs, nurses, and doctors, while a five-character Little People set features one of each of those plus a grocery store worker. Products are set to ship at the end of the year.
- Upper Deck released a collection of collectible trading cards featuring real-life essential workers such as nurses, grocery store staffers, and community activists under the Genuine Heroes banner. The company first launched the initiative in 2018 as part of the Goodwin Champions brand, with members of the military and public servants highlighted. The new cards expand the line by adding real-life COVID-19 heroes, selected from submissions from the public. The products will be digital at first, meant for sharing on social media, but Upper Deck said it was looking at the potential for a physical product release to benefit charity.
- The National Bobblehead Hall of Fame and Museum introduced a bobblehead series of essential heroes including 35 different frontline professions such as warehouse workers, gas station attendants, food service and grocery store personnel, sanitation workers, mail carriers and delivery drivers, hospital workers, and more, each in a male and female version with dark and light skin tone options. Proceeds from the line, which is expected to ship in August, go to the Protect The Heroes campaign. Before launching this set, the institution offered bobbleheads featuring famous faces from the COVID era, including Dr. Anthony Fauci, Dr. Deborah Birx, high-profile state governors, and others, also for charity, with Dr. Fauci becoming its bestselling release ever.
- Funko is developing a Frontline Heroes collection of Pop! Vinyl figures featuring doctors and nurses. The set is expected to launch in October and includes four figures, two female and two male, shown in full personal protective equipment. BoxLunch and Hot Topic are donating net proceeds from sales of the figures to GlobalGiving’s Coronavirus Relief Fund. Funko made a separate donation to GlobalGiving, a crowdfunding platform that pairs nonprofits with donors and companies and is now focusing on supplying PPE to medical personnel. The figures are also available for preorder on Amazon and Entertainment Earth.
Many other licensees are supporting frontline workers through donations of proceeds from product sales or discounts to first responders, but the companies listed here have taken the extra step of creating merchandise depicting the frontline workers themselves. There has been no indication that any of the lines (or any of the figures therein) are not going forward, despite the backlash against portrayals of the police in pop culture. But it stands to reason that strategies may be tweaked to place less emphasis on police officers and more on health care professionals and other essential workers, depending on what the ever-changing landscape looks like when each line is released.
June COVID-19 Update: Looking Ahead to a Post-COVID World
June 16, 2020, published exclusively on this page: In some ways, the licensing community’s struggles to address the COVID crisis in the past month have taken a back seat to its efforts to address racism and social justice in the wake of the protests, in the U.S. and around the world, against police brutality and broader racial inequities. But the coronavirus pandemic continues to impact all aspects of licensing and consumer products. Following is our latest monthly update.
Licensing Deal-Making is Back
Stores are starting to reopen, some with curbside or delivery only and a growing number with limited in-store shopping. It is too early in the process in most regions to gauge the impact on sales of licensed products yet. And early results have varied. But Macy’s has been one of many retailers to say that the stores it had re-opened so far were performing “better than anticipated,” especially in the first days back in action.
As licensors and licensees settle into their new routines and as stores gingerly start to reopen, more and more deals are being announced. In previous months, the bulk of agreements related to products that were specifically tied to COVID-19 or to categories such as board games or baking that have been performing well during the crisis, and both types of deals remain top of mind. But announcements increasingly are trending toward being entirely non-COVID-related. Representation deals between licensors and agents have also picked up steam in the last month.
Agreements run the gamut from long-term to less-risky collaborations, capsules, and limited drops. So-called “B” and “C” properties are especially active these days, licensees say, as licensors of “A” properties are often dealing with significant furloughs and are less willing to negotiate more lenient terms. Agreements now are likely to include longer time periods to recoup guarantees and rely more on a fair royalty rate that allows for shared risk, in lieu of high guarantees and advances.
Although deal-making is on the rise, the licensing landscape remains very tough in most categories, and is still fraught with uncertainty. Recovering would be hard enough due to fear, economic hardship, and other factors. Add to that the complication of a potentially strong second wave of virus on the way for this summer or fall, at least in some regions, including the U.S. The reopening of stores, restaurants, and other activities, along with massive protests and political events, has made many health experts increasingly certain that the pandemic is here to stay for some time ahead.
The Virtual World: Assessing the Future
Virtual trade shows have been taking place in the past month or so with some success, as measured by attendance levels, and several organizers have said that they expect future shows to be a hybrid of digital and live elements, even post-COVID. Informa Markets is currently looking at the possibility of bringing a fashion marketplace—it hosts MAGIC and related apparel trade shows—to life in the fall with physical components in Las Vegas, reconfigured for social distancing, combined with complementary digital solutions. It has also said that it is planning to integrate a virtual component as part of future Licensing Expos, after hosting this year’s event entirely digitally.
Twitter, Facebook, and Shopify Canada are among the companies that have announced they would allow many of their employees to work from home for the foreseeable future, potentially with some office visits on an as-needed basis. The continuation of Zoom calls rather than on-site meetings and travel will likely lead to long-term reduced demand for items such as business attire, take-out coffee, and lunches in business districts, along with continued robust demand for things like home office supplies and comfortable athleisure apparel.
A recent study from Citrix found that 77% of workers would rather work from home permanently or only go to the office for specific purposes, until they are fully satisfied with the safety measures in place. And a survey from The Conference Board found that 77% of HR executives believe that employees will still be teleworking at least three days a week a full year after the virus subsides substantially.
Meanwhile, consumers continue to embrace streaming entertainment at a much higher level than pre-COVID, and that seems likely to continue. More films are following in the footsteps of Trolls World Tour and premiering exclusively on streaming platforms rather than waiting for a theatrical release. These digital-first premieres are driving at least some merchandise sales as well, according to reports. Even when traditional movie releases return, the theatrical window is likely to be compressed. Streamed TV shows, meanwhile, continue to attract strong viewership, raising potential for niche licensed product programs based on both new and library titles, as well as pop culture themes that go viral. The preference for on-demand over appointment viewing is likely to continue when the pandemic subsides, with some exceptions.
Finally, shoppers, some of whom had never purchased anything online before the pandemic, are getting used to ecommerce. Consumers of all ages expect to continue shopping online more frequently than in the past, even after the lockdown, with 42% saying so, according to ChannelAdvisor and Dynata. Retailers are looking at how to merge the online and offline experience to create an optimal combination—one that is likely to look little like the pre-COVID landscape in many cases.
Pessimistic Numbers Pile Up
While licensing negotiations are on the upswing, the question is how well the resulting products will sell. In some good news, both unemployment figures and retail sales have rebounded somewhat from their nadir earlier in the crisis. That said, the greater landscape in which licensing operates remains challenging, to say the least. The U.S. Federal Reserve predicted an unemployment rate in the U.S. of 9.3% at the end of 2020 (compared to 13.3% in May), adding that it believes the number will stay high for years to come.
Individual companies in the mass, value, and e-commerce channels are still reporting positive results, overall, as the pandemic goes on. But many retailers and other marketers continue to release negative news: Gap Inc. announced a loss in the first quarter of almost $1 billion, while Macy’s losses were $652 million in the quarter. H&M’s year-over-year sales declined 50% in its second quarter. Recently bankrupt JCPenney said it would close 154 stores, with more rounds of shutdowns to come, while Inditex plans to shutter 1,200 globally over the next few years. Kohl’s cancelled $150 million in orders it had placed with factories in Bangladesh and Korea. Funko announced it was reducing its workforce by 25% worldwide, letting go about 250 people.
There is also a greater awareness of the high costs of reopening bricks-and-mortar shops, due to the need for extreme cleanliness, reconfigured environments, and caps on the number of customers shopping at a given time, all of which reduces profitability, even if sales rebound. Excess inventory is also a critical problem, with retailers figuring out whether to sell unsold items at big discounts, keep them on hand for future seasons, sell them to resale channels or off-price chains, or destroy them. Quantities of unsold inventory make retailers wary of purchasing new licensed goods as well, of course.
Uncertainty about what happens next in a year of never-before-seen events makes planning difficult. As noted in our earlier updates, however, this is also a moment that allows companies in licensing to rethink their business models. They can not only position themselves for the new norms of the future, whatever those may look like, but also address some of the issues that have plagued the business over the past several years as new consumer shopping behaviors have taken hold.
Musicians Chime In with PPE
June 15, 2020, first published in RaugustReports: Like property owners from across the spectrum of licensing, many musicians have lent their names or other IP to COVID-related merchandise. In some cases, their products have involved creative twists on their music or look. Key categories include:
- Hand sanitizer. Wu Tang Clan introduced “Protect Ya Hands” hand sanitizer—a riff on their song “Protect Ya Neck”—with JUSU, a skincare company. The all-natural and vegan product is part of a broader assortment called the A Better Tomorrow Collection, which also includes a reusable food bowl and t-shirt. Sales of the line benefit the Children’s Hospital of Eastern Ontario, Ottawa Mission Foundation, and the Ottawa Food Bank; each purchase of a bottle of hand sanitizer results in a donation of another bottle to the Ottawa Mission Foundation and other homeless shelters in Canada.
- Face shields. Devo launched a line of personal protective equipment that includes face masks as well as unique face shields patterned after the well-known “energy dome” helmets that the group started wearing on stage in 1980. Replicas of the famous hats come with a clear plastic shield that is attached with Velcro.
- T-shirts with inspirational COVID messaging. Alice Cooper released branded t-shirts (and masks) with the phrase “Don’t Give Up,” based on his song of the same name, written and recorded to address the pandemic. The song’s video includes 500 or so crowdsourced photos of fans holding up signs inspired by the lyrics, with many others, from the more than 20,000 fan photos submitted, available online.
- Face masks. Justin Bieber and Ariana Grande paired to release four face mask designs featuring stick figure images reminiscent of the cover art of their joint single “Stuck with U.” Proceeds go to the First Responders Children’s Foundation. Meanwhile, many other musicians, from Kiss to Katy Perry, have joined an abundance of licensors across all property types in getting into the mask game.
Musicians represent a group that has been very hard-hit economically by the crisis. Live concerts have become the primary financial driver for most acts and are no longer possible, with a few exceptions, for the foreseeable future. Products such as those described here—like most COVID-related initiatives that have been revealed across licensing to date—are primarily promotional and charitable in nature, rather than directly revenue-generating, and therefore do not help much financially. From a marketing standpoint, however, they can help raise a musician’s profile, keep fans engaged, and perhaps spur tune-in to virtual concerts or drive purchases of new singles and albums. They also enhance the act’s positive image by virtue of fundraising or other charitable components.
June 4, 2020, first published in RaugustReports: Since the coronavirus pandemic started, licensors, licensees, and retailers have been hosting virtual versions of normally live annual events that are important to students and families and cannot occur face to face. After going digital with prom and graduation, they are now addressing the next big virtual adventure: summer camp.
Among the companies with ties to licensing that are pitching their tents in this sector:
- Candlewick Press. The publisher’s Camp Candlewick is a free, 12-week online education program for grades 1 to 12, focused on reading, which starts on June 11. Campers are divided into virtual cabins, by age, and participate in workshops, read-alouds, appearances by Candlewick authors, and other activities. They and their families also have access to e-newsletters, website materials, and Pinterest content. The company has been providing remote-learning resources to families through its Stay Home with Candlewick Press site (which houses the camp) since shortly after the lockdown began in mid-March.
- Geek Squad Academy—At Home. Best Buy is bringing its normally live summer tech camp online this summer. Content, for tweens and teens aged 9-18, includes classes on taking better photographs on a mobile phone, creating videogames and websites using free software, and coding. The online lesson plans can be done individually or in a group.
- Little Tikes Camp Play @ Home. MGA Entertainment’s Little Tikes division is hosting a virtual summer camp starting June 15, featuring games, activities, and ideas for creative new ways to play. All are aimed at the younger kids that would be Little Tikes users and are billed as easy for families to do, inexpensive, and self-paced. The venture also provides information and inspiration geared to parents. Content is shared via email and social media.
- Camp Care Bears. This camp from Cloudco varies from the others in that it began in April, early in the pandemic, as a means of keeping families occupied in isolation. (Many other companies in the children’s business offered similar packages.) This venture features camp-themed downloadable activities, posted weekly, such as arts and crafts, games, cooking, virtual nature walks, reading, and journaling, as well as livestreams and group sharing events. Content is available on Instagram Live, IGTV, and YouTube.
- Camp PBS Kids. PBS is offering downloadable, printable, and web-based materials for parents to use with their children aged 2-8, many tied to shows on the network. Content includes checklists of activities to complete and books to read during the summer, to which families are encouraged to add, and educational projects themed to the arts, dinosaurs, upcycling, animals, kindness, and space exploration. Resources for parents and tips to keep their kids engaged in learning are also included.
These are just a few representative examples. Some of the initiatives are set up more like a traditional camp than others, with a variety of camp-like activities and ways for kids to virtually connect, while others focus on self-paced, downloadable projects or how-to videos. Some are virtual versions of live events that the companies have hosted during previous summers or during the school year, while others are completely new initiatives. From a corporate-objective point of view, all are about burnishing brand image and not about revenue generation.
Numerous live activities involving licensed properties have gone digital during COVID-19, from watching a new theatrical movie release to attending a fan festival. In some cases—such as movie streaming—the virtual edition meets consumers’ needs very well and is likely to continue at a higher level than pre-COVID, even after people can finally get together again.
But camp is all about meeting new friends and having new experiences outdoors or in another out-of-the-ordinary setting, away from the rest of the family. It seems to be one of those experiential activities that will go back to its in-real-life form when that becomes possible to do safely. At the moment, however, virtual camps are certainly a way to meet the immediate needs of families by helping keep kids occupied, engaged, and learning during a summer of self-distancing.
Tokens of Gratitude
May 25, 2020, first published in RaugustReports: In the last few weeks, a handful of licensors and licensees have launched marketing campaigns and/or product lines built around thanking the medical professionals and other essential workers who have been risking their health to care for the sick or fill the population’s basic needs during the COVID-19 crisis. While a number of companies involved in licensing have previously touted their efforts to get supplies such as protective equipment or ventilators into the hands of first responders, these newer campaigns are built around a simple message of thanks, although there is often a charitable component as well.
- Mattel’s Fisher-Price brand launched a special-edition line of 16 collectible action figures—ranging from doctors, nurses, and EMTs to delivery drivers—under the #ThankYouHeroes banner. The figures, available on a dedicated page of the Mattel Playroom website, cost $20 each, with $15 of that going to #FirstRespondersFirst, which supports frontline COVID-19 healthcare workers. Preorders begin May 31, with delivery expected by the end of the year. The company is also introducing a five-character Little People Community Champions set consisting of a doctor, nurse, EMT, delivery driver, and grocery store worker. Other charitable initiatives honoring first responders are planned for the future.
- Random House Books for Young Readers is publishing a picture book called Thank You, Helpers: Doctors, Teachers, Grocery Workers, and More Who Care for Us, written by Patricia Hegarty and illustrated by Michael Emmerson. The title helps families discuss the importance of these workers, as well as the need to express appreciation. An e-book edition will go on sale in early June, followed by a paperback edition later in the month. Each purchase will prompt a donation to Americares, a global organization currently offering protective supplies, emotional support, and training to health workers in the U.S. and abroad.
- Fourteen pro sports and e-sports leagues—Association of Tennis Professionals, Major League Baseball, Major League Soccer, NASCAR, National Basketball Association, National Football League, National Hockey League, National Women’s Soccer League, U.S. Golf Association, WNBA, Women’s Tennis Association, WWE, Activision Blizzard Esports, and Electronic Arts—came together for a PSA campaign that honored more than 30 U.S. healthcare workers fighting COVID-19, by name. The Real Heroes Project was put together in conjunction with marketing agency 72 and Sunny, Hecho Studios, and Adweek. In the videos, athletes offer personal tributes and cover their own names on their jerseys with the name of the healthcare worker. Fans are encouraged to do the same with their own jerseys and share on social media using #TheRealHeroes.
- Organizations ranging from Hallmark to Aardman Animations to the Washington Capitals NHL team have created free e-cards specifically designed to send a thank-you message to a front-line essential worker. In Aardman’s effort, Wallace and Gromit creator Nick Park designed new artwork for the cards featuring the characters; a minimum donation of £1.00 to the W&G-themed charity, The Grand Appeal (which benefits Bristol Children’s Hospital and is currently funding coronavirus research) gives the consumer the ability to send five e-cards. The Capitals’ designs involve its hockey players offering messages of thanks.
Note that not all of these efforts are focused on licensed properties per se, but all involve companies active in licensing.
Thank-you campaigns such as these have been popping up since the beginning of the lockdown. Initially, examples skewed toward national and regional advertisers such as United Health, Pizza Hut, and Rogue Fitness, who sent their messages of gratitude—sometimes to their own employees, sometimes to essential workers in general—through television ad campaigns. Over time, a growing number of companies of all sizes, including those involved in the licensing business, have been adding their voices.
May COVID-19 Update: Navigating a New Reality
May 19, 2020, published exclusively on this page: The last month has seen the release of many economic and corporate financial numbers that painted a picture of the impact of the coronavirus on the worlds of consumer products and retail. Businesses are starting to re-open or make plans to do so, albeit with many unknowns ahead. And announcements of licensing deals and marketing campaigns to support licensed products are on the rise, at least to a degree, despite continued uncertainty.
The Numbers Are In
We all knew the pandemic and associated lockdown would have a negative impact on the global economy. In the past month, we started to get an indication of how big that impact would be. In the U.S. alone, unemployment hit 14.7% in April, and as of mid-May 36 million people are without jobs. Retail jobs alone fell by 2.1 million in April.
Sales in retail and food service channels in the U.S. overall fell 16.4% in April compared to March, according to the U.S. Commerce Department, and saw a 21.6% year-over-year decline in the month. Apparel and accessories stores were down 89.3% from a year earlier, department stores down 47%, and bookstore sales down 33.4%. E-commerce sales were, not surprisingly, a bright spot, with sales up 21.6% in April compared to last year. But in dollar terms that does not compensate for the losses at bricks-and-mortar.
Meanwhile, the National Retail Federation in the U.S. predicted double-digit declines in imports this year; U.K. retail saw a decline in foot traffic in April of 80.1%, according to Springboard, the biggest decrease ever tracked and almost double the rate of decline in March.
All of this has an impact on companies’ value, not just in terms of stock or other financial measurements, but in intangibles, including IP. Brand Finance says global companies will lose $1 trillion in brand value—the value of trademarks and associated intellectual property—due to the crisis.
Individual Companies Continue to Struggle
Of course, not all categories, regions, or even property types are affected equally by these macro-economic numbers. But recent releases of quarterly financial data for public companies, as well as other corporate announcements, together paint a dark picture.
J. Crew, Nieman Marcus, JCPenney, and Stage Stores are among the companies reorganizing under Chapter 11 bankruptcy. Lord & Taylor plans to liquidate. Dillard’s said same-store sales in recently opened stores were down 56% percent from the previous year, while Uniqlo saw total sales (in-store and online) drop 57.7%. Gap stopped paying its rent. Even essentials retailer Costco saw a negative impact on sales due to safety restrictions that kept the customer count down.
As their retail customers face challenges, so do licensees and licensors. In Q1, Safilo’s sales were down 11.5%, Spin Master saw its revenue drop 4.9%, Mattel’s sales declined 14%, Formula 1 announced a year-on-year revenue decrease of 84%, and Iconix’ total licensing royalties dropped 22%. Designer label John Varvatos and Gold’s Gym both filed for Chapter 11. Not all of these numbers are attributable solely to licensed products, but they create a snapshot of the landscape in which licensing executives are operating.
Sales declines are not the only problems being faced. Costs are rising due to safety protocols and many retailers and suppliers are dealing with inventory issues ranging from too much on hand currently, given sales levels, to the threat of shortages later in the year due to supply chain issues. Xbox’s head, Phil Spencer, has said in interviews that the current halt in production will potentially lead to a lack of new titles in the video game sector—a growth business during the pandemic—in early 2021.
In some of these situations, the COVID crisis is simply hastening things that would likely have happened anyway. Many observers note that there are too many retail stores and that this is a needed contraction. But that does not make it any easier for the companies that sell to the shuttered locations.
A Cautious Re-Opening
In Asia, Australia/New Zealand, and parts of Europe, businesses are coming back online, especially in places where the virus has largely taken its course and/or the impact was less severe. Many regions in the U.S. are opening, too, either wholly or gradually, despite the still-rising illness numbers.
Some malls in China have seen better-than-expected traffic, although others remain empty. When Disneyland Shanghai announced it would reopen (at 30% capacity), tickets available for the first four weekdays and the first weekend sold out immediately.
But there are still concerns. How many people will shop or eat out in the short term and how long will it take the masses to come back? Will businesses be able to bear the increased costs and lower capacities associated with safety needs? Will the virus lag on or come back in repeated waves? Can businesses fully get back to work with social distancing and travel restrictions still in place? When will large-scale events be able to operate again?
Many of the concerns in the short term have to do with safety. But the severe economic downturn that most analysts agree is ahead will likely play an even bigger role as the months go on. The question is how long it will be before a turnaround occurs; analysts and others currently disagree on the potential severity and duration.
Meanwhile, activity on the licensing front is on the rebound (to a degree). More deals for licensed products and especially collaborations are being sought, signed, and announced at an ever-quicker pace, although perhaps not with the terms that would have been expected during pre-corona times. Licensors and licensees are working together to renegotiate contracts to ensure both parties can survive and keep the products or services on track. Marketing and promotional campaigns are starting to come back, not just with pandemic themes but also with general messaging to support licensed products.
Taking Time to Reimagine the Future
A number of licensing executives across property types and product categories are taking the time to re-envision what their businesses might be in the future. Almost everyone agrees that the “new normal” will be different from the “old normal.”
They are looking at how licensing deals will change in the future, how they will reach consumers directly or in new ways given the upheaval at retail, and which B2B and B2C relationships and events can or should continue virtually after the crisis. The fashion industry is taking a close look at whether the traditional seasons for new collections constitute a reasonable way of organizing the year, given the way customers shop now. Everyone is considering how to ensure and communicate safety and balance it with commerce.
A lot of uncertainty exists about how long this crisis will last and what the licensing business will look like in the aftermath. But many licensing executives see an upside, in that this time will give them a chance to learn and refocus, or perhaps even force the business to change for the better.
Bringing Apparel Back: Can Licensing Help?
May 19, 2020, first published in Raugust Communications’ e-newsletter: One of the hardest-hit sectors during the coronavirus pandemic has been apparel, accessories, and footwear, which had already been facing significant challenges prior to COVID-19’s appearance. Some of the hurdles facing this segment of the business:
- It has seen some of the biggest sales decreases overall of any category where licensing plays a role, aside from a few bright spots such as athleisure clothing. The global apparel market is set to decline more than 15.2% this year, a drop of $297 billion, according to GlobalData, with the U.S. accounting for 40% of that number.
- Sales estimates by retail channel confirm these trends, with apparel marketers’ customers seeing the poorest results. Specialty store sales dropped 89.3% and department stores almost half in April compared to last year, to name just two relevant stats, according to the U.S. Commerce Department.
- Many of the retail Chapter 11 reorganizations (J. Crew, Nieman Marcus, JCPenney, and Stage Stores among them to date), not to mention store closures, rent non-payment, loan defaults, and other struggles, have involved chains that are particularly important customers for apparel and related categories.
- It seems as if consumers are going to be working from home at a much greater rate than in the past, even as the crisis eases, with some companies such as Twitter saying their employees will have that option for the foreseeable future. This will tamp down demand for many clothing categories.
- Excess inventories are a big problem, with the crisis starting just after spring collections hit retail stores. Many apparel marketers are deep discounting and selling to off-price and outlet stores. Some, such as Armani, are waiting until next year to debut new collections. Meanwhile, the entire concept of seasonality in fashion is being questioned, with the crisis moving the industry toward a long-discussed “buy-now-wear-now” approach.
- Safety issues will impact many aspects of the fashion industry going forward, as some consumers will be leery of trying on clothes and browsing through items on racks or shelves, both “high-touch” activities. Fast-growth new business models such as rental/personal styling boxes and resale programs will also be off-limits for some consumers for the same reason, at least for a time, despite their relevance for shoppers who value sustainability.
On the positive side, drops of limited edition and capsule collections, many of which are collaborative in nature, have reportedly continued to perform well overall. This model, already a key strategy, is generating interest even among companies that had stayed away in the past. In fact, as announcements of licensing and collaborative deals start to come back after an approximately month-long hiatus, a significant proportion—from Leicester City football club with Kasabian to Super Mario with Uniqlo—fall into the category of limited collaborations with outside properties.
Such programs infuse a degree of consumer excitement and urgency, while minimizing risk to still-struggling fashion marketers and retailers and their partners. It seems logical that limited collaborative collections featuring licensed IP will play a key role as the industry reimagines itself and ultimately reemerges from the current crisis.
Licensing-Related Marketing Campaigns During COVID-19
May 19, 2020, first published in Raugust Communications’ e-newsletter: The number of marketing, promotional, advertising, and social media campaigns to support licensed properties and products decreased precipitously in the U.S. as soon as the coronavirus hit the region in earnest in mid-March. The incidence of awareness-generating efforts, both to consumers and the trade, is creeping back up. But many licensors, licensees, and other partners are still figuring out when it is appropriate to get back to marketing, as well as how to develop appropriate messaging for the times.
Companies that have been promoting themselves in some way have mostly been sticking with COVID-related messaging, according to new Raugust Communications research. The analysis includes approximately 400 examples of advertising, social media campaigns, and published publicity releases (consumer and trade) launched from March 15 to May 15.
COVID-related efforts tend to fit into three categories: spotlighting charitable efforts (35.1% of campaigns); highlighting existing COVID-friendly product lines, such as puzzles, educational workbooks, meal kits, and the like (29.4%); and touting new products or services created due to the virus, such as face masks, content about hand-washing, t-shirts with COVID-related phrases, and thank you messages to first responders (12.4%).
Non-COVID-related messaging continues to exist, but these represent just 16.9% of campaigns. They fall into two classifications: 7.3% that are tying their messaging to a recurring special event, such as Easter, Cinco de Mayo, graduation, Earth Day, or the NFL Draft, and 9.6% that are promoting general product launches.
The landscape has evolved quickly as the crisis has gone on. In the first month, COVID-related messaging of the three types mentioned above collectively drove 84.4% of campaigns, while 11.4% were non-COVID-related. From April 15 to the present, messaging still skewed toward the COVID-specific, accounting for a 73.0% share of campaigns collectively. Non-COVID messages are starting to reappear, however, comprising an 18.7% share in the past month.
A Little Help From Your Friends
May 18, 2020, first published in RaugustReports: A number of retailers have set up programs in which they assist their customers in supporting healthcare workers, their neighbors, or their broader communities during the COVID-19 pandemic. These initiatives are primarily charitable, but they bring marketing and sometimes sales benefits as well:
- Walmart teamed with NextDoor, a social networking app for neighborhoods, for a “Neighbors Helping Neighbors” Program. The collaboration, formed at the end of April, is meant to make it easier for neighbors to assist each other during the lockdown. It creates a platform to match consumers who need help securing essentials such as groceries and pharmacy items with neighbors who are willing to pick up and deliver the things they need. Members of the free Nextdoor app click on the Groups tab to find Walmart stores in their area pinned to the page, along with a prompt to post a message if they need help or want to provide it. Members can then connect and coordinate logistics and payment. Prior to this deal, Nextdoor had seen a sevenfold increase in people joining groups formed to help their neighbors during the crisis.
- Joann, the craft and fabric retailer, has encouraged its sewing-savvy customers to make face masks for healthcare professionals, and has given away free kits containing all the materials they need, with instructions and how-to videos available on its website. The retailer’s store managers have worked with local hospitals to assess their current requirements, collect the finished products, and arrange the deliveries. As of the end of March, the chain had gathered more than 11 million masks. The effort not only fills a need for medical first responders but keeps consumers busy and fulfilled as they self-isolate.
- Lowe’s created a campaign to spur consumers to build yard signs to thank healthcare professionals for their essential work. The company asked them to use materials they have around the house, such as holiday lights or craft and DIY supplies to create the signs and display their creations in a prominent location. On April 6, participants shared pictures of their work on social media with the hashtag #buildthanks. Lowe’s offered instructions and examples for inspiration on a dedicated page on its website. Like the Joann program, the #buildthanks campaign also gives consumers a project to keep them occupied while offering support to those on the front lines, even as it reinforces the retailer’s position as a go-to source for craft and DIY products.
- JCPenney, prior to its Chapter 11 bankruptcy declaration, created an initiative in partnership with Give Back Box that allowed customers to donate used items and feel confident that they went to charities supporting education and job training for furloughed and unemployed Americans. Customers could fill a box with good-condition used clothing and household items, print a free shipping label from the JCPenney website, and drop the box at a UPS or USPS location. The boxes were recycled and the goods donated to local charities. The initiative was themed to Earth Day, but its timing this year meant the need for such a program was as great as it ever has been, for humanitarian as well as environmental reasons.
- Supermarket operator Southeastern Grocers, whose chains include Bi-Lo, Winn-Dixie, Harveys, and Fresco y Más, paired with Feeding America on a program where shoppers can give “hunger relief” bags of groceries, for $5.00, to people facing food insecurity because of the ramifications of COVID-19. The bags, filled with SE Grocers-branded private-label non-perishables, are available for purchase at store registers across all of the chains, fulfilled at company warehouses, and donated to food banks in the southeastern U.S.
Retailers have often spearheaded charitable initiatives in the past, sometimes involving their customers’ participation. What is interesting about these examples is that they offer an opportunity for a retailer to raise awareness and buff its image in a pandemic-acceptable way, because they are filling a real need for consumers who want to help. This was a particular benefit during the first month or more of the crisis, when many marketers were shying away from advertising, promotions, and other exposure-generating activities altogether in fear of seeming insensitive or inappropriate. (Marketing efforts have slowly been coming back in the last few weeks, although nowhere near pre-pandemic levels.) Several of these initiatives also bring traffic to the stores and/or spur purchasing, either directly or indirectly.
Competing for Fan Loyalty During Hard Times
May 14, 2020, first published in RaugustReports: One segment of the licensing business where the shutdown of live events has had a significant impact is sports. The cancellation of sports seasons and events has removed their core reason for being, creating financial hardship for many and lessening the urge to purchase licensed merchandise, both in the short term and very possibly for a longer time.
As social distancing has made their real-world iteration at least temporarily impossible, marketers of live events and experiences of all types have tried to build alternative presences in the digital world. Virtual editions of things like author tours, theatrical movie releases, trade shows, and fan fests do not replicate their associated live events perfectly, but they have been adequate substitutes for the time being. Live sports, on the other hand, do not have a direct translation in the virtual world. Not only is there nothing like the experience of watching live sports in a stadium, but consumers cannot even watch the sport from afar in the safety of quarantine, since the players have been self-isolating as well. At this writing, some sports around the world are tentatively starting to relaunch, but the full sports experience as fans knew it in the past is not coming back anytime soon.
That said, sports licensors and their licensees and other partners have kept their brands and a bit of the experience of their sport—and sports in general—alive during the hiatus in a variety of ways. Some of the most common strategies have included:
- E-sports. Leagues, events, and athletes have been entering or expanding their presence in the world of competitive video gaming. The eNASCAR Coca-Cola iRacing series on Fox and FS1 has seen viewership grow during the crisis. Infront and the International Ice Hockey Federation hosted an Esports Fan Championship with eSport Studio in May, with fans from each of the 16 countries that had qualified for the real-life IIHF World Championship competing and with the finals broadcast on Twitch. Esports organization Misfits Gaming hosted an event pitting NFL athletes against gamers in Fortnite and Call of Duty competitions, with proceeds going to charity. NBA athletes played Take Two Interactive’s NBA 2K2020 on an event on ESPN, which also raised money for COVID-19 charities. Fox Sports aired a similar competition in which current and former NFL stars played Electronic Arts’ Madden 20. E-sports has been one of the most popular alternative marketing channels for sports entities during the pandemic, and there are many more examples.
- Gambling. Sports betting had been on the rise prior to the crisis, as laws in the U.S. and elsewhere have loosened. Without traditional live sports to bet on, gambling entities have kept their businesses alive by turning to simulations of canceled events. These are virtual games where the action is based on probabilities calculated from real-life player and team statistics. As one example, IMG Arena hosts virtual Association of Tennis Professionals (ATP) tennis matches for bettors. Gambling purveyors have also offered betting for e-sports competitions and some continuing live events, such as horse racing from Hong Kong, the NFL Draft, and soccer leagues that played on in countries such as Turkey and Tajikistan. FanDuel and DraftKings, both partners of the U.S. major leagues, initially focused on the fantasy sports arms of their businesses as their gambling operations have fallen off, although fantasy sports has also had to evolve as it is based on real-life sports stats that have stopped being recorded.
- Alternative live events. Fans are turning to all kinds of obscure sports events that are able to continue during the lockdown as they strive to maintain the excitement of live competitive sports. A notable example has been competitive marble racing. Jelle’s Marble Runs, which launched on YouTube in 2006 and is the leading player in the space, has teams, commentators, and official team merchandise with TeeSpring. It has received significant boosts to its number of followers and viewers during the pandemic; Formula E racing has taken note and partnered with Jelle for a Marbula E series. Jelle also has had a presence on ESPN8: The Ocho, a pandemic-driven repositioning of ESPN2 featuring unusual live sports. Other marble racing leagues include M&H Racing and Fubeca’s Marble Runs.
- Ancillary events. Programming related to live sports, both ongoing and newly created, has generated publicity and sometimes significant viewership. The NFL Draft, which has been growing in interest over the years as a live event, generated record viewership this year, with more than 15 million people tuning in on the first day. The 10-hour Michael Jordan documentary series, The Last Dance, has not only been the top-rated ESPN documentary in history but out-rated this season’s NBA games as well, thanks to the dearth of competitive sports programming. ESPN, the NBA, and the NBA Players Association created a HORSE basketball shot challenge involving NBA and WBNA players, which did not garner high ratings but did generate notable publicity.
- Charitable initiatives. Fanatics’ CEO Michael Rubin launched the “All In Challenge,” in which sports and entertainment celebrities offer once-in-a-lifetime experiences that fans are eligible to win if they make a donation, with funds going to several nonprofits addressing food insecurity. The initiative has generated significant participation from celebrities and fans, raised $38 million as of last weekend, and built a high profile on social media. Separately, the Real Heroes Project features athletes who each dedicate a match shirt or jersey to an individual healthcare worker in their community as a gesture of thanks. The initiative is a collaboration between 14 pro sports and e-sports leagues, from the five U.S. major leagues to WWE, NASCAR, the U.S. Golf Association, and the World Tennis Association.
- Re-runs. While not as exciting as live sports, fans have been revisiting the many classic sports moments being televised by ESPN, Fox Sports, NBC Sports, and other networks, along with local TV and radio channels. NBC Sports Chicago re-ran all of the 1998 Chicago Bulls post-season games (the same period captured in The Last Dance), MLB Network’s programming has included things like “MLB’s 20 Greatest Games,” and ESPN Radio highlighted classic World Series games from the past decade, to name just a handful of many examples.
- Foreign live sports. This is a new addition to the list (aside from the few examples followed by bettors) as live sports are slowly coming back in some of the regions where the pandemic occurred first. ESPN signed a deal to distribute the 2020 regular season, playoff, and championship games of the Korea Baseball Organization, played live but without fans, with six games planned per week. ESPN commentators are doing the play-by-play from their homes. Also from Korea, K League soccer is streaming globally for the first time, with games available for free on Twitter and YouTube with English-language commentary. The K League also recently signed broadcast deals in a number of countries.
Currently, all of these initiatives primarily serve to maintain awareness for the leagues and other entities—and for live sports in general—and to keep fans engaged during this fallow period. There are few expectations for significant revenue-generation at this time, including from licensed merchandise, although there are products associated with some of these initiatives, such marble racing and the NFL Draft. And, fans engaging with alternative sports programming or events may be motivated to make the occasional e-commerce purchase, perhaps of a current need such as a sports-licensed face mask or a t-shirt or collectible from the available range of licensed merchandise.
Meal Kits: Reprieve or Turnaround?
May 11, 2020, first published in RaugustReports: Meal kits represent one consumer product segment that has benefitted from the stay-at-home orders in place during the last two months in the U.S. (and longer in some other regions) to stop the spread of COVID-19. Research has shown that this sector appeals to consumers, especially younger adults, at least in theory. Prior to the pandemic, however, it had been struggling to find a workable business model that would satisfy price-sensitive consumers while generating ongoing profits.
During the current crisis, meal kits have offered an attractive alternative for many. They keep consumers out of crowded grocery stores; they present another option, alongside restaurant delivery and curbside pick-up, to fill the void left by the elimination of dine-in restaurant options; and they help consumers prepare a good meal at home, even if they lack cooking skills or a full complement of beyond-basic ingredients. These benefits have led to an increase in sales for meal kits and related products and services, as well as the launch of new kits, across a variety of players:
- Meal kit specialists. Hello Fresh saw year-on-year growth of more than 66% for the first three months of this year, through March 31. That included two weeks of the lockdown in the U.S., the company’s biggest market, and longer in Europe, where it is based and where the virus hit earlier. It also doubled its U.S. customer count compared to the same period in 2019. Blue Apron reported a loss in the first quarter, but said its sales were up 8%, with orders up from 1.6 million to 2.5 million and customers up from 351,000 to 550,000 in the quarter, year-over-year. Other meal kit companies have reported similar results, and researchers including Nielsen and Earnest Research have tracked sales spikes for the segment as a whole during the pandemic.
- Restaurants. In addition to offering curbside pick-up and delivery of a range of prepared menu items, several restaurants have launched kits to allow consumers to prepare a fresh-cooked replica of their favorite restaurant foods. Shake Shack is offering DIY ShackBurger kits in partnership with Cream Co. Meats, delivered through Uber Eats in the Bay Area of California. Chick-fil-A launched a chicken parmesan meal kit, containing two precooked, breaded filets, marinara sauce, cheese, and creamy garlic and lemon pasta. Denny’s is offering Make-at-Home Meal Kits including a breakfast meal, picnic sandwiches, chicken and rice and pot roast dinners, and apple crisp desserts. Smashburger is offering kits including Classic Smash, crispy chicken, and smoked bacon brisket, all with tots. Taco Bell has an At-Home Taco Bar. A popular and award-winning Chicago fine-dining restaurant, Fat Rice, closed for good and transformed into a meal-kit provider called Super Fat Rice Mart. Several independent restaurants offered Cinco de Mayo kits so consumers could celebrate on May 5, a big day for Mexican restaurants in the U.S. And the list goes on.
- Retailers. U.K. retailer Home Bargains is selling lockdown baking boxes that are delivered to consumers’ homes and gather together all the Jane Asher-licensed products consumers need to create a variety of baked goods in their own kitchens. Each box includes five different cake and pastry mixes (from a vanilla sponge to scones); a variety of kitchen gadgets such as pastry cutters, tins, spatulas, and paper cake cases/baking cups; and additional ingredients such as frosting and sultanas/golden raisins. Kroger has seen almost triple the number of customers purchase its Home Chef kits (sold in-store and by subscription) during the lockdown, compared to before the virus hit. In a slightly different twist, Kroger is also offering downloadable activity kits for weekly parties under the “Social, Social” banner, with examples ranging from Mother’s Day to an ice cream social. Downloadable assets like cards and activities are paired with recipes using ingredients under the company’s various private labels, which must be purchased separately. Consumers are encouraged to share photos themed to the events.
- Delivery companies. In addition to partnering with restaurants to deliver their menu items, some services are creating kits, with a focus on special occasions. Deliveroo offered “Seder-to-Go” Passover kits in four cities in the U.K. and Ireland, in partnership with charity organization Chabad Lubavitch. The kits contained traditional foods plus other items that are part of the ceremonial meal, including a roll-up Seder plate, a box of matzoh, a bottle of grape juice and one of wine, a Kiddush cup, and a Haggadah with an English translation. The boxes were aimed primarily at vulnerable consumers who cannot or should not shop.
- Suppliers. Produce companies across the country are creating community-supported agriculture (CSA) style boxes of fresh fruits and vegetables for consumers to pick up, as well as direct-to-consumer fresh-produce delivery services. These ventures help them generate cash flow to partially replace the loss of their restaurant and other food service customers, as well as providing a channel for excess inventory and appealing to consumers’ desire to avoid stores.
The question, of course, is whether these positive trends for meal kits and related services will continue after things get back to some sort of normal and consumers feel more comfortable going back to restaurants and shopping regularly at supermarkets.
This is something licensors, especially in the food, diet, media, and celebrity spaces, will be closely watching. They have viewed meal kits from the beginning as a logical opportunity for partnership, with both marketing benefits and, potentially, revenue-generation opportunities. Many deals have been done over time, from Food Network with Kraft Heinz, to the blog Skinnytaste with Peapod, to model Kate Upton with Urban Remedy. But—with some notable exceptions—the challenges meal kit purveyors have faced in trying to build a sustainable business model have increasingly kept property owners away.
May 7, 2020, first published in RaugustReports: When we last wrote about face masks as a licensing opportunity, about a month ago, licensors’ and licensees’ activities in this space were almost purely charitable, with the products donated directly to healthcare workers. But manufacturers and IP owners have pivoted quickly to creating masks for consumers to purchase. There is still a charitable component—with some licensees using a buy-one-donate-one model, others donating proceeds from sales, and some doing both or taking another path altogether—but sales to the public are a key driver of many current initiatives. It should be noted that all the masks are cloth, as opposed to N95 or other more protective models.
These ventures may not be big money-makers at this point, but they seem to be generating significant demand, at least at this early stage. Some of the key players in licensed face masks to date include:
- Fanatics, FOCO, and Industry Rag. The five largest U.S. major sports leagues (MLB, NFL, NBA, NHL, and MLS) are working with Fanatics to sell team-logoed face masks, supplied by licensees FOCO and Industry Rag, for sale through league and team online stores managed by Fanatics, as well as on the Fanatics-branded and the licensees’ own e-commerce sites and some other platforms. FOCO also makes league-licensed gaiters and scarves that can be used as alternatives to masks for face covering.
- Mask Club, a new company backed by licensee Trevco. Mask Club was launched as a protective facial wear specialist, debuting with more than 2,000 licensed choices. Properties range from numerous Warner Bros.-controlled characters to Star Trek, Betty Boop, Popeye, Care Bears, and Hello Kitty. In addition to entertainment/character designs, it also has licenses with other properties, such as Lotéria Don Clemente, WWE, Stark/House of Scalamandré, the Emoji brand, and NASA. The masks are available as one-offs and through a one-per-month subscription.
- Wild Bangarang. This U.K.-based specialty apparel company, which holds rights to a wide variety of geek-and-gamer properties, launched its NHS Face Mask Program to benefit the British National Health Service. The range debuted with more than 40 designs. Licensed options among them include SKUs tied to fantasy artist Anne Stokes, character-based lifestyle label Phat Kandi, and Bill & Ted. The company was forced to stop production and shipping of its other products for a time to focus solely on face masks, due to high demand and a skeleton staff to ensure worker safety.
These initiatives often start with extensions of existing deals with current licensors, which helps speed up the process of getting the product to market. But new deals are being signed as well. In the last week or so, Mask Club secured the rights to the Emoji brand and Lotéria, the latter licensed by Pacific Swell Brands, while Wild Bangarang acquired Bill & Ted, represented in the U.K. by Reemsborko, to name a few examples.
Meanwhile, other IP owners are creating property-identified masks that are sourced internally rather than achieved through a licensing deal. Disney launched an extensive program of masks featuring characters and designs from all of its major property families and plans to donate up to $1 million in U.S. mask profits and 1 million masks to the nonprofit group MedShare. Music merchandiser Bravado launched a We’ve Got You Covered ecommerce site featuring graphics from Universal Music Group artists, from Justin Bieber to Black Sabbath; proceeds will benefit the music community, which has been hard-hit by the pandemic. And a variety of designers, such as Alice + Olivia, have also entered the mask-selling business.
Companies making licensed or branded face masks have generated controversy in some quarters. Critics have accused the marketers of capitalizing on a crisis, creating products that are in bad taste, and inappropriately or unnecessarily turning face masks into fashion accessories and/or pop culture statements.
That said, there are also benefits to licensing and branding in the face mask category. Licensed face masks could encourage kids, and some adults, to wear the product, as recommended or required (depending on location), and could help lessen the fear some young children feel when seeing loved ones or strangers in a mask. In addition, if consumers are going to have to wear them anyway, or at least be encouraged to do so, they are likely to want them to become a canvas for social expression, much like a cell phone cover or t-shirt. And, at present, sales of masks, licensed or otherwise, are an effective way to help get equipment into the hands of healthcare professionals who continue to need the support. Licensed face masks certainly seem to resonate with consumers, given strong sales and fundraising reported by licensees and brand owners so far.
Of course, such licensing partnerships are beneficial to licensors and licensees as well. Face masks are one of the relatively few growth categories in licensing at present and, as a new segment, offer plenty of white space for licensors to fill. The opportunity may also have longer legs than originally thought. It seems as though the pandemic is likely to last for a while, with social distancing and face covering becoming the norm for many. These consumers are likely to want to add some personal style, and licensing is one way to do that.
May 4, 2020, first published in RaugustReports: While the spread of the COVID-19 virus has created a long list of challenges and uncertainties for the licensing community, it has also given rise to some untapped opportunities for properties that are a good fit and can capitalize in a way that makes sense. One is to help fill the void for high school and college students, especially seniors, who are missing key milestones in their young lives due to stay-at-home orders.
Recent initiatives involving the licensing community and other marketers fall into three groups:
- Virtual graduations. Dr. Seuss Enterprises and Random House Children’s Books are hosting an Oh, the Places You’ll Go! Virtual Graduation, tied to the 20th anniversary of the Dr. Seuss title, a popular graduation gift. The month-long initiative kicked off on May 1 with a commencement keynote on Facebook by WWE star John Cena, which incorporated a reading of the book. Astronaut Scott Kelly is a spokesperson for the event. Other components include inspirational words of wisdom from educators, first responders, authors, illustrators, and celebrities; audio readings from John Lithgow, who narrates the Oh, The Places audiobook; a charitable donation to First Book (up to 20,020 books, one for every in-feed post tagged with #ohtheplaces2020, to be donated to school libraries in the fall); LinkedIn activities and thoughts about the book from business leaders; and graduation photo-sharing. A merchandise program from five licensees accompanies the initiative. Separately, other virtual commencement activities this year have included a Facebook-hosted address from Oprah Winfrey; a “Show Me Your Walk” celebration, presented by Chase, with Kevin Hart, Serena Williams, and Stephen Curry; and a LeBron James-backed primetime special with Megan Rapinoe, Pharrell Williams, Malala Yousafzai, Bad Bunny, and the Jonas Brothers.
- Fostering general camaraderie and school spirit, an important part of the secondary and post-secondary educational experience. CLC, the licensing division of IMG College, launched a digital campaign meant to help replace the loss of the community connections normally fostered by on-campus sports events, classes, and social functions. The campaign offers the overriding message, “United as One,” encouraging students at more than 180 CLC partner institutions to support each other and share their allegiance to their school. Students are prompted to create content, such as photos of themselves in their college gear and/or recreations of their most memorable sports moments, and to share it on their social platforms with the hashtag #UnitedAsOne. They can also download school-specific Zoom backgrounds. A nationwide top-10 list of memories will be aggregated from the user-generated content. In addition, seniors get a 20% discount code to Fanatics as a graduation gift, through a partnership between that company and CLC.
- Virtual proms. While there has been little connection to licensing in this space to date, a number of celebrities and a few corporate sponsors have jumped in. Actor John Krasinski held a virtual prom on his Some Good News YouTube channel, with visits from celebrities, first responders, and fans. The prom included dance music DJ’d by Krasinski and appearances from Chance the Rapper, Billie Eilish, and others. Seniors across the country got into the event by dressing in promwear, decorating their homes in prom style, and, without a date during social distancing, bringing their parents along for the fun. Many shared their experiences on social media. Meanwhile, the radio station KISS FM put together a virtual prom, hosted by Ryan Seacrest, with celebrity appearances, DJ sets, and shout-outs. And Al Roker held a prom for a single high school in Nebraska that was dealing with floods as well as COVID-19; seniors dressed up and danced, and each received a corsage or boutonniere from Roker, delivered to their homes. The festivities were highlighted on NBC’s Today show.
Collectively, these initiatives represent one example of how licensors, licensees, and other companies are gingerly negotiating the sensitive marketing landscape during COVID-19. They are attempting to fill a need in the marketplace in a way that gives them a positive image with relatively little danger of controversy or blowback, and helps them maintain awareness during a time where many consumers are not shopping much or receptive to sales messages. While the main goal is marketing, these sorts of events can sometimes also be opportunities to logically drive a few sales of licensed products along the way.
Children’s Books: What’s Selling in the Mass Channels?
April 30, 2020, published in Publishers Weekly: Mass retailers, from Walmart and Target, to supermarkets, drug stores, the dollar/value channel, and wholesale price clubs, have remained open during the pandemic and continue to bring in enormous foot traffic. Customers are not only picking up essentials like food and pharmacy items, but also children’s books, with publishers reporting strong sales across mass channels. Educational and coloring and activity titles lead the way, but increases have also been noted for titles outside of these categories.
Read the full article, from Publishers Weekly, here.
To Promote or Not to Promote
April 30, 2020, first published in RaugustReports: When the COVID-19 pandemic began, many companies put their plans on hold for product launches, marketing and media campaigns, publicity, and the like. But some have decided that an uninterrupted presence in consumers’ minds will help position them for success, or at least survival, once the peak of the crisis has passed. They have therefore continued to run publicity and/or advertising campaigns across traditional and social media over the past six weeks or so.
For the most part, given the severity of the crisis, with people still dying and a growing number suffering economically, marketers have kept their messaging squarely coronavirus-related, although there are commercial elements to some of the initiatives being promoted. Strategies fall into three major buckets:
- Highlighting efforts to support health care workers, consumers, or both. Many companies, from Fanatics to Prada, have highlighted their charitable activities, such as making or securing face masks or ventilators and distributing them to hospitals, raising funds and making financial donations, or providing free educational content for at-home learners. A number of entertainment studios and publishers have released content to teach kids to wash their hands or to help them understand the virus; Genius Brands touted the COVID-19-prevention PSAs it created starring the characters from Llama Llama and Secret Millionaire’s Club. Some initiatives help business partners that are hurting; CLC’s “United as One” campaign bolsters its university clients during a difficult time by fostering virtual community connections when classes and football games are not possible. Some retailers have touted the sale of products that aide consumers in supporting medical personnel or each other; Walmart paired with the neighborhood social networking app NextDoor to create a platform for consumers to buy products for people in their community who are at risk.
- Publicizing launches of products or virtual experiences that are COVID-related or came into being due to the lockdown. Several licensees are selling face masks, usually with an associated charitable donation. Marketers who normally put on or participate in physical live events are promoting the virtual iterations they have created for their fans during the pandemic; examples include BTS’s virtual concert convention and Tokidoki’s virtual fan fest. Some companies are going the quirky route, as WWE did with its line of t-shirts tied to WrestleMania 36, held without live spectators, with the phrase “I Wasn’t There.” The Smiley Company is taking to social media and email to spread good news about people who are helping in the crisis and to stress that everything will eventually be O.K. The respective marketers have generated awareness for all of these initiatives through publicity, social media, and/or advertising. In addition, several companies have been promoting existing product lines that fit the COVID lifestyle. These include categories such as puzzles (Masterpieces), arts and crafts (Michael’s), and coloring books (IDW), among others.
- Creating thank-you messages to a company’s own employees, or generally to first responders, healthcare professionals, or other essential workers (e.g., supermarket cashiers, warehouse pickers and packers, delivery drivers, etc.). This route tends to be taken by bigger corporations, with the messaging occurring through ads on TV or in other traditional-media advertising, supplemented by social media. One example: Pizza Hut’s “proud to serve” campaign applauding its 115,000 workers for their dedication and community outreach during the crisis. While several companies involved in licensing have used this technique, it has not been common in association with licensed product lines specifically.
There are always exceptions to the rule, of course, but most publicity, promotional, and marketing efforts tied to the licensing community and undertaken during the pandemic have fallen into one these major classifications.
As the crisis is entering its third month in the U.S., a growing but still small number of marketers have started to spotlight new products that have nothing to do with COVID-19. These are pre-planned campaigns that are going on as scheduled, or are being launched after a short delay. Several marketers publicized or advertised their Earth Day products, for example, while others promoted merchandise or fan contests tied to the NFL Draft. And, while still relatively rare, licensors and licensees—from Rebecca Atwood and Pottery Barn to Uniqlo and Nintendo—are increasingly announcing new licensing deals of the sort that would have been common up until the virus hit.
Coloring and Crosswords Books for Adults Get Boost
April 28, 2020, published in Publishers Weekly: Since early March, when the Covid-19 pandemic began, adults have been purchasing books to keep their children occupied during the long hours in isolation, driving sales of educational workbooks and coloring books. But they are also on the hunt for activities for themselves, both to while away the hours and to reduce anxiety and stress. As a result, puzzle books, coloring books, and even joke books for adults have seen strong sales over the past seven weeks, publishers report. They have seen sales increases for these categories both at online retailers and in the mass stores that have remained open, including Target, Walmart, grocery stores, and dollar chains.
Read the full article, from Publishers Weekly, here.
Turning Point for Digital Events?
April 21, 2020, first published in Raugust Communications’ April 2020 e-newsletter: The COVID-19 crisis has, by necessity, moved many formerly live experiences online, with each type of event taking a slightly different digital form:
Theatrical movies. With theaters shut down, TV shows halting production, and more free time available than usual, consumers are turning to streaming in a bigger way than ever before, with Nielsen and other researchers measuring big increases in viewership across platforms in March and April. Most theatrical films set for release this spring and summer have been delayed to later in the year or next year, if they have a new date. But Universal’s Trolls World Tour, the first big studio film to open as a digital download in lieu of a theatrical release (at $19.99 for a 48-hour viewing window), has been lauded as a success. While definitive numbers haven’t been released, it reached the top of almost every platform’s sales chart after its April 10 release, and Deadline estimated its earnings at $50 million, based on interviews with studio executives.
Shopping. With non-essential bricks-and-mortar retailers shut down and many customers uncomfortable with shopping in-store, the use of e-commerce is, as expected, on the rise. But the transition has not been a slam-dunk. Category success varies, with segments like fitness equipment seeing positive trends and others, including apparel, experiencing the opposite. Amazon stopped accepting non-essential items for about a month (affecting only products shipped from its warehouses). Fulfillment across e-commerce has been slow due to social distancing in warehouses and the need to bulk up on delivery personnel. And some retailers and etailers (e.g., Next, Yoox Net-a-Porter) stopped their e-commerce operations altogether for safety reasons.
Sports. Live soccer matches and baseball games do not translate directly from analog to digital forms. But leagues, clubs, and athletes are finding other ways to engage fans online. One is e-sports, with organizations from the NFL to NASCAR setting up e-sports competitions featuring their athletes as a way to engage fans during the hiatus from live play. Other entities, such as the ATP pro tennis association and many more, are working with betting providers to create sports simulations for gambling purposes.
Trade shows, fan festivals, and experiential initiatives. The inability to hold these events has been a big blow from a marketing perspective. Shanghai was one of the first of many global Fashion Weeks to be cancelled and subsequently launch a digital version. Canceled trade events from Children’s Media Conference to the Bologna Licensing Trade Fair have implemented digital events with components such as speakers, webinars, networking opportunities, and virtual exhibits. Events that have not been cancelled—including Toy Fair New York, which occurred before the pandemic, and Licensing Expo, which has been moved to August but not officially cancelled yet (as of this writing)—are implementing similar iterations. Meanwhile, individual licensors and licensees that rely on now-canceled fan events such as San Diego Comic Con (e.g., Mezco, Cryptozoic, Tokidoki) are setting up their own digital fan fests. Fan experiences are also turning to digital alternatives; Disney created a dedicated, interactive website to help fans engage with its now-closed theme parks, for example.
What are the long-term implications of these moves? It is likely that most of these digital alternatives will remain as viable options after the pandemic, probably at a lower level than at present but certainly much more frequent than before the crisis. In certain cases, they will likely be supplemental to traditional live events. It is hard to replicate in a virtual setting the unique experience of going to a live sports competition, for example, or of attending a fan event with other like-minded people.
In other cases, however, the long-term impact may be more profound. Some attendees and exhibitors have already been questioning the value and cost of trade shows, for example, when the work can be done via email, videoconference, and occasional office visits. E-commerce is already on the rise, of course, while traditional bricks-and-mortar shopping has become less appealing to many consumers (and some key chains may not even survive the pandemic). Box office revenues for theatrical films have been on a long downward trajectory; perhaps this will be the turning point where at least some studios opt for straight-to-streaming releases, even for tentpoles.
Of course it is difficult to look into the crystal ball when we do not yet know how long the pandemic will last or what the aftermath will look like. Time will tell.
April COVID-19 Update: Settling In But Also Struggling
April 21, 2020, published exclusively on this page: The global COVID-19 pandemic began more than three months ago, and there is as much uncertainty as ever about the long-term ramifications. While the licensing community for the most part has settled into its temporary new way of life, many companies are focused on simply trying to survive. Others are maintaining a business-as-usual outlook, while trying to figure the best way forward.
Impact on Sales of Licensed Products
“Non-essential” stores have closed temporarily—who knows for how long—in many cities and countries. Some of these are unlikely to reopen; one analyst predicted that over 20,000 UK stores could remain permanently closed after lockdown, and some independent stores and small chains have permanently shuttered already.
Consumers are staying home, venturing out only to shop for food, pharmacy, and other essentials, as well as for outdoor exercise. Some states and countries are opening back up, or considering doing so, at least a bit, but there are concerns about the virus continuing to spread, or spreading again, in the wake of this decision. And, with the ranks of the unemployed reaching 22 million in the U.S. alone in just four weeks, there is little desire or ability to shop anyway.
Thus consumer purchasing is down nearly across the board. H&M saw its sales for March fall 46%, while England’s Rugby Football Union said it faces revenue losses (from all sources) of between £45 million and £50 million in the next 18 months, to name just two examples.
Mass merchants, supermarkets, dollar stores, and other venues that have remained open have seen sales spike in certain categories as consumers stockpile non-perishable foods and household goods such as toilet paper. Target reported comparable store sales for March were up 20% compared to last year, with food and essentials up more than 50%. Many mass stores are hiring additional employees to meet demand, as are the delivery services that are also seeing a significant boost.
But will the upward trend continue at mass? At some point consumers will have hoarded enough rice, canned fruit, and paper towels. Stores are increasingly implementing limitations on the number of units that can be purchased of some items. They are also limiting the number of people who can be in the store at one time and some are considering curbside pick-up only, as more of their employees catch the virus. Some states, such as Vermont, have started barring mass and grocery retailers from selling anything beyond essentials.
Some categories are faring worse than others. Apparel, jewelry, accessories, and footwear are all down significantly for the most part—sneaker sales fell 75% in March—while housewares and automotive supplies have been flat. But essentials and some items that support a life entirely at home are doing well. These include home office products, puzzles, board games, toys, children’s books, baking accessories, alcoholic beverages, video games, and workbooks, as well as athleisure and yoga wear.
With stores closed and events cancelled, many formerly physical aspects of life have moved online. E-commerce, naturally, has seen an increase in sales as bricks-and-mortar stores close. In the U.S., e-commerce sales were up 40% in the second half of March, according to Listrak. That said, digital retailing is not the panacea many thought it would be.
Many of the categories that are showing weakness at retail overall, such as apparel, are doing the same online, including formerly hot segments such as personal styling subscription services. Conversely, the categories that are doing well in-store are doing well online, too. Web-only retailers are not seeing the bump in sales that bricks-and-mortar stores with online presences are.
Not all retailers are keeping their online presence active, since they feel they cannot operate their fulfillment warehouses safely. Retailers Next and TJX, for example, announced they would shut down their e-commerce operations, as well as their physical stores, and online-only operators such as Yoox Net-a-Porter did the same. Many that are online are offering products at deeply discounted prices to move inventory. Amazon stopped accepting and fulfilling items that are not deemed essential for a time, as it struggled to fulfill orders for essentials such as disinfectant wipes. (This policy affected only items fulfilled from its warehouses, not direct-shipped or Marketplace orders.)
Meanwhile, aside from e-commerce, live events of all kinds have transitioned to digital iterations. Streamed entertainment is picking up steam (including the Trolls World Tour feature film successfully debuting as a download); gatherings from business meetings to cocktail parties are moving online through Zoom and other platforms; employees are being set up with the technology they need to work at home, even in tech-driven areas such as movie special effects; trade shows, fan events, and some individual exhibitors (e.g. board game and collectibles companies) are creating virtual environments to see if they can replicate at least some aspects of the live event; sports leagues are setting up e-sports competitions featuring their athletes; authors are doing virtual book tours and housewares retailers are hosting virtual wine tastings.
Inventory and Supply Concerns
A month ago, the main threat was a lack of inventory coming out of China and how that would impact marketers later in the year. Supply chain issues are still present, both in China (even as it largely comes back online) and other countries. But things are getting better and the concern now, given plummeting demand, is excess inventory. Some store inventory has been moved online, but that has not solved the problem entirely.
Many retailers, especially on the department and specialty apparel side of things, have cancelled orders, some of them even before closing their physical and/or digital stores. Primark and Ross Stores are two examples. Others are pausing orders for a “few weeks” until they can forecast for later in the year, although the timeframe seems to be moving further and further away. Some are even refusing shipments as they are delivered. All of this and other factors have slowed imports into the U.S., which were at their lowest level in five years in March, according to the National Retail Federation.
Many retailers and licensors are holding off on releasing new products, delaying some items to the fall (if possible), or even to next year. Giorgio Armani and Gap are among those taking the latter route. Some excess inventory ultimately will need to be donated, recycled, or destroyed. Many licensors have begun focusing on just their best customers or best-performing products.
The trickle-down effect of these decisions touches the entire business, of course. The Bangladesh apparel industry, second largest in the world after China, initially benefitted from the closure of Chinese factories. But it now expects to lose $6 billion in export revenue this year due to cancelled orders from retailers and brands.
Marketing: Walking a Fine Line
The cancellation or delay of trade shows, fan festivals, experiential events, sports seasons, theatrical films, and more, not to mention the closure of physical and some online retail stores, have wreaked havoc with licensors’ and licensees’ marketing plans and launch dates.
A growing number of trade and fan events have moved online, creating virtual editions. Marketers are trying to compensate for lost live opportunities by participating in these organizer-led platforms, as well as by creating their own virtual fan events, boosting their social media activities, or other alternatives. All told, 81% of global marketers have postponed advertising and promotional campaigns, according to the World Federation of Advertisers, while 79% have created coronavirus-specific messaging.
Speaking of messaging, some marketers are positioning themselves, if they can do so logically, as a solution relevant to consumers’ lives during the pandemic. Joann Fabrics is encouraging consumers to use its fabrics to make facemasks for hospitals and other caregivers. Puzzle and board game companies are reminding consumers that their products are a fun and family-friendly way to spend their abundant at-home time. Content providers such as Sesame Workshop have created new, free online materials to help kids and families understand the crisis or make good use of their time. Many marketers are temporarily making their e-books, educational materials, and trade magazines, normally sold through subscription, available to all.
A large and growing group of companies and brands, from Sesame Workshop to Fanatics to Prada to MGA Entertainment, are lending a helping hand. Their contributions include supplying masks, protective gear, hand sanitizer, and ventilators; donating goods, services, or funding to the cause; or fundraising. These are meant to help improve a bad situation, as well as, in many cases, to help keep some factories running and employees at work. They can also have secondary marketing benefits in that they keep a company top of mind and give it a positive image. But it is easy to cross the line into insensitivity or commercialization in a situation like this.
Looking Toward the Future
Companies are doing what they must to survive the many short-term challenges and threats presented by the virus. Widespread employee furloughs—cutting across companies from Build-A-Bear and Macy’s to Rent the Runway and Funko—are causing economic suffering in the immediate term, and it is likely that some of these will become permanent layoffs.
Several companies with a connection to licensing have declared Chapter 11 in an attempt to survive. To date, they include USA Rugby, fashion brand True Religion, and six European subsidiaries of fashion conglomerate Esprit, with Nieman Marcus, AMC Theatres, and others thought to be not far behind. Macy’s, Nordstrom, JCPenney, and Kohl’s are among the many that have warned about the substantial negative impact on their financials for the year.
Meanwhile, retailers and other marketers are doing what they can to cut costs and keep their businesses going, beyond furloughs. Ralph Lauren has drawn down $475 million from its credit line. Adidas suspended a 1 billion euro buyback of its shares that it had planned for this year, as a means of keeping cash on hand, while Puma suspended its planned dividend payment and secured additional financing. Target intends to reduce its planned number of store remodels by 50% this year and open about half the number of small stores originally anticipated. Some retailers and other marketers are foregoing rent payments; looking for extended terms or other concessions from landlords, vendors, and suppliers; and asking management and sometimes other still-employed staff to take pay cuts.
Licensors and licensees are considering restructuring licensing contracts to compensate for the impossibility of reaching minimum guaranteed royalty or sales levels this year. Many are also putting new releases on hold.
But even as they try to reduce costs and do what they can to survive in the short term, licensing executives are also working to move forward. Most continue to review new licensing proposals and some have even announced new deals, created new marketing campaigns, and gone ahead with product launches. Although this activity is at a much lower level than usual, it is still a positive sign for the future.
Bright Spots in Dark Times
April 20, 2020, first published in RaugustReports: The COVID-19 lockdown has caused steep global sales declines for most consumer products over the last six weeks or so. The impact has been evident across a wide swath of product categories, with the key licensed sectors of apparel, footwear, and accessories particularly hard-hit. There have been some exceptions to the rule, of course, notably toilet paper, hand sanitizer, disinfecting wipes, and non-perishable foods.
In addition to these lockdown necessities, several other opportunities for sales of licensed products have emerged over the course of the crisis, driven by consumers’ self-isolating lifestyles:
- Board games, puzzles, coloring books, video games, and other leisure-time activities. These were among the first categories to see a boost in sales as homebound consumers, both adults and families, looked for something to do to fill the time. Educational workbooks also give kids something to do while keeping them sharp, which was especially important during the gap between the close of the schools and the start of distance learning.
- Crafts and hobbies. Adults in particular have been revisiting hobbies they enjoyed in childhood, taking up things they have always wanted to try but never had time for, or increasing their participation in current hobbies as a way to reduce stress. Examples include baking (spurring sales of both gadgets and supplies like eggs and flour), crafts such as knitting (especially in the form of kits), musical instruments, and Lego sets, to name a few. Gardening is also on the rise as a way for consumers to get outdoors; some are even creating Victory Gardens to grow some of their own food. Meanwhile, the sharing of finished projects through social media has become a way for the hobbyists to connect with their community.
- Meal kits. This struggling category has seen positive trends as some consumers without well-honed cooking skills want to prepare more sophisticated meals at home and as others look for a bridge between the home cooking they must do and the restaurant meals they wish they were enjoying. Several of the leading purveyors of meal kits, including Blue Apron, Sun Basket, Purple Carrot, and Hello Fresh, have reported increased interest.
- Comfort foods. Feel-good products such as sugary cereals, chips, and frozen pizza, as well as childhood favorites like Chef Boyardee canned spaghetti, are all on the rise. Medical professionals have advised consumers to help ward off the virus by eating healthfully, and categories such as fresh produce have also seen sales increases, but the junk food has been particularly strong.
- Products tied to streamed entertainment. Streaming of TV, films, and other entertainment has spiked during the pandemic, and anecdotal evidence shows that tie-in products may be benefitting. Examples range from books linked to current and archival TV and film programming to plush tigers and fan-created merchandise driven by the popularity of The Tiger King on Netflix (which has not been officially licensed). Some new forms of streamed entertainment have popped up, too, such as marble racing as a replacement for live sports. Partnerships are starting to happen, with electric-car racing league Formula E launching a marble racing team in a deal with Jelle’s Marble Runs, the YouTube channel of choice for newly minted fans.
- Home fitness. Products to help consumers stay in shape while the gym is closed have seen holiday-level sales far exceeding the norm for this time of year. Smaller items like yoga mats and hand weights have been the focus, but major equipment requiring a bigger investment has also been performing well. Meanwhile, outdoor toys have experienced strong sales as parents try to get kids out of the house and moving, in a safe way. Online fitness courses are also seeing spikes in viewership.
- Apparel niches. Sales of clothing in general have plummeted. Consumers are not dressing up while at home and are holding off on non-essential fashion purchases due to economic concerns. That said, purchases of athleisure apparel have grown as consumers look for comfortable options for hanging around the house. And on the dressier side, Walmart has reported strong sales of tops as consumers want to look good—albeit only on the upper half of their bodies—for video conferenced business meetings and online hangouts with friends. Also driven by the need to look good on video conferences: sales of hair color, especially now that many consumers have gone more than a month without a stylist.
- Alcoholic beverages. Consumers seem to be drinking more wine, beer, and spirits during the pandemic. Many have been stockpiling alcoholic beverages in case of shortages, while others are buying due to an abundance of online happy hours. One brand of particular interest: Constellation Brands’ Corona, which some consumers initially thought was associated in some way with the coronavirus. Rather than causing a sales decline, however, the added publicity seems to have boosted sales so far.
- DIY projects for the home. Now is the time for many consumers to catch up on some of the smaller items on their to-do list, as well as to get crafty with home décor. Home retailers and e-tailers report strong sales of paint, removable wallpaper, hand tools, and other building materials and supplies. Many orders are small, as do-it-yourselfers focus on doable projects such as building a bookcase or wallpapering a small area, rather than a full makeover of a space.
- Products to support the new normal. Children’s books about handwashing, such as Andersen Press’s Little Princess: Wash Your Hands!, have experienced big sales increases. Craft supplies such as poster board and sidewalk chalk are being purchased to make signs of appreciation for medical professionals or upbeat “we’ll all get through this together” messaging. Meanwhile, as state and federal governments increasingly encourage or require the use of face masks or other protective fabric, consumers are buying both finished masks and material to sew face coverings for friends, family, hospitals, and assisted living facilities. Many are also seeking out scarves, bandanas, neck gaiters, balaclavas, and similar accessories as protective alternatives.
Many of these categories, from baking, to DIY and crafting, to puzzles and board games, were performing well even before the pandemic began. In other cases, such as meal kits, the crisis has proven to be a boon to their struggling businesses. The question is, can the latter turn this short-term interest into a long-term turnaround once things start to get back to some sort of normal, whatever that may look like?
In the Background
April 16, 2020, first published in RaugustReports: Since the coronavirus lockdown began, usage of video chat and teleconferencing apps has grown significantly as employees and consumers around the world utilize them to participate in virtual meetings, cocktail parties, trivia contests, and Easter and Passover celebrations.
Zoom in particular has hit the mainstream in a big way, reporting a 151% increase in daily active users year-over-year in March. Meanwhile Google Hangouts and Hangouts Meet, Microsoft Teams, House Party, Marco Polo, FaceTime, and Skype, among many others, have all seen spikes in downloads and usage. In fact, seven of the top 10 video conferencing platforms in the U.S. saw week-over-week download growth of over 200% during the seven days beginning March 16, according to SensorTower, led by House Party with 502.3%.
The platforms are enhancing this spike in popularity by offering formerly paid-for services, features, or tiers for free during the pandemic, either for certain territories or users (e.g., schools), or for all. Many are free to begin with, or at least have a complimentary option.
Naturally, IP owners want to get involved in a hot sector like this, especially at a time when other marketing efforts can be problematic. They are doing so by offering virtual backgrounds, enabling users to look like they are chatting from the set of a TV show or a sports stadium rather than their living room. Zoom is the primary setting for this activity. But other platforms such as Skype offer virtual backgrounds as well, and more are jumping on the bandwagon as consumers start to request this feature. Microsoft Teams added virtual backgrounds in March 2020, for example. Some third-party apps also enable users to add backgrounds across platforms.
Licensors offering free Zoom backgrounds cover the gamut of property types:
- Entertainment. Fox, Lionsgate, Disney, CBS, and many other studios and networks have made Zoom backgrounds available based on their TV show and film properties, with The Simpsons, Parks and Rec, Picard, Marvel movies, Sesame Street, Jeopardy!, Disney Princess, Star Wars, and RuPaul’s Drag Race among the abundant and diverse examples.
- Sports. Most of the teams in the major U.S. leagues have released backgrounds of stadiums and other imagery. So have football/soccer clubs around the world, from the Geelong Cats of the Australian Football League to British club Manchester City, to Germany’s Borussia Dortmund, to name just a few examples. Colleges and universities also are well represented, as are golf properties, NASCAR, and a variety of other sports-related IP.
- Corporate brands. Home goods brands such as West Elm and Behr Paint, names in travel such as OneFineStay, food and beverage players such as Nescafé, restaurant banners such as Taco Bell, and candy brands such as Skittles are among a growing range of corporate IP owners creating backgrounds. (Not all maintain licensing programs.) The bulk of examples to date are either brands with logical connections to imagery that can be used as environments (e.g. travel or home décor) or have a fun or offbeat positioning.
- Video games. Backgrounds are available showing in-game images from properties such as Final Fantasy, Street Fighter, Elder Scrolls, Doom, Sonic, and many more, offered by publishers across the globe.
- Other IP. A diverse range of properties of all types, in addition to the main classifications broken out here, have also been involved. They include fashion and media brands (Highsnobiety), artists (photographer Gray Malin), musicians (Machine Gun Kelly), and more.
Of course, anyone can create a Zoom background, and users are doing so with unlicensed imagery such as album covers and screen grabs. But the number of legitimate licensor-endorsed and provided examples is proliferating as well.
Once the current crisis is over, this trend will likely wane as consumers go back, at least to a degree, to live meetings and in-person cocktail parties. And the players may change over time; Zoom, for example, is facing scrutiny for privacy issues, which could affect its future success. Still, it is likely that the use of video chatting, both for business and personal activities, will remain at a much higher level than it was pre-pandemic. And that means that the desire for fun backgrounds will probably live on, although at a lower level than is currently the case.
While not a commercial opportunity for licensors, backgrounds for Zoom and other video chat and conference call platforms bring long-term marketing benefits. Choices based on TV shows or video games may spark immediate action, such as the purchase of a download or product; options tied to sports can help maintain engagement and awareness during the off-season; corporate-branded alternatives may help create a positive image and lead to purchases, either immediately online or on a later shopping trip. In the current environment, video chat backgrounds are a way for all properties to remain top-of-mind at a time when many other marketing channels are off limits or on hold.
Lending a Helping Hand
April 13, 2020, first published in RaugustReports: Many companies active in the global licensing and consumer products business are doing what they can to support medical professionals and consumers during the COVID-19 crisis. In addition to being the right thing to do, their efforts help keep some of their workers employed, utilize existing capacity and already-purchased materials, and give them a positive image among their consumers.
The initiatives, to date, fall into several classifications:
- Making masks and protective wear. Fanatics and Major League Baseball repurposed a factory to produce masks and gowns from on-field jersey fabric. Fashion designers and retailers such as Christian Siriano, H&M, Zara, Ralph Lauren, Baby Dior, Gucci, and more are transitioning some of their factories and/or assigning some of their workers to this task. Joann Fabrics and Crafts is enlisting its crafty customers to sew face masks and protective gear.
- Producing hand sanitizer. Spirits conglomerate Diageo provided 2 million liters of alcohol to be used to make more than 8 million bottles of free hand sanitizer and donating them to healthcare workers. Kylie Jenner and Kris Jenner teamed with Coty, a major investor in Kylie’s cosmetics brand, to produce hand sanitizer for hospitals in southern California. And toy company Crazy Aaron’s Thinking Putty paired with Five Saints Distilling to create hand sanitizer to be donated to medical professionals.
- Manufacturing ventilators, face shields, and other hard goods. MGA Entertainment is constructing ventilators, ventilator valves, and goggles, including in its Little Tikes factory, as well as making its 3D printers available to hospitals so they can address specific needs. Nike recently started making face shields from elements and materials used in its shoes and apparel. Car companies, electronics brands, and 3D printing services have redirected their operations to the production of ventilators or parts.
- Leveraging distribution and delivery networks. Burberry is delivering protective gear by utilizing its global supply chain. Footwear licensee Leomil and its sibling divisions acquired 200,000 face masks and donated them to Belgian healthcare providers. Among other initiatives, Burton, the snowboard maker, is donating 500,000 respirator masks to hospitals in the Northeast U.S., securing the products from a Chinese factory recommended by its binding manufacturer in that country. MGA is sourcing masks from China and using its distribution network to get them to hospitals.
- Providing free access to content to help kids pass their time in isolation productively. Sesame Workshop is making available over 110 Sesame Street e-books for free across platforms to help kids stay occupied. Amazon Prime did the same for its kids’ and family original TV content, as well as some commissioned and licensed series. Hasbro created a global platform called Bring Home the Fun, with content meant to inspire family activities and playtime, and Mattel introduced a similar initiative, Mattel Playroom. Harry Potter at Home is a free online hub of activities, videos, quizzes, and more. And Scholastic made a variety of online courses, of the sort it usually provides with subscription, available free to all families.
- Developing virus-specific educational content. Nickelodeon implemented #KidsTogether, a multiplatform initiative in which its characters explain to viewers how to stay healthy. Cartoon Network has created PSA video shorts starring a number of its characters, focusing on good hygiene, available both online and on-screen. Planeta Junior introduced a #StayatHome campaign, featuring the Gormiti and Pucca properties, to raise awareness of COVID-19 among children. Sesame Workshop launched a Caring for Each Other platform featuring resources for parents on how to manage their kids’ anxiety and stay healthy, along with kids’ content on how to wash their hands and cough and sneeze properly. (The campaign also led to a capsule collection with Champion.) Most of these initiatives enhance the message-based content with leisure-time activities similar to those mentioned in the bullet above.
- Making donations of existing inventory or funds. Amazon is donating N95 masks and other medical supplies, formerly sold through its site, exclusively to hospitals, first responders, and government agencies. Radians, the Stanley brand’s licensee for personal and worker protective equipment, donated N95 masks to hospitals in two Tennessee cities. Dolce & Gabbana, Armani, Kering, and Prada are among the fashion marketers that have made big monetary donations to be used for research, hospital facilities, and other purposes. ViacomCBS set up a $100 million coronavirus relief fund.
- Raising money. The NFL is turning its 2020 Draft, now a virtual event, into a three-day fundraiser for six NFL Foundation-selected charities involved in combatting the spread of the virus. Singer Harry Styles is one of several celebrities to make an effort to help, in his case by raising funds through the sale of a t-shirt with a self-distancing message. Ten percent of proceeds from apparel brand CLOAK’s collaboration with Five Nights at Freddy’s will be donated to the COVID-19 Solidarity Response Fund for WHO.
These examples are just a sampling of the many initiatives that are ongoing, with more announced every day. It should be noted that, while such programs offer secondary marketing benefits in terms of awareness and image, they need to be authentic to the company and have the potential to make a real difference. In a situation such as the coronavirus, where human life and livelihoods are at risk, it is easy to cross the line into being perceived as too crass or too commercial.
Cover Your Mouth
April 9, 2020, first published in RaugustReports: After first saying cloth facemasks were not effective in preventing the spread of the COVID-19 virus, the U.S. Centers for Disease Control and Prevention (CDC) is now encouraging Americans to wear masks whenever they are in the presence of other people, outside of those with whom they are self-isolating. Governments in Europe and other parts of the world are also increasingly suggesting or ordering their use. The World Health Organization, conversely, continues to maintain that healthy people should only wear masks when taking care of someone suspected of having the new coronavirus. (Protective N95 masks are, for the most part, being funneled to the medical personnel who are experiencing shortages and who need them the most.)
While the guidance is conflicting and confusing, there is no doubt that more consumers all around the globe are wearing face masks that cover their mouths and noses. This practice has been common in many East Asian countries for some time, particularly in China, where the population relies on masks for both disease and pollution protection.
Increasing demand naturally leads to the possibility of licensing. Licensed versions are already available in Asia, and signs suggest that face masks may evolve into a licensed category in other countries as well:
- Japanese apparel company Ceno markets licensed character-based masks under its Gonoturn brand, featuring Rilakkuma, Doraemon, Bonobono, Hamtaro, and Hello Kitty and the rest of the Sanrio family of properties. Other Asian companies, such as KNH of Taiwan, make cartoon prints, although not necessarily licensed.
- In China, fashion designers are creating face masks as well as other protective apparel. Liu Wei, based in Beijing, recently designed germ-resistant and breathable windbreakers, some of which are used in medical settings. Meanwhile, designers including Masha Ma, Wang Zhijun, Xander Zhou, Qiu Hao, and Sankuanz have been creating pollution masks since the mid-2010s.
- Halyard, a U.S.-based medical equipment supplier, has a license with Disney for children’s masks. Pre-coronavirus, they were positioned as being for use by kids who have the flu, are visiting a hospital, or are immuno-compromised.
- Croatian fashion designer Zoran Aragovic makes colorful masks from leftover fabrics that are simply a fashion statement, without protective qualities. They have become popular in his home country.
- U.S. designers are mostly getting into face mask production for charitable reasons, either making them to donate directly to medical personnel or selling them to raise funds for hospitals. But there have been some commercial ventures. These range from niche fashion brands such as Los Angeles Apparel and Matrushka to outdoorsy offerings such as Ball and Buck’s camo version. And designers and retailers active in production for medical professionals, including Christian Siriano, Prada, and H&M, among many others, could easily transition to consumer offerings at some point if demand remains high after the crisis.
- An activist posted a petition on Change.org in the hopes of convincing the five U.S. major sports leagues, as well as the NCAA and NASCAR, to work with face mask manufacturers on team-identified products as a way to encourage children and adults to wear them during the pandemic.
A growing group of communicable-disease experts are starting to say that there could be a long period of continuing cases and/or multiple waves of COVID-19 after the immediate crisis wanes and people start getting back to work and play. That suggests that the potential exists for face masks to become a permanent category for entertainment, design, and other properties in the U.S., Europe, and elsewhere, as it already has, at least to a degree, in Asia.
Licensed Publishing in the Covid-19 Era
April 7, 2020, published in Publishers Weekly: Publishers of licensed books tend to rely more on distribution through mass merchants than children’s publishers at large, whose sales skew more toward trade channels. This fact has helped mitigate the sales declines that have accompanied the spread of the new coronavirus. On the other hand, publishing licensees are dealing with the unique challenges that come with releasing tie-ins to feature films that are being postponed indefinitely or being watched online instead of in theaters.
Read the full article, from Publishers Weekly, here.
Brands Practice Self-Distancing
March 26, 2020, first published in RaugustReports: A number of brands—many of which are involved in licensing in some way—have gotten creative with their logos as a means of stressing the critical importance of self-distancing to curb the spread of COVID-19. These tweaks simultaneously engage the brands’ fans and boost awareness during a difficult time for most businesses.
- Mercado Libre. This e-commerce site, which does business across Latin America, temporarily changed its logo from a handshake to an elbow bump. A small version of its regular logo appears at the top of each page on the site, with a larger version of the new design appearing throughout the various product pages.
- McDonald’s in Brazil. The company separated its two golden arches across all of its digital media platforms to remind consumers of the need for social distancing. (This example ended up being taken down after a global backlash against the company for not giving its employees paid sick leave.)
- Coca-Cola. It transformed its normally script-style identity on its billboard in Times Square by setting the letters apart and adding the phrase “staying apart is the best way to stay united.”
- Major League Baseball’s Boston Red Sox. The team separated its logo’s two overlapping socks in its profile picture on Instagram, one of a number of corporations tweaking their look under the hashtag #newsociallydistantprofilepic.
- Major League Soccer’s Inter Miami. The club moved the two white herons in its logo, whose legs are typically intertwined, away from each other. The reimagined take has been utilized across the club’s digital presence.
- Time Out London. The magazine changed its name temporarily to Time In, with the word “Out” crossed out and the “In” written over it in red. The publication covers bars, restaurants, live theater, movies, and events across the city, most of which are on hiatus due to the virus.
There is no licensing involved in any of these ventures (although there are plentiful examples of coronavirus- and self-distancing-themed products available on the on-demand marketplaces). This is simply a temporary and eye-catching shorthand to remind consumers of important information, while accruing some secondary marketing benefits, even as these businesses and their employees struggle to overcome the more fundamental challenges associated with the crisis.
We all certainly hope no situation like this one occurs again in the future. But on a broader level these examples illustrate how it is possible for marketers to respond, with creativity and authenticity, to global news, events, and trends of all types—both positive and negative—in a tasteful, effective, and on-brand way. The McDonald’s example, conversely, serves as a warning of the scrutiny all brand owners face when responding to a crisis such as this.
March COVID-19 Update: Short- and Long-Term Considerations for the Licensing Business
March 16, 2020, published exclusively on this page: News about the global spread of COVID-19 seems to change hourly. Some observers are predicting dire long-term effects on business, the economy, and human behavior, while others continue to feel the whole thing is largely a made-up crisis. But there is no question that the virus is already having an impact on consumers’ daily lives, worldwide, and on businesses’ daily operations and future prospects.
We cannot add much to the conversation at this point, given the already-ubiquitous coverage, the difficulty of accurately predicting the future, and the fact that the situation is continuously evolving. Our take, therefore, is meant as a framework for thinking about the challenges ahead, to help guide licensing executives as they figure out how to move forward.
It goes without saying that the primary concern for businesses now is the safety of company employees and their families, as well as the customers and communities they serve. That said, following are some of the key topics to keep in mind from a business perspective:
Impact on Retail and Consumer Sales
During the peak of the virus’ spread in China in February, key global brands and retailers, such as Nike and Benetton, closed 50% to two-thirds of their stores across mainland China, which has grown to represent a significant market for these and other marketers. In the meantime, traffic at stores that remained open was significantly down—up to 80% in some cases, with accompanying plunges in sales—as customers preferred to stay safe at home.
The sportwear market and the luxury tier are two sectors that were hard-hit in China. In the latter, Chinese consumers account for 40% of the global business (per investment bank Jefferies). Adidas said it expected to take a $1 billion hit in sales due to coronavirus impacts in China; Capri, which owns Michael Kors, Versace, and Jimmy Choo, reduced its quarterly sales outlook by $100 million; and Ralph Lauren expected an impact of $55 million to $70 million. Many licensing programs beyond these segments are affected; properties from Disney and Garfield to the NBA to Westinghouse count China as a key market.
A similar pattern has emerged in other countries that have followed China into crisis. Armani and many others closed their stores in Northern Italy, even before the government required businesses nationwide to do so. France has shut down all retail stores, restaurants, bars, theaters, and other public gathering places across the country. Apple temporarily closed all of its locations worldwide, outside of now-recovering Greater China, C&A did the same in the U.K., and chains from Patagonia to Glossier, among more and more examples, are joining them.
Others have reduced hours (Walmart) or discontinued beauty services (Ulta) or food sampling (Target). Those that have remained open for normal business—as of this writing—have seen traffic and sales drop significantly. Exceptions include purveyors of essentials such as hand sanitizer, disinfecting wipes, rubbing alcohol, toilet paper, and frozen, canned, and shelf-stable foods, all of which are quickly disappearing from shelves across retail channels in the U.S. and elsewhere, despite frequent replenishment.
Even as sales overall are falling, retailers are incurring higher costs for everything from paid sick leave for employees with the virus, to wages for symptomless employees sent home to prevent the spread, to bulked-up cleaning protocols that require additional time and supplies.
Not surprisingly, marketers of licensed products are reporting that retailers are holding back on purchases, especially of newer or more niche products, due to cost-cutting, falling customer counts, and/or a general sense of uncertainty. That said, there are pockets that are doing well in the short-term. E-commerce and streaming entertainment are two examples where pundits expect to see strong sales as consumers look for products and services that allow them to stay home comfortably.
What to do? In the short term, retailers and the brands that work with them are trying to boost their online presence, cut costs, and keep inventories low, in line with weak near-term demand. They are also catering to customers’ needs by offering more delivery and curbside pickup services, and issuing coupons and special offers, especially for items that will help their customers get through the crisis.
Concerns About Inventory Levels and Material/Component Supplies
One of the first impacts of the coronavirus on the global licensing industry was the threat to supplies of raw materials and processed components (e.g., semiconductors, zippers, shoe soles, fabrics, plastics) used in manufacturing, not to mention finished products. This has been a concern since January, since China is a key manufacturing center for many industries. The closing of factories there has caused immediate shortages for companies such as Apple. It has also created concerns for fashion designers about their ability to meet demand in the fall/winter season and for toy companies about fourth-quarter toy availability.
After almost two months, manufacturing in China is starting to move back to normal, although not to full capacity yet in many cases. The lags in getting products to store shelves and online are likely to continue for a time, however, due to the logistics of bringing the ports, trucking, and ships back to full capacity. Securing space for air freight, some of which travels on now-cancelled commercial flights, will also be challenging.
Supply issues are not limited to China, of course. Estimates put 60% of Italian textile production, including for brands such as Versace, Gucci, and Armani, in the area surrounding Milan, an epicenter of the virus that has been completely shut down as of this writing. And many workplaces around the world, including in the U.S., are sending employees home, where possible, to prevent the spread of the virus. Most are trying to remain up-and-running, but the transition to a working-from-home model to prevent the disease is bound to have an effect, as is the growing number of people who are sick and cannot work at all.
The National Retail Federation, in its latest survey of U.S. port activity, found that 40% of U.S. businesses were seeing supply disruptions, as of early March, with 26% more expecting to see disruptions in the months ahead. The most optimistic predictions (to date) expect the challenges to continue through at least April, but the potential timeframe seems to lengthen daily and the impacts are felt worldwide.
It should be noted that the concerns about supplies and inventories, top-of-mind at the beginning of the crisis, have taken a backseat to the more profound issue of what will happen to consumer demand if the global pandemic lasts for a while.
What to do? In the early days many companies sought alternative sources of parts and materials in countries such as India, Malaysia, or Vietnam, although the global spread of the coronavirus means few countries will be immune from some disruption. Companies are also being creative about how they get products to their customers by considering new shipping and freight options. Meanwhile, they are trying to manage inventories so they can survive lower demand in the near future while being ready for a potential spike later in the year. Long-term, businesses are thinking about diversifying their manufacturing and sourcing to more locations to reduce the impact of future crises.
Changes to Day-to-Day Business Operations
Almost all trade shows through April, a large number in May, and even some in June, have now been canceled or postponed, or are going virtual. These include some of the biggest gatherings for the licensing business, including the Inspired Home Show, MipTV, and E3, among many more. Licensing-specific events are no exception, from the cancellation of Licensing China and the Bologna Licensing Fair to the postponement of Licensing Expo until August. Fashion weeks all around the world have been canceled as well.
Meanwhile, businesses are instituting travel bans on a global basis and “non-essential” employees are working from home. The U.S. government has shut its doors to non-Americans flying in from Europe, while the airlines have voluntarily stopped flying in and out of certain affected regions. And a general reduction of flights due to lack of demand—Delta alone has reduced its schedule by 40% to date—has followed, limiting travel for those who still need to fly on business (albeit against health organization recommendations).
To meet this challenge, some companies have invested significant funds in improving their platforms for holding virtual meetings. Many have incurred significant costs related to changing their travel plans and are racking up sunk costs spent on trade shows that will now not bring in any business. New properties and product lines have lost an invaluable launch window and are scrambling to change their plans and find alternatives that will be as effective. The trade shows themselves are also facing big financial consequences.
What to do? The first step has been to transfer individual and some group meetings online. Companies that have lost their primary opportunity to launch a new product or property are trying to find new ways to make a splash, whether through virtual presentations to the trade, boosting social media campaigns to the public, or rescheduling launch dates. Long-term, some observers see the crisis as a death knell for at least a percentage of business travel and trade shows, as digital alternatives are often less expensive and as effective. On the other hand, there will likely always be some need for face-to-face gatherings.
Disruptions to Marketing and Fan Engagement
It’s not just trade shows that have been canceled, but big consumer events as well. Music festivals scheduled for the next couple of months, such as South by Southwest and Coachella, have almost all been canceled, as have concert tours by everyone from Santana to Pearl Jam. Disney and other theme parks around the world are not welcoming visitors at the moment. Sports events and seasons are virtually all on hold or canceled completely until the crisis passes. Movie premieres have been delayed and TV productions shut down. Live theaters have stopped performances and some movie houses and restaurants are closing for now.
These decisions have an immediate financial impact, of course, with ticket sales and on-site purchases of food, beverages, and merchandise no longer occurring. Indirectly, they also have a big effect on licensing. A hiatus in sports events means less awareness and engagement, and likely less product sales. The stoppage of arena concerts means no merch sales on-site and less exposure to drive sales online and in-store. A significant drop in restaurant traffic could mean more sales of a chain’s frozen restaurant meals in the short-term; over the long haul, less engagement is likely to lead to lower sales for licensed goods at retail.
Licensed products tied specifically to an event such as a Formula 1 race, a concert tour, or a Broadway play face particular challenges, but concerns extend to any licensed merchandise that benefits from the awareness generated by either a big happening or regular exposure. Furthermore, events such as SWSX and March Madness serve as key launch windows for new consumer products initiatives, which are now on hold.
What to do? Brands are offering streaming entertainment (Disney’s early release of Frozen 2) and educational platforms (Scholastic), often for free, to help consumers manage the crisis and generate goodwill. They are working to keep in touch with their consumers online and through social media while their other marketing ventures are on hold. Some are creating new content to keep their fans engaged, such as musicians offering a streamed concert from their living room or releasing a surprise drop of a new song. From a long-term perspective, the crisis reinforces the need to reach consumers through multiple touchpoints so the conversation continues despite interruptions on some fronts.
Looking Ahead: Business Survival and Economic Uncertainty
Toy company Basic Fun recently announced that it had let go 10% of its employees, citing coronavirus-driven production delays. U.K. menswear brand Kilgour closed its high street showroom permanently, saying the coronavirus was the last straw in a difficult environment in general; the brand itself remains in business.
Even if this crisis passes relatively quickly, some of the ramifications will continue to be felt down the road. The toy industry and others could see a reduction in fourth-quarter sales due to a lack of inventory resulting from production delays this spring, for example, which could lead to more consolidation and closings for an industry still recovering from the demise of Toys ‘R’ Us and other challenges.
One big issue facing everyone is the difficulty of predicting and preparing for the future. No one knows how long the spread of the virus will continue or how severe it will be. In some cases, temporary closures could become permanent. New properties and products, as well as companies of all sizes that are already hovering on the edge, are likely to be most affected. Can fast-fashion retail chains or mid-tier department stores that are always in the bankruptcy conversation survive a long period of self-distancing? Will a new property recover if it spent significantly on its introduction before losing its planned launch window? Would a trade show without insurance be able to continue in future years after canceling in 2020?
Finally, the spread of COVID-19 is already having significant effects on the global economy and, while forecasts differ, more analysts everyday are starting to predict longer and deeper impacts than first expected. If the economy goes into recession, that will obviously be a profound long-term challenge for the licensing business as a whole, as the last recession in 2007-2009 and its aftereffects clearly showed.
What to do? There are no definitive answers here. But the licensing community can take several steps to move through this situation and position themselves to survive future challenges, some of which they are already doing in response to ongoing licensing and retail trends. These could include making more of an effort to ensure they have cash reserves for future emergencies such as this; diversifying their businesses to encompass more suppliers, transportation options, marketing channels, and retail outlets, online and off; and implement business practices that give them the flexibility to react to sudden changes in their fortunes.
Coronavirus: The Latest Challenge for Toy Makers—and Publishers
February 24, 2020, published in Publishers Weekly: February 24: The coronavirus was one of the main topics of conversation at the 117th edition of Toy Fair New York in February. Two weeks before this year’s event, show producer The Toy Association, in consultation with the China Toy & Juvenile Product Association, canceled the China Pavilion, the section of the show where Chinese manufacturers have traditionally exhibited their wares.
Many toy companies source 60% to 90% of the products they sell in the U.S. from China, and several of the 30-plus children’s book publishers exhibiting at Toy Fair New York (out of about 1,000 total exhibitors) say they also use Chinese factories to produce a significant percentage of their books. The virus, therefore, has the potential to significantly disrupt the supply chain.
Read the full article, from Publishers Weekly, here.