Raugust Communications’ monthly e-newsletter features a Licensing Topic of the Month; Datapoint (a recent research finding from Raugust Communications); and news about the company and its books and reports on licensing. Below are the Licensing Topic of the Month archives.
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Licensing Topic of the Month: November 2023
Holiday Sales Predictions Cautious Due to Mixed Signals
As we enter the official start of the holiday spending season, it’s time to take a look at analysts’ forecasts for holiday spending growth in the U.S. this year. While predictions (and methodologies) vary, most are in the 3% to 5% range. The researchers expect sales increases in 2023 to be less than in 2022, when actual sales were up 7.6%, according to the U.S. Census Bureau. Most estimate the increases will be consistent, or nearly so, with pre-pandemic annual holiday gains, after three higher-growth years post-lockdown.
Key predictions from some of the researchers tracking the market:
• The National Retail Federation predicts year-on-year increases of between 3% and 4% during November and December of 2023. That would put holiday sales as high as $966.6 billion. Online spending is expected to grow between 7% and 9%.
• The International Council of Shopping Centers anticipates holiday-season sales growth of 3.8%, with 80% of consumers saying they will spend more than they did last year. Food and beverage spending will see a jump of 7.6%. Physical stores will account for 41% of total expenditures, online-with-delivery for 42%, and click-and-collect for 17%.
• Deloitte forecasts increases of 3.5% to 4.6% in holiday sales in 2023, with sales totaling $1.56 trillion at the top of that range. E-commerce sales will grow by 10.3% to 12.8%, totaling $284 billion at the high end.
• Ernst & Young’s EY-Parthenon expects retail sales growth of 3% during November and December. Online sales will account for 19% to 20% of holiday sales totals, up from 18% to 19% in 2022.
• Mastercard SpendingPulse foresees sales up 3.7% year-over-year, with in-store sales rising 2.9% and e-commerce sales up 6.7%. Forecasts vary by category, with electronics and restaurant expenditures outpacing the market, apparel growing just 1%, and jewelry down 0.3%.
Many other organizations have also made predictions, from RSM, which expects an increase of 5% in retail sales from October through December, to Bain & Company, which predicts 3% year-over-year growth in November and December.
The organizations’ research, taken collectively, sheds light on some of the positive and negative economic factors that inform their predictions. Inflation is moderating, but prices remain high in categories such as food/beverage and gas. In fact, the current inflation level of 3.24% overall negates much of the growth outlined above, suggesting volume sales will be relatively flat.
The job market is strong, wages are growing, and the overall savings level is relatively high. Yet these positives mainly are associated with middle and high-income consumers, who are expected to drive much of the sales this holiday. Lower-income consumers are struggling due to high rent costs, the resumption of student loan payments, rising credit card rates, and other factors.
Despite many positive economic signs, even middle- and high-income consumers are generally pessimistic about the economy overall, and they are expecting to set and stick to holiday budgets. They are also looking for discounts, which they are unlikely to receive as frequently as last year, as improvements in the supply chain situation have helped retailers reduce excess inventories. That said, even given shoppers’ less-than-optimistic views these days, some researchers predict many of them will spend more not just on gifts but on holiday decorations and self-indulgences.
All of these competing factors were taken into account in the researchers’ forecasts, but time will tell whether actual consumer behavior is in line with expectations.
Licensing Topic of the Month: October 2023
Looking to the Bricks for Sustainability Best Practices
Last month, Lego announced that it would stop its program, announced in 2021, whereby it was testing the viability of making its building bricks from recycled plastic rather than new oil-based plastics.
While the company continues to look for ways to make sustainable, oil-free bricks—it says it has tested hundreds of materials to date—it is abandoning this effort, after discovering that using recycled PET plastic would actually have led to higher carbon emissions. The impact on the carbon footprint was attributable to the many changes that would have been needed to reconfigure its factories for the new manufacturing processes.
The move illustrates some best practices for other companies in the licensing business to keep in mind as they try to make progress toward a more sustainable future:
• It is important to closely track all efforts to make sure that they are truly beneficial to the environment. Using recycled bottles sounds good, but it was not a positive move on balance in Lego’s case. Without monitoring the impact closely, it is impossible to know whether you are really making a positive difference or causing harm.
• Measuring sustainability initiatives needs to take all components into consideration. A program like Lego’s could be beneficial in removing plastic from the oceans, which is a plus, but when taking the entire supply chain into account the result was a negative impact on the environment.
• Transparency helps bring consumers and business partners along on the journey. Lego’s public announcement was spun as negative news in some quarters, but the fact that the company explained its decision and the why behind it helps consumers understand and is better for a corporate reputation in the end than letting the initiative quietly go away, as many companies tend to do.
• Sustainability is a long and bumpy road rather than a destination. There will be setbacks and alterations in strategy along the way. The key is to honestly measure the results of your efforts and to be brave and flexible enough to face any challenges that arise and change course when needed.
A number of companies have programs in place to use recycled bottles in their products, and it will be interesting to see if any of them reexamine their processes in light of Lego’s news. It should be noted that most of the initiatives to date involve textiles and soft goods, rather than hard plastic; thus the impact on their carbon footprint may differ.
Licensing Topic of the Month: September 2023
Standing Out Through Shared and Layered Storytelling
One way collaborative deals can differentiate themselves in the marketplace is for the two (or more) partners to share an attribute that authentically prompts storytelling opportunities to draw consumers in and keep them interested. Some of the best pairings have a common characteristic that surprises and delights while at the same time making perfect sense.
Some examples from recent years illustrate:
• Shared history. Red Wing Boot’s collaboration with Indian Motorcycle, marking the former’s first foray into motorcycle boots, played on the companies’ similar pasts. Both were founded within four years of each other, now more than 115 years ago, and both established a reputation in common for American-made quality and craftsmanship that continues today.
• Mutual geography. Dolce & Gabbana joined with appliance maker Smeg for a Made-in-Italy project under the Sicily is my Love umbrella. The two high-end Italian companies initially created a line of 100 hand-painted Smeg refrigerators featuring all-over Dolce & Gabbana prints inspired by Sicilian folklore. That was followed by another, broader collection of small appliances. Separately, Vivienne Westwood and Burberry, two well-known British fashion labels, collaborated on a limited edition of pieces inspired by British heritage, such as kilt skirts, double-breasted jackets, and lace-up platforms. The collection combined Westwood’s punk style with Burberry’s plaid. Both brands hit the peak of their fame in the 1970s, Westwood as a new designer at the time and Burberry as a legacy brand launched in 1856.
• Common ingredients. While most collaborative foods bring together disparate but complementary ingredients, some pin the pairing on an ingredient they both share. Eastside Distilling combined vodka and potato chips in a collaborative blend that included both its Portland Potato Vodka and a second vodka made from the proprietary potatoes its partner Lay’s uses to make its chips. Another example: Katz’s Deli and Henrick’s Gin’s co-branded half-sour pickles, which highlight the cucumbers and coriander that are found in both brands’ original products.
• Brand or industry connections. One collaboration highlighted all the various facets of the Michelin brand. Chaud Devant, a Dutch specialist in footwear and apparel for chefs, created a Michelin-branded line of shoes with soles of non-slip Michelin rubber. The line was in collaboration with chef Claude Bosi of the restaurant Claude Bosi at Bibendum. The restaurant is Michelin Guide-starred; is located in Michelin House, the tire company’s art deco U.K. headquarters building in South Kensington, London; and takes its design cues from Bibendum (the official name of the Michelin Man corporate mascot).
Some collaborations encompass multiple shared attributes, for a strong bond that lends itself to layered storytelling. A case in point: General Mills and Fulton Beer partnering several years ago to create HefeWheaties, a German-style wheat (hefeweizen) beer. Taking place in the early days of craft beer collaborations, the combination seemed surprising at the time, but the story of how the two brands came together made a lot of sense. Not only are both products made from a common ingredient, wheat, but both companies were founded and continue to be based in the same city, Minneapolis. In addition, wheat played a critical role in the city’s development as an early flour-milling hub—with the two of the companies that led to today’s General Mills, Gold Medal Flour and Pillsbury, being key players—adding another layer to the collaboration and its reason for being.
As these examples suggest, the more multifaceted and authentic the connection between the players in a collaboration, the more opportunities there are to pique consumers’ interest, have them recognize the sense of the pairing, and enhance the brand image and positioning of all the players involved.
Licensing Topic of the Month: August 2023
B2B Marketplaces Seek to Streamline Licensing Process
A handful of licensing-specific B2B marketplaces, intended to streamline the process of discovering licensing partners and completing licensing agreements, have launched (or announced their intentions to launch) since the beginning of 2023.
They include BIP, which hosts properties such as Squishmallows, Dali Universe, Arthur, Planters, athletes represented by the Cut Agency, and a number of metaverse-origin gaming properties, among others; Cocoban, whose early announced users included several Bored Ape IP owners; and Spaceport, which matches partners both for physical products and metaverse activations, hosting licensees and licensors including the likes of Threadless, Supermojo, 24/7 Comics, and others.
All are in their very early stages, but they hope to succeed by providing advantages including:
• Limiting the time and cost of finding licensing partners and completing licensing agreements efficiently.
• Offering tech support like post-deal royalty reporting, approvals, and payment mechanisms.
• Helping users discover lesser-known properties and/or licensees that would be difficult to find otherwise, while simultaneously opening doors for those emerging and smaller licensees.
• Facilitating deals among companies in different territories, who might not cross paths in real life.
• Creating exposure for all the potential partners, providing another B2B marketing touchpoint.
• Assisting in the vetting of potential partners and the monitoring of IP ownership.
• Offering transparency in royalty reporting, real-time tracking of progress, and other components of the licensing process.
In addition to the general licensing platforms mentioned above, there are several other, similar start-ups that focus on a specific aspect of licensing, such as Icon Source for collegiate name, image, and likeness rights; Avanti for patents; Layer for video games; and others specializing in film content, music licensing, NFTs, and the like.
Although some major licensors and licensees have a presence on one of these platforms, the benefits seem to be more meaningful for smaller and emerging brands. Marketplaces such as these could present opportunities for IP owners and licensees that have a hard time getting noticed through traditional licensing processes and do not have marketing or operating budgets comparable to the more established players.
It should be noted, however, that automating the process of selecting a licensee or licensor could eliminate some very important components of that process, such as the detailed vetting of prospective partners to make sure they are a good fit. Many parts of licensee and licensor evaluation can certainly be accomplished through technology. But it has always been said that licensing is a business of relationships, and getting to know each other personally before forging a deal, as well as maintaining close ties throughout the duration of the agreement, has always been considered a critical factor for success.
Licensing Topic of the Month: July 2023
Business-Wide Trends Lead to Group-Licensing Growth
Group licensing programs comprise an established business model that is on the rise, touching on an ever-wider variety of different IP types. This model offers emerging and lesser-known IP owners opportunities they may not have otherwise. At the same time, it gives licensees something new to offer their customers, with minimal risk. Central management of a number of similar properties also makes the licensing process easier for both licensee and licensor in a fragmented marketplace.
Some examples show how this model can be used across different industries:
• Some NFT programs allow purchasers to customize their NFTs, based on a common core character or other design. The NFT owners have the right to exploit their specific version commercially. One of these programs is the Bored Ape Yacht Club. A number of group licensing collectives have sprung up around this NFT collection for the purpose of making licensing of the owners’ assets easier. The collectives include the Bored of Directors, a group of more than 10 owners represented by Brand Central; Army of Apes, represented by Maurizio Distefano Licensing in Italy; and The Advisory Bored, represented globally by Blonde Sheep, with Germany’s Celebrities Entertainment and Dubai’s Markettcom being the first two sub-agents signed.
• In the online gaming and metaverse platform Roblox, users create their own games, which can be played by other users. Creators own the rights to their titles and can license out the characters and other assets they have developed. Some creators have enlisted Roblox to serve as their representative, although a growing number, including Uplift Games’ Adopt Me, choose to fly solo. Jazwares’ DevSeries is one recent example of a group-licensing effort involving several of the top Roblox developers, whose creations include Tower of Hell, Ninja Legends, Murder Mystery 2, Livetopia, and a growing list of others. Not only does Jazwares make plush toys based on the properties, but it is helping the developers seek out additional consumer product opportunities through its relationship with the licensing marketplace BIP.
• With the advent of name, image, and likeness (NIL) licensing at the university level two years ago, a number of group licensing programs, similar to the model used by pro athletes’ players associations, have sprung up. Talent and other commercial agents work with universities, and/or the NIL Collectives formed by university alumni, to represent their athletes in seeking commercial opportunities, including licensing. The Brandr Group, for example, has partnered with a number of institutions, including UMass, Murray State, The University of Connecticut, and almost 80 others. It recently partnered with Icon Source, an NIL marketplace platform, to expand group-licensing opportunities for the student-athletes it represents.
• Group licensing programs and group collections have been a frequently used tool for increasing diversity at retail. Most recently, Designer Evan Jerry of Studio Anansi paired with home goods retailer CB2 for the Black in Design Collective program, a home décor collection bringing together the designs of 11 Black artists and designers from around the world. Each had leeway to interpret the theme of the collection, Black futures in design, in their own way. JCPenney’s partnership with Thirteen Lune and Target’s Future Collective brand, which features an ongoing series of collections with Black and Brown designers, are other examples.
• Central Saint Martins, a fashion school in London, does many partnerships with brands that involve multiple student designers. The brands get the satisfaction of contributing to the students’ education and potentially benefit from a recruitment standpoint, while treating their customers to collections of products designed by these emerging talents. Dr. Martens, Tod’s, and Lululemon are among the many brands that have released collaborative collections with CSM student and alumni designers. The Council of Fashion Designers of America (CFDA) has also facilitated group designer collaborations over the years.
These programs represent just a few examples of the different uses and configurations of group-licensing programs today. The expanding pool of makers and creators of user-generated content, many of whom are developing licensable IP, along with the growing importance of emerging and niche properties, suggest that this business model is destined for continued expansion.
Licensing Topic of the Month: June 2023
Caught in the Crosshairs of Controversy
Companies involved in licensing have been in the news lately as they face consumer backlash for their pro-LGBTQ+ initiatives, both ongoing and especially in the weeks and months leading up to Pride Month. Brands and organizations including Bud Light, Target, the L.A. Dodgers, Disney, and Starbucks have all found themselves in the middle of unwanted negative publicity due to their original programs—the likes of which, it should be noted, have been successfully and uncontroversially implemented for a decade—and their reaction to the outcry.
While the programs in the news lately have been efforts to market to the LGBTQ+ community, similar controversies can spring up for all kinds of different reasons, from #MeToo situations with employees or partners, to maintaining a business in Russia since the beginning of the war in Ukraine, to greenwashing accusations, to even commonplace DE&I efforts.
Here are some observations springing from the recent LGBTQ+-related situations that could apply to any type of controversy:
• In today’s divided society, with small but passionate groups on both sides of any issue, there’s a chance that a backlash will affect any marketer at any time. With some initiatives, a backlash is almost inevitable, but companies need to be aware that controversies can arise unexpectedly as well.
• It’s worth talking over different scenarios that could happen and how you would address them, well before they occur. When negative feedback pops up and goes viral, it’s important to be prepared to address legitimate concerns honestly, authentically, and immediately. The time it took Bud Light to respond to its controversy seemed to exacerbate the situation rather than help it pass over quickly. Of course, some consumers or advocacy groups will never be satisfied, but your core consumers will likely be won over by a logical and caring reaction and/or explanation.
• Be prepared to stand your ground if you feel you are in the right. Reversing course quickly seems to add fuel to the fire, as Target and the L.A. Dodgers discovered when they pulled back on their plans (in Target’s case, due to violence toward its employees). That not only did not appease the original complainers, but angered the people who were in support of the original initiatives, too. The exception would be when the infraction is self-inflicted or when a backlash makes an organization realize it inadvertently did something in conflict with its core values, in which case a reversal is likely warranted.
• Your reputation for providing a valuable product or service while trying to do the right thing in general can help alleviate and shorten the timeline for such controversies. Disney has been the focus of boycotts and social media hate for its opposition to Florida’s “Don’t Say Gay” law, but the fact that a large swath of customers on both sides of the political spectrum love Disney World and Disney in general is helping them weather the storm.
• It is important to know your audience. In Bud Light’s case, it created a single custom beer can for a trans influencer, who highlighted it on social channels—something that would normally be a fairly under-the-radar effort for anyone outside of the influencer’s core fans. But the situation blew up, with Bud Light users calling for boycotts and posting videos of themselves shooting up their stocks of Bud Light on social media. The controversy remains ongoing and ultimately contributed to Bud Light losing its place as the top U.S. beer brand to Modelo Especial, at least for now. Bud Light seemingly underestimated the power of its core audience’s views when creating a promotion that many other companies could have done unscathed.
• Realize that misinformation can intensify the backlash. A viral post about how there were no fans at the L.A. Dodgers game on the night of its LGBTQ+ promotion, shared by individuals and politicians alike, showed a photo taken before the game. In fact, the game actually attracted a slightly higher attendance than the average for the year, for a club that has one of the highest average attendance levels for the league as a whole. There is not much that can be done about this sort of misinformation, but an awareness that it can happen, a trusted relationship with core consumers, and good intentions can help.
None of these are easy to do or to do well. The temptation for some companies is to avoid taking a stand on any issue that might generate a controversy, especially one that is difficult if not impossible to adequately address.
But research shows consumers and employees want companies to take a stand on issues important to them. When it comes to support for the LGBTQ+ community specifically, a recent study from Edelman and GLAAD found that more than 51% of U.S. employees said they would be more likely to work for a pro-LGBTQ+ company, versus 11% who said they would be less likely. And on the consumer side, 34% of U.S. consumers said they were more likely to buy from a brand that stood for LGBTQ+ rights, versus 19% who said they were less likely to do so. Other studies have found similar trends. So, depending on the views of your specific customer base, remaining neutral may not be a better option.
Licensing Topic of the Month: May 2023
Direct-to-Consumer Platforms As Key Distribution Channels
A lot of the headlines about direct-to-consumer retail in 2022 and 2023 have been doom-and-gloom, as DTC-only brands have been entering Chapter 11, experiencing big layoffs, and diversifying their business models in part away from DTC and into wholesale distribution. That said, while DTC-only marketers are struggling, 85% of business leaders overall had switched at least some of their retail business to DTC by the end of 2022 and 13% more planned to do so in 2023, according to research from Circuit, a delivery-management platform.
Fashion and lifestyle IP owners have been taking the lead on this transition:
• True Religion and other brands are converting some or all of their wholesale sales to DTC, both digital-first and physical.
• Labels such as Nike and Kate Spade are seeing direct sales increase at a faster pace than wholesale sales.
• Adidas and Levi’s are among the marketers expecting DTC to represent 50%-plus of their core business within a few years.
• Ralph Lauren and others are expanding their networks of owned-and-operated physical stores.
What are the lessons that the licensing business in general can learn from this trend? First, apparel, accessories, and footwear are a good place to start a foray into DTC, as this category dominates the sector. Second, it is becoming evident that DTC works best (at least for most marketers) within a full ecosystem of distribution options rather than as a standalone strategy. And third, companies that are relying on DTC for a large percentage of sales for the brand tend to be IP owners that manage much of their consumer products business in-house rather than through partnerships.
The occasional collaborative product (e.g., a licensed accessory tied to a brand or a collaborative collection with an outside property) may find placement in the brand owner’s DTC shops. But for the most part, a licensing deal or other form of partnership adds a layer of complexity that makes it difficult for DTC to grow into a core distribution channel. There may be competitive issues, for example. And some licensors do not allow their licensees to sell through DTC channels at all.
With the caveat that there are always exceptions to the rule—and that is certainly the case here—IP owners at present are most often utilizing their DTC channels for ancillary sales purposes such as hard-to-find products, novelty merchandise, personalized goods, or limited tests of new items, while also creating a hub for storytelling, fan engagement, data collection, brand positioning, and the like. For most, at least for now, these marketing and ancillary sales goals take precedence over trying to establish DTC platforms as a primary distribution channel for licensed products.
Licensing Topic of the Month: April 2023
Learning from Retailers’ Metaverse Maneuvers
Retailers, like most marketers, are still in the experimentation stage when it comes to establishing an effective presence in the metaverse. Headlines lately have noted that some retailers are retrenching, citing the end of Walmart’s Universe of Play initiative on Roblox as the main example.
But many more retailers have launched or expanded metaverse programs in the first quarter of this year, including H&M, Aéropostale, Pacsun, Home Depot, and South Korea’s 7-11 franchisee. They join retail brands such as Forever 21, Lowe’s, Wawa, Claire’s, Albertson’s, and others in trying to hone their presence in the metaverse.
In these early days, such initiatives are typically viewed more as a marketing play and/or an opportunity to test strategies and tactics that will lead to monetization down the road, rather than a profit center. Among retailers’ current objectives:
• Marketing. Having a presence in a virtual world like Roblox, whether a billboard or a store offering virtual goods for purchase—allowing consumers’ avatars to wear their brand while playing games or otherwise interacting with the site—puts a retailer’s name in front of the often-younger consumers who are spending large blocks of time there each day.
• Fan engagement. Offering access to exclusive content, events like concerts or fashion shows, discounts, games that lead to rewards or prizes, or unique virtual goods helps retailers solidify fan loyalty and positive feelings about the brand and merchandise.
• Product development and feedback. Monitoring how visitors are engaging with their brand in the metaverse, such as what they are purchasing or where they are spending their time, not only helps them better engage fans in the digital world going forward but can influence their physical offerings. Retailers can also quickly and inexpensively introduce vast numbers of new styles and see how consumers react.
• Immersive shopping experiences. Metaverse shops are able to give consumers who cannot reach a physical store due to distance, cost, or circumstance a taste of that experience. It can also give consumers the opportunity, via their avatars, to try on a nearly unlimited number of styles, colors, and combinations of goods, something not possible in a physical location or traditional e-commerce site.
• Driving sales of physical goods. Increasingly, retailers are connecting virtual and physical purchases, such as offering a discounted or free physical item with a digital purchase, or vice versa, creating real-world products inspired by successful virtual goods, or linking virtual try-ons with immediate physical purchases through e-commerce links.
• Creating ancillary revenue streams. Selling virtual goods can bring in some revenue for retailers, although at present this is typically not among the top goals for their metaverse strategies.
Retailers’ current objectives, tactics, and challenges closely parallel those of all players in the licensing business and can offer lessons for licensors and licensees as they develop their own plans for the metaverse.
Licensing Topic of the Month: March 2023
Resale as Sustainability Tool: The Promise and the Problems
For the last couple of years, retailers, fashion labels, and others have been launching branded resale platforms, usually in partnership with one of the leading resale marketplaces, as a key component of their sustainability efforts. The trend seems to be strengthening this year, with more and more brands jumping into the space.
These initiatives are meant to keep products out of the landfill while also giving consumers a chance to discover and purchase products at a discounted price, including items that might normally be out of reach because they are too expensive or have been discontinued. Resale is a straightforward sustainability technique that is easily understood by consumers and can give retailers and brands a sustainability halo.
A few of the initiatives announced since the beginning of this year:
• H&M paired with ThredUp for its first U.S. resale platform, H&M Pre-Loved, which includes sportswear, kids’ products, and denim among the categories, as well as items from some of its previous guest collaborations. Meanwhile, ThredUp’s other new brand partners since January include Kate Spade, Francesca’s, and J. Crew. J. Crew launched on online resale platform, J. Crew Always, as well as a curated in-store program called J. Crew Vintage.
• Gucci teamed with Vestiaire Collective for Gucci Preloved, starting with nine of its signature bag styles. As part of the initiative, consumers can have their bags valued at select Gucci stores or online.
• Carhartt partnered with Trove for a branded resale site called Carhartt Reworked, billed as the first resale initiative in the workwear segment.
• Childrenswear brand Hanna Andersson collaborated with Archive to launch its resale marketplace, called Hanna-Me-Downs.
All predictions point to growth ahead for resale, with a survey from ThredUp and GlobalData predicting that U.S. secondhand sales—including traditional thrift sales, donations, and resale—will more than double to $82 billion from 2022 to 2026.
At the same time, few of the major resale specialists are profitable, and many, from ThredUp to The RealReal to StitchFix, have reported slowing sales growth, decreases in active clients, layoffs, management changes, and/or other challenges. Their recent issues have been attributed to lower consumer spending and more competition from discounted goods in other retail channels.
More fundamentally, resale is facing questions about whether its sustainability claims are even true. Some recent research has shown that consumers are treating the sites something like a fast-fashion outlet, drawn by the lower prices as much as any sustainability goals, and that usage of resale sites does not necessarily reduce purchasing or waste overall.
While resale retains potential as a viable piece of sustainability efforts in apparel and other categories, these questions serve as a reminder that companies need to think about how to ensure their programs are really making a positive impact on the environment, if they are billed as doing so, and how to measure that impact. Otherwise, their efforts may ultimately backfire with consumers who are looking to them to be good stewards of the earth.
Licensing Topic of the Month: February 2023
Layoffs and the Licensing Business
The economic news since the beginning of the year in the U.S. has been, on balance, more positive than negative. Most economists believe the chance of recession is decreasing. Inflation is still very high but abating somewhat (with continued ups and downs along the way). Jobs are being created and the unemployment rate remains low. The stock market has been rallying in 2023 so far. Retail sales were up 3% in January, stronger than expected, and the consumer confidence rate is at its highest level this month since January 2021, more than two years ago.
Of course, the economy in general and the licensing business in particular continue to face many challenges and uncertainties about what is ahead. One indication that all is not well is the string of layoffs that have occurred since the beginning of the year, continuing a trend that started in the second half of 2022. Marketers across industries are letting people go in big numbers to shore up poor results, get themselves ready for potential trouble ahead, or position themselves better for success in a changing environment.
Much of the attention has been paid to widespread layoffs in the tech industry, but the phenomenon has hit many sectors that intersect with licensing. Companies that have announced significant layoffs since the beginning of the year include Amazon, Disney, HarperCollins, Philips, Hasbro, and Wayfair, among others. Although the pace seems to have slowed since earlier in 2023, observers believe there still may be more bad news ahead regarding further layoffs.
What does all this mean for licensing? A few possibilities, both direct and indirect, include:
• More competition in the already crowded licensing agency world, as laid-off executives hang their own agency or consultancy shingles, whether permanently or as a bridge to another position.
• More difficulty in bringing deals to fruition in the companies most impacted. Some agreements may be discontinued or not go through at all. Speed to market may also decline due to shorter staffs, which could be a significant issue in today’s fast-paced market.
• A danger of poorer customer service, messier stores, longer timeframes before receiving online orders, and the like, which could worsen consumers’ perceptions of properties, brands, and retailers.
• Less buying power among the consumers affected and less inclination to purchase by those who are worried about future layoffs in their industry or about the economy in general.
• Personal tolls for the individuals touched by the recent layoffs, and their families.
Over the long term, executive and staff reductions could result in better profitability and efficiencies that ultimately represent a net positive for the licensing business. But that doesn’t make it any easier in the short term, especially for those who are personally affected.
Licensing Topic of the Month: January 2023
Meeting the Particular Demands of Female Consumers
Some important needs specific to female consumers have until now been largely ignored by mainstream marketers, despite their huge potential. But signals are starting to appear that brands, retailers, and IP owners are about to recognize that these white spaces are growth opportunities for collaborations:
• Menstruation. Big players including Puma and Adidas have entered the “period wear” market, which consists of leak-free and odor-free underwear and activewear that is washable and does not require the use of traditional disposable feminine products. These items appeal to many consumers both on convenience and sustainability grounds. Recent collaborations have ranged from Puma pairing with Modibodi, a period wear specialist, to Saudi Arabian designer Nasiba Hafiz partnering with feminine products brand Always for a Not Hot Collection.
• Menopause. Actress Naomi Watts recently announced deals for a beauty and wellness line with Amyris and a greeting card line with Em & Friends, both focused on products for women experiencing menopause. Tennis star Serena Williams and celebrity stylist Stacy London have also gotten into the space, the former through an investment in supplement line WILE and the latter through the launch of a company called State of Menopause. Several retailers have launched or expanded menopause-related product assortments as well. The messaging is often focused on self-care.
• Mastectomy. Fashion label Pretty Little Thing paired with charity GIRLvsCANCER for an 18-month collaboration centered on post-mastectomy bras, bodysuits, and lace dressing gowns, while Stella McCartney collaborated with Victoria’s Secret on its first mastectomy bras, branded as The Body by Victoria, after creating a post-mastectomy sports bra with Adidas for Breast Cancer Awareness Month back in 2019.
• Maternity. McCartney has also been on the forefront of collaborations in the maternity and nursing bra space, with offerings under her Adidas partnership. Retailers are more often promoting this category as well, with Walmart’s new Joyspun intimates line highlighting maternity and nursing bras within the range and Victoria’s Secret having added maternity products to its assortment, for example.
Specialty marketers and retailers have been attending to these categories in the past, but the interest from mainstream marketers and personalities expands their distribution and puts a more fashion-forward and lifestyle spin on products that have traditionally focused on functionality. While it is still very early days for licensing and collaborations in all of these sectors, it is likely that more licensors and licensees will seize the opportunity over time, especially (but not only) in the apparel and wellness categories.
All four of these sectors represent huge potential markets, which begs the question of why they have not been more widely targeted by marketers and IP owners to date. Many factors have likely played into this, from the taboos associated with some of these topics to a historical lack of female executives in decision-making roles. But consumers (including celebrities) are becoming more comfortable talking publicly about these issues and their experiences and needs, which is leading to change. In addition, marketers are always on the lookout for gaps in the market that can drive growth, and these four untapped opportunities all show significant potential for sales of licensed and collaborative products.
Licensing Topic of the Month: December 2022
Holiday Results: What We Know So Far
In October we took a look at analysts’ predictions for 2022 holiday-season sales. The results of the first half of the holiday selling season are now in and, as expected, are somewhat mixed:
• Shoppers are back in stores. More than 120 million consumers shopped offline during CyberWeek (Thanksgiving through Cyber Monday), an increase of 17% over 2021, according to the National Retail Federation, while 130.2 million shopped online, up 2% from 2021.
• But are they spending? Black Friday week (including Thanksgiving, Black Friday, and Small Business Saturday) marked the sixth week in a row of in-store sales revenue declines for discretionary general merchandise, with sales down 5% compared to the same week in 2021 and unit sales down 8%, according to the NPD Group. Fourth quarter retail sales revenue through December 10 was 6% below 2021, it said, with unit sales down 10%. On the other hand, NRF’s first-half-of-holiday season growth estimate of 6.2%, based on U.S. Census estimates, is on track with its fairly rosy forecasts.
• E-commerce sales continue to grow, albeit at a slower rate. Adobe Analytics reports that Cyber Week — Thanksgiving to Cyber Monday — saw U.S. consumers spend $35.27 billion online, 4% higher than in 2021, and Amazon reported its highest sales ever during the period. While Thanksgiving, Black Friday, and Cyber Monday all set online sales records, year-on-year growth slowed compared to the previous couple of years. And November online sales had been flat before that, up just .1% over 2021, according to Adobe.
• Predictions of consumers shopping early seem to have come true. Total sales in November (online and off) declined 0.6% compared to October, although they were up 6.5% compared to 2021, according to the U.S. Census Bureau. The National Retail Federation, which excludes auto, gas, and restaurant sales from the Census estimates, found sales down 0.4% in November versus October, but still up 6.2% year-over-year.
• Consumers are looking for low prices. Salesforce found a clear correlation between discounted items and strong online sales, particularly in apparel, beauty, luxury handbags, and kitchen appliances, during Cyber Week, while Adobe noted that discounts were driving toys, gaming, and consumer electronics. Salesforce also found that shoppers are increasingly utilizing buy-now-pay-later options for their online purchases, with 5% more orders than last year. Average order value for U.S. BNPL transactions during the five days of Cyber Week decreased by 5%, however, indicating that consumers are not reserving BNPL for big-ticket goods but using it for lower-priced products as well.
• Indie retailers are facing headwinds. According to American Express, Small Business Saturday accounted for an estimated $17.9 billion in sales in 2022, down from $23.3 billion during 2021 (a record). Sales were also down from both 2020 and 2019 levels. While surveys show that consumers want to support their local small businesses, higher prices at independent stores likely have been a factor this year.
• Did Super Saturday shoppers come through? The last Saturday before Christmas, another key sales window, came early this year on December 17. Retail sales results for the day are not in as of press time, but shopper traffic was up 17% compared to the previous Saturday and up very slightly (0.2%) compared to Super Saturday 2021, according to Sensormatic Solutions.
The full picture is not complete yet. Early results suggest any sales increases are due more to rising prices than higher unit sales. And factors such as inventory levels, a lack of new product in the market, thin margins, continuing supply chain issues, and predicted bad weather in the final days of the season will determine the ultimate post-holiday health of the business and the individual players in it.
Licensing Topic of the Month: November 2022
Innovative Retail Initiatives To Watch
A handful of partnerships from this month and late last month illustrate some of the innovative methods retailers and brands are using to reach consumers in new ways:
• Disney strengthened connections between its Disney+ streaming service and its consumer products operation. A limited test offered the 150 million global Disney+ subscribers exclusive access to a small range of merchandise based on Star Wars, Black Panther, Frozen, and other properties, all exclusive for a weeklong period before hitting retail. This is just the latest effort in the licensing business to connect on-screen entertainment and physical merchandise, which practitioners agree should drive sales but which has proven challenging to put into practice on a large scale.
• Amazon Fashion became the latest partner for Snapchat’s augmented-reality, Virtual Try-On shopping feature, with eyewear the first product to be introduced. Snapchat’s 363 million daily active users can digitally try on styles from a variety of brands in Amazon’s Profile and link to purchase at Amazon Fashion. Mobile commerce has been growing rapidly and features like these will expand the market by giving consumers confidence in their purchase decision. Amazon has also experimented with AR shopping on its own site.
• Sephora teamed with DoorDash for an on-demand delivery service in North America. Consumers living near one of more than 500 Sephora stores can shop Sephora’s beauty products on the DoorDash app and arrange for delivery, with the order typically arriving within an hour. Prices are the same as in-store, and the DoorDash account can be linked to the consumer’s Sephora loyalty program. More non-foods retailers are pairing with delivery services such as DoorDash and Uber to give consumers more convenience and flexibility.
• Marvel paired with Shopify to allow its merchants to sell licensed Marvel lifestyle merchandise to consumers in North America, using the Marvel Design Collection App, powered by apparel licensee Mad Engine Global, on Shopify. The effort expands distribution for Marvel’s properties and Mad Engine’s products, while giving Shopify’s independent sellers a way to connect with the vast universe of Marvel fans, potentially increasing their customer base long-term.
• Dior is taking over the entirety of London luxury department store Harrods this holiday, with features including an immersive exhibition that recreates Dior shops in the form of gingerbread villages, two pop-up shops, a café, and multicategory window displays featuring well-known Dior products such as the Book Tote and Bar Jacket. The Fabulous World of Dior is the retailer’s largest brand takeover to date and gives both parties significant exposure, as well as offering consumers a fun experience that will likely increase traffic and sales.
• Ralph Lauren is the latest brand to partner with Epic Games for a Fortnite Experience. The effort includes a brand new logo substituting Fortnite’s loot llama for the Ralph Lauren polo horse (a first for the brand); a digital-first capsule collection of apparel and cosmetics, sold first as in-game purchases and then as a physical capsule; and a Twitch livestream reveal of the collection followed by a sponsored Fortnite tournament (a first for a fashion brand). This effort shows how metaverse initiatives are evolving to incorporate not only digital experiences and merchandise but connections to physical products.
This list represents just a fraction of the interesting retail programs and experiments that have come to light this year. They demonstrate how retailers and brands are willing to experiment as they try to figure out how to best reach consumers and spur purchases, both now and in the future. Not only that, but initiatives such as these are attractive in their own right, as consumers are always on the lookout for something new and different from the brands and properties they love.
Licensing Topic of the Month: October 2022
Analysts: A Difficult-to-Predict Holiday Season at Retail
A review of analysts’ predictions for the 2022 holiday season show the level of uncertainty that exists this year, as forecasts of retail sales and other factors diverge widely in many respects. But some trends emerge:
• Inventory is still out of balance. Retailers are dealing with shortages of some items that are expected to experience strong demand during the holiday, but still have high inventories on categories that were heavily stocked during the peak pandemic period. Meanwhile, supply chain issues, while less dramatic than earlier this year or during last year’s holiday season, remain a concern.
• Consumers started shopping early. In addition, specific sales/discount days have less meaning than in the past, as consumers spread their purchasing across the season. As a result, retailers are offering weeklong sales or multiple discount days rather than counting on Black Friday, Cyber Monday, or a single Amazon Prime Day to spur the bulk of purchasing.
• Discounts will rule, both to attract consumers worried about inflation and to move merchandise in categories where inventory gluts still exist. Special pricing offers are rolling out early as well, as retailers anticipate demand might fall off later in the season and want to capture early-shopping consumers. This consumer discounting, along with rising costs, means retailer and brand profit margins are likely to decline.
• Customer service, if done well, will be a differentiator, as labor shortages create a less-than-optimal environment for both shoppers and employees. Retailers that cross-train their workers and provide incentives (both financial and non-financial) will have an advantage, analysts believe. Consumers are expecting a high level of service—delivery within a few days, multiple pick-up/delivery options, liberal return policies, free delivery, in-stock items, etc.—all of which may be difficult to provide this year.
• Most analysts think sales will rise, but at less than the rate of inflation, and much of the growth will be due to higher prices rather than strong unit sales; in fact, the latter may well decline. And a significant percentage of consumers plan to spend less, according to some forecasts. Deloitte, one of the most widely cited predictions of holiday sales, expects seasonal increases of between 4% and 6% over last year. Other predictions vary, though, with some as high as 7% or 8% and some analysts expecting declines.
• Many expect online shopping to outpace bricks and mortar again this year. Some of the advantages of online shopping in consumers’ eyes in 2022: Better discounts than at retail, the ability to monitor prices and time purchases for maximum discounts, and product reviews to spur confidence in spending. Deloitte predicts that growth rates for online sales will be two to three times higher than increases for sales overall during the holiday period; other analysts’ projections vary widely on both sides.
Analyst data considered this review came from, among others, Bain & Co., Coresight Research, Deloitte, Digital River, eMarketer, Emodo, Forbes Advisor, Future Publishing, Gartner, Google, HarrisX, JungleScout, KPMG, Mastercard, McKinsey, Morning Consult, Radial, Salesforce, and Trust Pilot.
Licensing Topic of the Month: September 2022
Consumers with Disabilities: A Mostly Untapped Market
Licensors and licensees have been taking steps to be more inclusive in their brand positioning and product assortments. One component of inclusiveness is attention to the needs of consumers with disabilities, and this has been an area of growing interest in the mass-market consumer products and pop culture landscapes in general. The trend manifests itself in a number of ways:
• Representation on television. Paw Patrol, Peppa Pig, Sesame Street, and Thomas & Friends are among a growing number of properties that have featured characters on screen who are on the autism spectrum, use wheelchairs or crutches, are hearing-impaired, and the like.
• Visibility in children’s products. Toy companies such as Mattel and Lego are also introducing characters with a variety of disabilities, both licensed and in-house developed, as are other licensees, notably children’s publishers.
• Adaptive apparel. Kohl’s, Tommy Hilfiger, Zappo’s, Land’s End, and Target’s Cat & Jack label are among the marketers that have introduced stylish apparel, accessories, and footwear that are easier to put on and take off and/or accommodate medical devices.
• Assistive home goods. Among the retailers offering furniture and accessories to make life at home easier are Lowe’s (with AARP), Pottery Barn, Target, and Ikea (with ad agency McCann). Products include beds with rails, tables configured to accommodate wheelchairs, grab bars, and the like.
• Home health care. Michael Graves Design became the first major licensor to enter this category, creating utilitarian but also stylish bathroom safety items as well as travel walkers and foldable canes exclusively for drugstore chain CVS.
• Halloween costumes. Target and Spirit Halloween have carried adaptive costumes for consumers with special needs, incorporating a wheelchair into the design of the costume, for example.
• Representation in marketing materials. Catalogs and advertising from Marks & Spencer, Target, and many other companies have been increasingly portraying people with disabilities using their products.
• Sensory rooms. Location-based venues are offering quiet rooms for consumers with autism or others who need a break from sensory overload. Examples include the New Children’s Museum in San Diego; the Philadelphia Phillies, which brought a mobile sensory room to its ballpark; and a holiday park in Blackpool, England, which offers Disney-themed, sensory caravans.
This trend has been gaining steam for several years, as marketers tap into a large customer base. An estimated 61 million Americans have a disability, encompassing everyone from children with autism to people with conditions such as Parkinson’s disease or multiple sclerosis, to seniors with dementia or physical ailments.
That said, the market remains for the most part untapped—with a few exceptions—when it comes to licensing. This seems to represent a strong opportunity for a wide range of properties, including designer labels, children’s characters, sports leagues, home furnishings brands, disability influencers, and more.
Licensing Topic of the Month: August 2022
Retailer Woes: Takeaways for Suppliers of Licensed Products
As key retailers release their quarterly results in the coming days and weeks—Walmart’s were out this morning, Target’s tomorrow—their comments offer a snapshot of the interrelated challenges they, and their suppliers, currently face. While most of these trials are ongoing and familiar, it is instructive to take stock of where things stand at the start of the back-to-school and holiday period:
• Inventories. Retailers still have excessive inventory levels, and many, including Walmart, Target, and Best Buy, are reducing prices in categories such as home goods, electronics, and apparel to clear warehouses and reduce storage costs. They are also sending more inventory to close-out specialists such as TJX and Burlington.
• Inflation. Rising prices, especially on food and gas, have reduced consumers’ discretionary purchases, including in many of the categories associated with excess inventories. As prices for raw materials and finished goods rise, retailers are trying to pass the increases along to consumers when they can. But that strategy is in direct opposition to their need to reduce inventories, and often is a barrier to consumer purchasing.
• Supply chain. Port congestion (improved but continuing), delays in rail and truck transportation, and factories still closing periodically for virus outbreaks are among the factors creating uncertainty, impacting sales, and raising costs. Some retailers are asking their suppliers to assume transportation costs and to store merchandise orders at their own warehouses.
• Employee attrition. Retail employees, which account for 20% of all U.S. workers, have a quit rate twice that of the national average and are 30% more likely to leave their jobs than employees in other sectors, according to McKinsey. Lack of customer service in stores comes as retailers are trying to entice people back to bricks-and-mortar and is linked to depressed consumer sales.
• Management reductions. Retailers such as Walmart, Victoria’s Secret, and Allbirds have laid off headquarters staff this year, and key upper management positions have been experiencing turnover at chains such as Bed Bath & Beyond and Gap, whether due to firings or executives leaving. This upheaval can lead to uncertainty and strategy changes that affect suppliers.
• Organized crime. Organized retail crime was up more than 50% from 2015 to 2020, when it cost stores an average of $700,000-plus per $1 billion in sales, according to the U.S. Chambers of Commerce. And the problem continues, including with high-profile daytime thefts by large groups. This contributes to lower profits for retailers and may keep some consumers away.
• Ordering uncertainty. One of the most direct impacts on suppliers is retailers’ changing ordering patterns, which are a result of the factors above. They are canceling orders; being cautious in the number of new orders and the quantities purchased; sticking with tried-and-true products (although some suppliers have seen a willingness to try new things of late); and waiting until the last minute to order.
These factors, and others, have led key retailers to lower their outlook for the second half of the year. Suppliers of licensed products expect a continued bumpy ride.
Licensing Topic of the Month: July 2022
Best Practices in Location-Based Entertainment
Location-based entertainment, while growing in both importance and incidence, remains a challenging business. It is also still an unfamiliar model to many licensing executives. Information from a variety of seminars over the past year, along with conversations with licensors involved in LBE, have underscored a number of best practices. Here are some of the key areas to consider:
• Most fundamentally, any LBE execution, whether a permanent attraction such as a theme park or restaurant or a shorter-term initiative such as a traveling show or pop-up experience, must be linked to a strong property, either homegrown or licensed. That is the connective tissue that holds everything together.
• The early planning is the most important part of the process. The partners need to be wholly on the same page when it comes to objectives and vision, as well as costs, division of labor, and other fundamentals. And adequate time needs to spent on figuring out what exactly the LBE will be, given the property’s DNA, the audience, the competition, the location, etc.
• Fans must have agency over how they interact with the property during the experience. Successful initiatives typically feature a mix of technology and physical activities, storytelling and interactivity, etc., with the balance depending on the specifics of the partnership.
• Success factors include repeatability (keeping it fresh so visitors come again and again), replicability (creating additional revenue streams), and especially authenticity (staying true to the property, true to the medium, and true to fans’ expectations). The latter means giving attention to even the smallest detail and delivering what the fans are hoping for while also giving them something new.
• The job isn’t done when the venue opens. Many glitches will come up during the day-to-day operation, and the partners need to brainstorm potential challenges upfront and determine how they would respond quickly and effectively. In addition, flexibility must be built into the plan to meet changing fan expectations, storylines, and market trends over time.
Of course this list just touches the surface. While the importance of location-based entertainment as part of any licensing program is a given, the chance of success for any such initiative lies in the details.
Licensing Topic of the Month: June 2022
The Search for Social-Emotional Content
Social-emotional (SE) content and social-emotional learning (SEL) have been increasing as themes within the licensing business for some time, as part of a broader banner of mindfulness or mental health. The stresses of the pandemic, along with the resulting fast growth of SE in school settings to support children’s health and academic learning, have intensified the interest in SE significantly in both the consumer products and content arenas over the past two to three years.
Social-emotional learning has long been a component of preschool entertainment properties, especially for younger children. TV series such as Daniel Tiger’s Neighborhood and Bluey, and any number of book properties, highlight these themes. But this content is being sought-after more than ever by licensees and retailers and, as a result, highlighted more by licensors.
Some of the happenings related to this trend:
• More properties are being developed that are specifically tied to SE content. Licensing Expo keynoter Gary Vaynerchuk based his first NFT-origin IP, VeeFriends, on positive emotions, behaviors, and traits that he believes will lead to happiness and success. The community around the property is built on friendship, kindness, and empathy, while characters are built around traits such as patience and tenacity. Entertainment and publishing properties, such as Fox Chapel’s Ninja Kitties, are other examples.
• Licensors that have always included social-emotional themes in their books, TV series, or other IP are developing more specific SE content, especially educational materials for parent and teacher use.
• Licensees, such as creators of workbooks and classroom materials, app developers, and plush makers, are specifically seeking out properties with SE themes more frequently than in the past. Categories such as weighted blankets lend themselves well to this sort of property.
• Licensees are creating products or adapting products to support social-emotional health. Magna Tiles is releasing three new Daniel Tiger sets, one of which consists of emotion tiles. One attendee at Licensing Expo was pitching an AR bracelet where scanning a code on the object brings up a particular character, which the wearer can use to feel better on a bad day.
As these examples show, this trend is mostly centered in the children’s entertainment, digital, and publishing sectors of the licensing business. But it can extend into other areas as well. Sportswear/footwear brands have developed apps that focus on mindfulness exercises to promote mental, social, and emotional wellness; corporate brands with positionings tied to things like sleep, calmness, yoga, mental health, or the mind can be married to social-emotional wellness; and athletes have participated in initiatives that help people deal with their emotions by realizing that their favorite stars are going through the same things.
Social-emotional wellness, mental health, mindfulness, physical health, and their various permutations and sub-categories are all part of the general wellness category, which has been growing in importance within licensing for years. Given the state of the world these days, it does not look like the interest will wane anytime soon.
Licensing Topic of the Month: May 2022
A New Role for Makers
As modern maker culture has become embedded in society—cemented by the pandemic but established well before that—it follows that property owners want to link their names to the trend. Today’s consumers appreciate products that are unique and handmade, and they often are drawn to items that link their favorite properties to these more meaningful, one-of-a-kind items.
Initiatives pairing licensed IP and makers take many forms:
• Disney partnered with Minted, a creator community of 16,000 makers, to create a range of products in which the independent artists reimagine Disney and Pixar properties. Their artwork appears on home decor, wall art, stationery, and gifts through the Minted marketplace and through its retail partnerships. Ongoing design competitions determine which designs are made available for sale as Disney-licensed products that, while not handmade, are billed as “artisanal.” The first drop included pillows, puzzles, and wall art and wall murals. A portion of proceeds go back to the artists, which Minted points out are mostly women.
• A number of celebrities have paired with Etsy for limited collections co-designed by artisans who sell on the site. Examples include Tia Mowry-Hardrict, who paired with nine makers for items such as woven baskets and decorative pillows; Zoe Sugg and her Zoella brand, for 20 items such as candles and planters, also from nine makers; and Tan France for 22 pieces with 13 sellers, including journals, vases, and bathrobes. These are just a few of many examples.
• Williams-Sonoma paired with Nest Ethical Handcraft, allowing it to carry 400 products under its own brand, created by some of 3,600 artisans around the world that are part of Nest’s network. Ethical sourcing and female empowerment are at the center of the initiative, announced in March of this year. The retailer has committed to purchasing $50 million worth of products through the partnership by 2025.
• Museums are increasingly including limited collections of handmade products by artisans as part of the assortment in their onsite and online shops. When the Aspen Art Museum paired with artist Jonathan Berger to take over its shop and curate 350 items for sale, he included maker-made products among the array. The new Academy Museum of Motion Pictures in Los Angeles highlights collaborations pairing IP from its exhibitions and permanent collections with products designed by Los Angeles makers and artists.
• Colleges and universities were the pioneers of this strategy within the licensing world, as most oversee crafters’ programs allowing makers of handmade goods featuring their trademarks to be sold locally. The purpose is to allow these crafters, who are fans and neighbors of the university, to make and sell products on a limited basis without infringing on any trademarks. But such products are also likely to be increasingly appealing to consumers. The programs sometimes bar certain categories (e.g. apparel or headwear) and require the makers to hold the license personally and only create handmade products under the deal. The Ohio State University allows crafters to sell up to 500 units or generate up to $3,000 in sales revenue per year and charges $150 annually for the license (plus $25 for 500 hologram labels).
Not only do programs like these satisfy consumers’ desire for artisanal rather than mass produced products, they also serve as a means for the licensors to enhance their programs with fresh images and product designs and do a little market research, perhaps leading to their next new, long-term licensing partnership.
Licensing Topic of the Month: April 2022
Trade Shows: What’s Ahead?
Live trade shows of interest to the licensing community are coming back, but they are not the same as they were before. In the short term, potential exhibitors and attendees face uncertainty that impacts planning, and some still have a fear of congregating. Longer term, licensing executives are concerned about the high cost of exhibiting and attending, and question whether there is really a need to have a full presence at every show.
As a result, trade shows are changing how they operate and how their events are configured, in ways both big and small:
• Wholesale reimaginings. After the Entertainment Software Association’s E3 was forced to cancel its event again in 2022, it noted that it would be back in 2023 but in a different form that puts the focus on new games and industry innovations. There had been some concern about whether E3 could survive, even before the pandemic hit, due to high costs and growing competition. Separately, Toy Fair, which canceled its 2022 edition due to the omicron variant, later said it would be back in fall 2023 with a reconfigured event that would replace both the February Toy Fair and the fall Toy Preview going forward. The timing was due to shifting production and buying schedules, the Toy Industry Association said. Meanwhile, Liberty Fairs, which operates apparel shows, had come back live before putting its events on hold temporarily to restructure its business model and consider locations other than Las Vegas.
• Thinking small. The 2022 Consumer Electronics Show in January went on live, despite the spike in omicron at the time foretelling a big drop in traffic. Attendance ended up falling more than 70% compared to the last pre-pandemic show, in 2020. The global textile show Heimtextil is holding a one-time only special summer edition in 2022, which will have 800 exhibitors, only 28% of the typical number. The show will return to its normal January date in 2023. While these numbers do not necessarily indicate a long-term trend, it is interesting that going ahead with these very small editions was considered worthwhile to the organizers and the industry. Some analysts believe smaller live shows are the way of the future.
• Enticements to participate. Licensing Expo is featuring a theme for the first time when it returns in May, focusing on location-based entertainment. Not only is this an area of high interest business-wise, but it provides an opportunity to showcase activations that are both educational and fun for attendees. Many organizers are looking at new entertainment, interactive, or other fun elements that will encourage potential attendees and exhibitors to sign on.
• Virtual elements. One thing COVID taught the industry was that digital components have a place at trade shows, both for virtual and in-person participants. Many shows are featuring online booths for their in-person and sometimes digital-only exhibitors, digital platforms for making appointments, and other virtual components. Digital seminars in particular have proven valuable. In-person attendees often do not have time to attend programming live, while virtual attendees would not participate at all without this option. The Bologna Licensing Trade Fair had a half-day themed seminar on the metaverse that was online-only and available for a separate purchase before the live event. It also held a full day of live seminars during BLTF that was then posted online for both in-person and virtual viewers, the latter for a separate fee.
• ESG. Most shows are highlighting sustainability, diversity, and other social responsibility, both on their own and their exhibitors’ behalf. These sorts of issues are increasingly important to trade show participants and their customers. Outdoor Retailer faced a backlash, including the potential for exhibitor boycotts, when it announced it was moving its trade show from Denver back to its previous long-time home of Salt Lake City; critics protested due to Utah lawmakers’ opposition to protecting public lands and national monuments, an issue of key importance to the industry. The show promised to make meaningful change even while exhibiting in Salt Lake City
• New configurations. The pet-products show Super Zoo rearranged its show floor to maximize efficient use of time and space, creating separate areas for fish, birds, and small animals; farm and feed; health products; and so on. In 2022, this move was more about safety than anything else. But creating a show with efficiencies built in to allow attendees to fully experience it while saving time and money will likely continue to be attractive.
• Seeking additional revenue streams and off-site engagement. San Diego Comic-Con, a consumer event that doubles as a trade show, paired with IMG to represent its brand for extensions into products, experiences, and retail destinations. SDCC experienced an $8 million loss in 2020 and has not filed its state taxes, which could lead to additional fines and the loss of its nonprofit status and state tax exemption. It believes licensing its brand name would allow it to reach fans and generate revenues well beyond its core annual event.
Of course there is still significant value to meeting in person, including the spontaneous contacts and reconnections and the top-level overview of trends and new initiatives that are only possible in a live trade show setting. The question is how to balance those traditional advantages with the changing needs of the licensing and consumer products businesses at large.
Licensing Topic of the Month: March 2022
Ukraine War: Potential Impacts on Licensing
While the humanitarian and geopolitical ramifications of Russia’s invasion of Ukraine are top of mind, members of the licensing community are also keeping an eye on the potential impacts to their own businesses. The Russian Federation accounts for a relatively low percentage of global sales of licensed products, just 0.9% of the worldwide total in 2019, according to the latest figures available from Licensing International. But there are consequences of the war for licensing globally.
Governments have been implementing trade sanctions and considering adding more, while Russia has been responding in kind. Consumer brands and IP owners, content distributors, sports entities, and musicians have been among those voluntarily curtailing their operations in Russia as well as halting their work with Russian properties or products worldwide. Companies supporting the economic and consumer products infrastructure in Russia (retailers and e-commerce sites, banks and credit card issuers, ad agencies) are also on a temporary hold.
Some of the implications for the licensing business include:
• Disruptions within Russia. Businesses in the fashion/luxury sector, Hollywood studios, European and other properties represented by the key Russian licensing agencies, sports and music entities, and some corporate licensors and licensees, are among the many global companies experiencing sales and royalty interruptions, in some cases significant. Some Russian-based properties are likely also hurting domestically, albeit probably less initially than global IP. Meanwhile, stores in Ukraine have been closed out of safety concerns, and clearly most consumers in Ukraine are not thinking about purchasing licensed products.
• Challenges for Russian properties and products outside Russia. Netflix stopped airing Russian-made shows, including Masha and the Bear. Russian designer and Putin supporter Valentin Tudashkin was taken off the roster at Paris Fashion Week. Russian teams and sometimes individual athletes have been barred from the Paralympics, FIFA competitions, Formula One races, and ITF tennis matches. The ramifications have spilled over into non-Russian companies as well; Chelsea Football Club has been facing complications due to its owner being a Russian oligarch, for example. Outside of licensing, Russian-seeming companies such as the Russian Tea Room, a New York restaurant founded by Russian expats in 1927 but long U.S.-owned, and Stolichnaya vodka (rebranded to Stoli since the invasion), made in Latvia, have also seen sales declines.
• Acceleration of supply chain issues. The world has not yet recovered from the supply chain concerns of 2021, and experts agree the war will make things worse. Contributing factors include the desire (or mandate) to not support Russian commodities, components, and products; disruptions to shipping and trucking due to closed borders and unsafe passage; and the fact that both countries are sources of petroleum and transport equipment for the global market. The impacts are initially most noticeable in Europe and China. Several U.S.-based companies in the fashion industry have reduced their sales and profit outlooks for the year, citing these compounded supply chain concerns.
• General impact on purchasing. The economy in Russia is taking a hit, and that is likely to continue. Meanwhile, higher gas prices and other forms of inflation, as well as potentially broader economic impacts all around the world over time, could reduce spending in general, for licensed as well as non-licensed products, on a global basis.
Very few people outside of Russia currently disagree with the decisions by governments and private companies to create economic consequences for Russia and Russian businesses, even given the impacts on their own lives. That said, companies and individuals involved in licensing are also monitoring the landscape for further complications that might threaten their own ability to succeed.
Licensing Topic of the Month: February 2022
Come Together: M&A in Media and Entertainment
Merger and acquisition activity involving companies with ties to the licensing business shows no sign of slowing down, especially in the worlds of entertainment and media. This phenomenon affects everyone in licensing, whether competitive licensees or licensors; promotional, content, distribution, marketing, or licensing partners; or advertisers.
Recent entertainment/media acquisitions, some of which are still undergoing regulatory scrutiny, include significant players across three key sectors:
• Gaming. In one of the biggest deals yet in this space, Microsoft said it would acquire Activision Blizzard, owner of Warcraft, Overwatch, Call of Duty, and Candy Crush, for $70 billion. Sony Interactive Entertainment acquired Bungie, original creator of Halo and owner of Destiny 2, for $3.6 billion. Console game developer and publisher Take-Two Interactive purchased mobile gaming specialist Zynga (the publisher of FarmVille and licensee of Harry Potter that just acquired StarLark) for $12.7 billion. Swedish gaming and e-sports outfit Modern Times Group purchased e-sports pioneer ESL Gaming for $1.05 billion, along with multiplayer platform developer FaceIt in a separate deal. Finally, Netflix, which has been getting into gaming of late, expanded those capabilities with the purchase of Night School Studio.
• Entertainment production and distribution. Amazon is in the process of buying MGM Studios for $8.45 billion, in a deal announced in May, which is still under U.S. government examination. Discovery just won Justice Department approval of its takeover of WarnerMedia; AT&T will own 71% of the merged company, known as Warner Bros. Discovery. CyberGroup, producer of Gigantosaurus, bought majority stakes in British production company A Productions and Italian animation studio Graphilm. Candle Media-owned Moonbug Entertainment, rights holder of CoComelon and Blippi, purchased YouTube network Little Angel. Genus Brands acquired animation production company WOW! Unlimited.
• Traditional and digital publishing. Bertelsmann-owned Penguin Random House (the product of a 2013 merger) announced it would buy Simon & Schuster from ViacomCBS for more than $2 billion, creating a huge house, if the government gives it the go-ahead, and raising competitive concerns. IAC’s Dotdash closed its acquisition of Meredith in December and this month transitioned six magazines, including EatingWell, InStyle, and Parents, to digital-only formats. Vox Media took over Group Nine, owner of The Dodo and Thrillest, while Buzzfeed, owner of Tasty, bought Complex, which oversees Sole Collector and other channels. Embracer Group, which has acquired many gaming studios, went after content with its purchase of comic book publisher Dark Horse Media.
In addition to all of this media and entertainment activity, mergers in the fashion/luxury space have been piling up, with recent examples including American Exchange Group’s purchase of Aerosoles, Authentic Brands Group’s of Reebok, and LVMH’s of Tiffany. In collectibles, Fanatics bought Topps; in the food industry, Hormel is taking over Planters; and in sporting goods both Amazon and Nike are reportedly considering a Peloton purchase.
When it comes to the entertainment/media examples, unique drivers exist in each case, but the buyers’ motives typically have a lot to do with control: of content, of distribution platforms, of retail and ecommerce channels. For the acquired, agreeing to a deal is often an acknowledgment of the difficulty of succeeding independently in a market dominated by huge players on one hand and small, agile entrepreneurs on the other.
For competitors, these powerful merged companies present an even more difficult landscape in which to sell their content and products. For partners, the mergers can bring benefits in terms of synergies and, potentially, additional opportunities for collaboration. But the corporate combinations also create a more unbalanced power dynamic that does not necessarily favor the smaller players.
Whatever the ramifications, it is likely that we will see more M&A activity as the year goes on, not just in media and entertainment but across all sectors of licensing.
Licensing Topic of the Month: January 2022
Advances in Social Shopping
An Accenture study released earlier this month predicts that social commerce—the merging of social media and e-commerce—will grow at three times the pace of traditional e-commerce over the next few years on a global basis. Social commerce is expected to increase from $492 billion last year to $1.2 trillion in 2025, the research says. That would put its share of all e-commerce at 17%, up from 10% in 2021.
One important growth driver is likely to be enhanced social-commerce functionality on the part of the major social media platforms. The big social media players are already driving product sales indirectly, as users seek out and purchase merchandise they see in their feeds; the new social commerce features make it easier for them to buy directly and immediately when the urge hits.
A few of the steps taken in this direction by the major platforms in the past year include:
• Instagram piloting an in-app affiliate program with several leading influencers, allowing them to create curated shops featuring items from more than 100 participating brands, including Sephora and Zara. The platform also premiered its Drops feature, which allows influencers to announce and launch limited-edition product drops through the Instagram Shopping tab and promote them in their posts and Stories. Interested consumers are notified 15 minutes before the drop.
• TikTok launching TikTok Shopping. One component of the effort was a partnership with Shopify for a pilot allowing the latter’s merchants to add a shopping tab to their TikTok profiles and product links to their posts. The company followed that deal with other partnerships involving e-commerce platforms and related service partners, including Square, PrestaShop, Ecwid, SHOPLINE, OpenCart, BASE, and Wix.
• Facebook (which owns Instagram) expanding its Shops feature to WhatsApp and Marketplace. Shops debuted on Facebook in 2020, allowing businesses to sell on the site, and as of mid-June more than 300 million users were paying visits monthly to more than 1.2 million active Shops. Facebook has also been working on ways to expand personalized advertising capabilities to drive more business to Shops.
• Snapchat saying it is doubling down on its augmented-reality shopping experiences, which allow consumers to “try on” products from Ralph Lauren, Ulta Beauty, and others. It reported in mid-2021 that more than 200 million people were using the AR feature, which launched in 2020, in the app each day. It also introduced a backend platform, through its 2021 acquisition of Vertebrae, to help brands better create and deploy AR assets.
• Pinterest allowing creators to add shopping links, tag featured products, and promote paid partnerships within its Idea Pins format. It also formed a partnership with Spotify to link creators’ businesses on the two sites, easing consumers’ path to purchase, and launched a Shopping List feature to enable users to collect product pins in one place, simplifying their shopping experience.
Not surprisingly, more companies with connections to the licensing business are testing the social-commerce waters through these and other platforms. Among many examples: Leeds United recently started selling licensed merchandise on TikTok, becoming the first football/soccer club to do so. Coca-Cola, Walmart, Hollister, and UnderArmour were among several brands to open immersive augmented-reality holiday stores on Snapchat in 2021. And celebrity stylist Zerina Akers created a digital storefront on The List’s new social commerce app.
Social shopping has grown quickly since the start of the pandemic, and most observers agree that efforts such as these and others will be an increasingly important way to promote and sell licensed products. Outside of certain territories such as China, however, social commerce is still in its very early stages, and most initiatives involving licensed properties and products today remain in the testing and piloting phase.
Licensing Topic of the Month: December 2021
Festive Season Forecasts
Holiday 2021, the second festive season of the pandemic era, is far from back to “normal,” and in some ways is even more challenging and uncertain than last year. Some of the things the licensing business is keeping an eye on include:
• Continuing virus concerns. The Delta virus drags on and the Omicron variant is coming on strong at press time, adding to some consumers’ reluctance to go back to in-store shopping. These issues are also impacting corporate decision-making going into 2022, since the evidence is piling up that we could be dealing with successive waves of new variants for a long time to come
• Supply chain challenges. Most experts expect shipping and trucking delays to last into next year, along with many of the issues that have been popping up across the supply chain, from low factory capacity to shortages of materials such as paper. Some consumers are not getting their packages in time or are having trouble finding the gifts they want to give, despite shopping earlier. One ramification: The situation is strengthening sales of gift cards in lieu of physical goods.
• Inflation. Despite a generally strong economy, inflation across the supply chain has consumers feeling less confident. Vendors are seeing their margins squeezed by higher prices on raw materials, printing, manufacturing, and shipping or are implementing higher consumer prices that could potentially reduce sales for the season and beyond.
• Timing. Many shoppers began purchasing earlier than usual to protect themselves against delays, enhancing a trend that has been ongoing. They also have been shopping on their own schedule rather than on milestone days such as Good Friday, Cyber Monday, Small Business Saturday, and Super Saturday. That, along with a relative lack of promotional deals, has contributed to lower sales and traffic at those key moments.
• Retail crime wave. The group smash-and-grabs that have generated significant media coverage, the less high-profile but constant organized theft from stores, and, to a lesser degree, the repeated cyber-crime incidents impacting e-commerce operations are all problematic. They are exacerbating the anxiety some consumers feel about shopping, especially at bricks-and-mortar stores; are causing retailers to implement merchandising tactics, such as locked cases, that could put a damper on purchasing; and are starting to impact retailers’ bottom lines.
• The “Great Resignation.” Retailers, like almost every business in the U.S., are operating short-staffed, as are companies up and down the supply chain. This affects the consumer experience in-store—an important wrinkle given that some shoppers are just making their way back to retail after an almost two-year gap—and adds to delays and higher costs. It also could be having an impact on consumer sales, not just due to service issues but because those former workers are earning less, although often by their own choice.
There is some holiday cheer ahead, experts say. Despite this perfect storm of challenges, almost all the leading researchers—The National Retail Federation, Deloitte, NPD Group, JLL, KPMG, MasterCard SpendingPulse, and others—are predicting overall sales increases of between 5% and 10.5% during the holidays this year versus last, which was also a strong growth year.
No matter what final sales results end up being, all of the issues mentioned here have been playing into licensors’, licensees’, retailers’, and consumers’ decision-making process this season. And many of these challenges are expected to continue through at least a good part of 2022. The new business models that marketers have adopted during COVID to react quickly to changing conditions will face another test in the coming year.
Licensing Topic of the Month: November 2021
At Retail, Two Heads Are Better Than One
Partnerships between complementary retailers have represented a key tactic for some store chains for many years. This year, store operators in a variety of categories are trying to lure consumers back into their physical stores, as well as positioning themselves for long-term success in an ever-more difficult market. Partnerships with other retailers are one way to do this, and the number of examples (both new and expansions) is seemingly higher than ever:
• Kroger teamed with Bed Bath & Beyond to bring an assortment of home, wellness, and baby products to Kroger’s online operation and pilot a selection of products in its physical stores, starting in 2022. The goods, which will include storage items, baby furniture, bedding, and the like, will bring some of the most popular products from Bed Bath & Beyond and Buy Buy Baby, including private label and branded goods, into the supermarket environment.
• Macy’s paired with Fanatics, in a deal announced in October, to increase its selection of fan apparel online. The collaboration helps Fanatics reach more women and extends Macy’s assortment of fan apparel. The array features apparel, hats, collectibles, tailgating products, and novelty items for all demographic groups, tied to the U.S. major sports leagues, colleges, and other sports IP. In addition to Fanatics-branded merchandise, there will be higher-end licensed products from companies such as Tommy Bahama and Wear by Erin Andrews. (Fanatics has partnerships with other retailers as well.) Separately, Macy’s is helping the Toys R Us brand return to the retail world, opening TRU-identified toy shops in 400 of its bricks-and-mortar stores starting in 2022. The first products debuted online in August.
• Target launched Ulta Beauty boutiques this August in 100 stores, with more than 50 brands highlighted, some exclusive to this venture. The concept, which also has a presence on Target.com, is expected to expand to 800 stores in “the coming years.” Brands include several active the world of licensing and collaboration, including Ariana Grande, MAC Cosmetics, Morphe, and Urban Decay. Meanwhile, Target is also expanding its Apple shop-in-shop locations, first introduced in February of this year, with 36 in place in time for the holidays. Target also pairs with CVS for its pharmacies.
• In October, Walmart and Gap Home added a new collection of 150 furniture pieces to their partnership, which debuted in June by spotlighting products in the categories of tabletop, bed and bath, and décor. As with the first group of items, distribution of the furniture will be online. In addition, some Gap Home products are about to launch in physical Walmart stores for the first time, through a capsule collection of bedding. Furniture in the initial collection include headboards, ottomans, TV stands, and more.
• Nordstrom partnered with the MoMA Design Store for shop-in-shops in 10 locations, with a focus on home goods. The MoMA shop, of which there are three around the world, is known for its collaborations with brands such as Vans and Champion. The shops include 200 of the most popular items from the museum’s core stores. This is not the first pairing between these two retailers; in 2017, Nordstrom hosted MoMA pop-ups shops. Meanwhile, the MoMA Design Store also has a similar deal with DaDeWe department store in Berlin, Germany.
• Kohl’s paired with Sephora for shop-in-shops in the beauty category. As of October 2021, 200 of its stores (out of 1,100) have Sephora shops, complemented by an online boutique on kohls.com. Sephora was until recently in JCPenney stores but moved to Kohl’s this year. Kohl’s also has an ongoing alliance with Amazon.com that allows customers to return Amazon purchases in Kohl’s stores.
• REI announced in September that it would expand its partnership with Athleta from five stores to 135. The deal allows Athleta to sell a curated selection of its product in REI stores, as well as on its e-commerce platform, and gives REI a strong position in athleisure, a hot category that complements its other offerings. The Athleta merchandise includes swim, yoga, and hiking items. The partnership started in 2018.
For the host partner, initiatives such as these bring in new categories, brands, or services from a partner with expertise in these areas, as well as increasing foot traffic, attracting new customers, keeping shoppers in stores longer, and offering consumers more convenience and a better guest experience. For the guest brands, the ventures expand awareness, add distribution points and a new revenue stream, and make their brands accessible to more shoppers (often through lower price points). Both partners also benefit from increased marketing clout.
For licensors and licensees, these partnerships can sometimes open doors by bringing their products into an as-yet-unexploited retail setting. More indirectly, but still importantly, the alliances may play a role in helping both retail partners thrive, which is a benefit to all players in the world of consumer products.
Licensing Topic of the Month: October 2021
Making the Most of the Metaverse
Three announcements this month have underscored the importance of the metaverse to those involved in marketing and content creation (among others):
• Facebook said it would hire 10,000 people in Europe to help it build a metaverse. This follows its statement this summer that its goal was to transition from a social media company to a metaverse company, focusing on applications for creation, community, virtual reality, and commerce.The organization recently launched a beta version of Horizon Workrooms, which allows for remote business meetings where avatars of the participants can interact in a real-life sort of way in a digital environment using virtual-reality headsets.
• Roblox introduced more tools at its Roblox Developers Conference to allow its gamer-creators to sell user-generated, limited-edition content items and get paid for the initial sale and subsequent resales; develop more realistic and lifelike avatars and game characters (including creating avatars in their own image), in a departure from its traditional blocky look; and use a cloud-based interface through which more creators can participate. Roblox content creators are expected to collectively earn almost $500 million in 2021.
• Sotheby’s launched a digital platform called Metaverse that is dedicated to buying and selling NFTs curated by the auction house. Each buyer and seller gets a unique avatar designed by the artist Pak and can interact with the other participants in a virtual gathering space. Auction winners pay in various cryptocurrencies or traditional cash. The focus at the beginning will be unique artwork created, contributed, or sold by celebrities, artists, and corporations, but ultimately it is expected to expand into luxury and fashion, music, sports, entertainment, and tech content. Sotheby’s has sold more than $70 million in NFT artwork globally to date, while its competitor Christie’s has sold more than $100 million.
What is the metaverse? It is a decentralized, immersive, 3D, real-time virtual-reality digital world that mirrors the real one. It allows people to digitally interact, buy and sell unique and authentic items (in the form of NFTs), have meetings or go to class, engage in experiences, and more, similar to how they do these things in the real world. But it also allows them to engage in ways that would be impossible in real life, such as live in a luxury home, go to space, meet a celebrity, or attend experiences that would be too far away or expensive to enjoy in the traditional way.
At present, individual platforms have created their own metaverses, with Roblox and Fortnite leading the way. In its ultimate form, the metaverse will be interconnected and platform-neutral. The vision is that consumers and fans will be able to interact, engage, and conduct business in one shared world, rather than going to Amazon to purchase, Netflix to watch content, or Twitch to engage with gaming.
The licensing community, other marketers, and fans can get involved in the metaverse in almost unlimited ways. Hearst advertised through a branded blimp in a video game to reach female gamers with health and wellness messaging. Ariane Grande and Travis Scott have performed concerts in Fortnite and Twenty One Pilots in Roblox. A full-length episode of the TV series Bakugan premiered in Roblox. Automotive brake brand Brembo licensed its name for use in the game Gran Turismo 7, so driver-players can upgrade their cars by purchasing authentic products. A fan recreated Squid Game’s red light-green light challenge within Fortnite. Paris Hilton is serving as a DJ at the Metaverse Festival within Decentraland, in the form of a Genie celebrity avatar. Gucci hosted a fashion exhibition in Roblox.
Many experts have recommended that marketers enter the metaverse now, to learn and position themselves for future success. And launching almost anything into the space these days can generate significant publicity and sometimes revenue. But it’s important to remember that the basics apply. The metaverse is already becoming a crowded market, so it is necessary to create something unique and meaningful to stand out from the competition and attract fans. It is also critical to think through the goals and implementation of any project and especially to remain on-brand.
Licensing Topic of the Month: September 2021
Looking Back on a Year of DE&I Initiatives
Almost 16 months have passed since the killing of George Floyd by the police in late May 2020, an event that reinvigorated the conversation about diversity, equity, and inclusion in the U.S. and around the world. While much remains to be done, marketers involved with licensed products have made some progress in creating a landscape that includes more Black and other underrepresented voices.
In early summer 2020, when the outrage over the Floyd killing was fresh, marketers focused on messaging. They created advertising, social media posts, and merchandise promoting themes of inclusion and anti-racism. Shortly thereafter, marketers took steps to expand their ranges of colors, whether in bandages, crayons, cosmetics, or dance slippers, to make sure they were including products for all consumers in their offerings. They also rebranded and redesigned names and logos considered offensive or hurtful.
Then came product collections and initiatives that highlighted diversity in various ways. Beyoncé’s Ivy Park Rodeo collection, released in August, honored Black history and experience by taking its cues from western wear and specifically the influence of Black cowboys and cowgirls. Target has been one of several retailers to offer a series of collaborations with a diverse range of designers and artists, including its extensive collection of children’s apparel, accessories, and home goods with children’s book author/illustrator Christian Robinson this fall. Gap created an all-ages line of t-shirts, terry sweatsuits, and hats in collaboration with a group of Black artists and designers who are also Gap employees. In fact, the number of brand marketers, especially in fashion and cosmetics, that have partnered with Black celebrities, artists, and other properties for products that resonate with consumers of color has expanded dramatically in the past year and continues to grow.
Meanwhile, Black IP owners have increasingly launched licensing programs of their own in recent months as well. Examples range from the Black-owned, Black culture-centric party goods brand Black Paper Party, represented by Brand Central, to the Kinsey African American Art & History Collection of art objects, licensed by Brand Liaison.
Several initiatives have also been introduced in the past year in the hopes of changing the landscape by expanding the presence of Black brands, designers, and products at retail long-term. For example:
• The goal of designer Aurora James’ 15% Pledge is to have 15% of retailers’ merchandise mix attributable to Black-owned brands, as Black Americans represent 15% of the population. The venture says it has secured space for 385 Black-owned brands on the retail shelves of close to 30 retailers in its inaugural year. Sephora is the first retailer to announce that it has fulfilled the pledge.
• JCPenney’s new cosmetics concept, JCPenney Beauty, which has a mission to be “hyper-inclusive” in its product mix, will feature a shop-in-shop with Thirteen Lune, an e-commerce platform that specializes in Black-and Brown-owned brands with mass appeal. The deal will give more mainstream exposure to niche brands that have done most of their business to date online.
• Tennis player and designer Serena Williams partnered with Nike for a project called Serena Williams x Nike Design Crew, which debuted its first collection of apparel, accessories, and footwear in August. The venture is an incubator for up-and-coming designers, mostly from underrepresented populations. Ten apprentices created the initial collection, and seven of those to date have been hired as full-time Nike employees. Plans call for new classes of diverse designers to go through the six-month program each year.
Initiatives such as these and others to come will help expand the presence of Black and other populations in the world of licensed products. Many steps still must be taken to create a diverse, equitable, and inclusive landscape that embraces all consumers, creates opportunities for diverse property owners, and gives all employees and potential employees a chance to succeed. But the last year-plus has brought some progress toward these goals.
Licensing Topic of the Month: August 2021
Experiential licensing and promotions are roaring back this year, at least as measured by the number of deals being implemented and announced.
To name just a small handful of recent examples: Moomin has a children’s museum exhibit planned for Washington DC this coming fall and winter. Japanese preschool property Shimajiro launched an attraction at Kyoto’s Toei Studio Park this month. GQ magazine opened a bar in Turkey. KFC paired with hotels.com for a themed pop-up hotel in London called House of Harland. And an Old Spice barber shop opened last spring.
At the same time, COVID uncertainty remains and there is always a chance that live events will have to be cancelled. In fact, a number of sports tournaments scheduled for this fall have already been cancelled or postponed, from the Korea Masters and Korea Open badminton tournaments to the Rugby League World Cup in England, with other events considering similar moves.
The current challenges associated with the delta variant of COVID-19 will eventually pass, but there is increasing concern about future variants bringing repeated waves of illness. In addition, the crisis over the past 18 months has made a percentage of consumers wary of attending big events, even during times when medical professionals say the chance of illness is low.
Thus, while those planning experiential initiatives want to get back to live events as soon as they can, it is important for marketers to provide choices for consumers. One option is to offer digital ways to engage, ranging from streamed content to events that take place in a video game or another part of the shared virtual space known as the “metaverse.” Another is to provide physical merchandise, especially in a curated package that allows consumers to recreate a physical experience or enhance a digital one at home.
Some marketers offer such alternatives as separate initiatives throughout the year, as a way to extend the experience of their brand or property and provide different means of engagement. Others include one or more of these options simultaneously with a live event to allow for a shared experience with different entry points.
It should be noted that offering a range of options can also reduce risk for the marketers themselves in case their live event is cancelled. More importantly, it is a way to ensure that no fan is excluded. Marketers can reach both the large number of fans that crave safety and/or convenience or simply can’t make it to a live event, while also catering to those that want an intimate, unique, and personal relationship with a property.
The idea that experiential initiatives cannot exist as purely live events is not only a short-term fact of life. Just as fans want to consume entertainment and make purchases in a range of ways, depending on their personalities and circumstances, so too do they want to experience their favorite properties through a variety of means. Finding new ways to engage fans in whatever manner works for their lifestyle and preferences will likely be a critical component of experiential licensing and marketing going forward.
Licensing Topic of the Month: July 2021
Licensors, particularly since the beginning of this year, have been heavily touting the launch of direct-to-consumer e-commerce sites tied to one or more of their properties. This is a change from previous years, when many IP owners operated DTC sites, but tended to consider them secondary to licensing and collaboration deals with licensees, retailers, and other partners. While DTC initiatives have been growing in importance over time, they are now front and center in licensors’ publicity efforts.
Each shop has its own spin. Warner Bros. Consumer Products launched a shop for its Apple TV series Ted Lasso that features in-world merchandise, such as jerseys tied to the fictional AFC Richmond Greyhounds soccer club, some of it customizable. Netflix opened a shop selling merchandise tied to the properties for which it owns licensing rights, to much publicity, about three weeks ago, followed by a bricks-and-mortar shop in Tokyo, announced last week. Merchandise ranges from Beams x Netflix and Loupin x Louvre collaborations to items tied to The Witcher, Yasuke, and Eden.
Pine-Sol became the latest corporate licensor to launch an ecommerce shop, the Pine-Store. It sells novelty merchandise, including a shoe collaboration with designer Vashtie, t-shirts and blankets with funny phrases about the product, and a Pine-Sol-scented candle. And Ascot Racecourse launched an online store carrying keepsakes ranging from t-shirts to tie pins to tea towels, along with a retail licensing program focused on high-end products from British brands.
One driver of DTC initiatives’ current high profile is the fact that the frequency of licensing and collaboration deals remains far less than it was pre-pandemic, and IP owners need alternative initiatives to promote. But there’s something more fundamental going on. Direct-to-consumer sites are becoming essential to the licensing eco-system today. They allow licensors to:
• Reach niche segments of their customer base with unique merchandise that perhaps does not resonate with the broader fan population.
• Tell a story about the property that serves as a connective tissue to tie the entire ecosystem—products and promotion, experiences and entertainment, media and marketing—together under one brand positioning.
• Have a conversation with the fans, soliciting ideas, responding to questions, accepting feedback, and getting them excited about what’s next.
• Ensure that products are available as soon as a property debuts, for the growing number of fans that take to an IP and want products immediately before moving on to something else.
• Experiment with new products and categories in a way that brings relatively little risk and can inform retail product development.
• Give fans unique added value—content, experiences, giveaways—as a reward for engaging with the property and to keep them coming back for more.
• Enable fans to link from merchandise, to entertainment and advertising content, to experiences, and back again.
All of these benefits were true for DTC sites in the past. But the increasingly fragmented consumer market underlines their importance. As consumers continue to want personalized shopping experiences and as mass licensing programs become less effective, DTC sites not only have become a critical component of a merchandise program, but serve as a hub for the entire brand.
Licensing Topic of the Month: June 2021
No Shortage of Supply Chain Challenges
A growing number of experts are predicting global supply chain woes will last into 2022. Shortages of raw materials, from lumber to oat milk to semiconductors, are leading to delays and gaps in finished products across the board, while rising costs of materials, manufacturing, and transportation are translating to higher prices for everyone along the supply chain, including consumers. Predicting demand remains difficult as the details of the post-pandemic future remain uncertain, and delivery delays are causing rifts in retailers’ and brands’ relationships with their customers.
The reasons behind these challenges are multifaceted. Demand patterns are changing again as countries start to open back up, requiring marketers to adjust processes, procedures, and product mixes. Some Asian countries are experiencing their biggest COVID emergencies since the pandemic began. Labor shortages have become a big problem, not just because of some workers’ discomfort with coming back to a plant or office, but for a variety of reasons.
The transportation and logistics industry is recovering from the pandemic only slowly, with some ports still clogged with ships and containers, and trucks not able to get to where they are needed. Unexpected situations such as shipping incidents or political and social unrest around the world, as well as consumer demands for brands and manufacturers to support workers’ rights and sustainability, create additional nuances.
These supply chain vulnerabilities impact all facets of the licensing business, from craft supplies to furniture to chicken-chain promotions. But many manufacturers involved in licensing have taken steps (and continue to do so) to alleviate the issues, improving their prospects both short term and into the future. Some tactics have included:
• Diversifying the manufacturing and transportation infrastructure to add flexibility when problems arise in one region, factory, or distribution point.
• Bringing some manufacturing back to a marketer’s home country to give better control and shorten lead times, albeit often at a cost.
• Assuming more internal control over some aspects of manufacturing and distribution, where possible, from purchasing a manufacturer to improving direct-to-consumer sales channels.
• Enhancing the capacity for data-driven decision making to help better predict consumers’ needs and make sound and timely inventory decisions.
• Moving toward a seasonless strategy focused on high-quality, long-lasting, classic products, which enable more flexibility than trend-dependent merchandise does.
• Expanding the ability for just-in-time delivery, through more print-on-demand and 3D printing capabilities, smaller manufacturing runs dropped more frequently, or other methods.
• Adopting new technologies to create efficiencies and shorten lead times.
• Monitoring sales in minute detail and improving communications between licensees and licensors to enable real-time tweaking of product mixes and strategies.
Solving for unpredictability in the supply chain not only addresses the current COVID and post-COVID issues in moving products. It also helps position licensors and licensees to successfully transform their businesses long-term in response to evolving consumer shopping behaviors.
Licensing Topic of the Month: May 2021
Contract Flexibility: Will It Continue?
Since the pandemic began in earnest in mid-May of last year, licensors and licensees have become more flexible in how they work together to ensure both parties succeed. One primary case in point has been their willingness to renegotiate existing contracts and rethink the terms of new agreements. For example, they are:
• Negotiating royalty and guarantee amounts and payment deadlines. They are taking a look at lower or no guarantees; guarantees spread over a longer period; more frequent, smaller payments; advances due later in the development process; and more cross-collateralization, among other creative solutions.
• Substituting non-monetary or alternative monetary contributions in lieu of some guarantees or other financial requirements. This could take the form of contractually guaranteed marketing initiatives by licensees or more investment in product development.
• Making allowances when a retailer fails or is in danger of doing so. This ensures that licensees will feel comfortable securing retail placement without bearing all of the risk of non-payment. Similarly, some contracts have allowed licensees to not sell to key retailers if they believe they are in danger.
• Being more flexible on grants of rights, such as adding or subtracting rights over the course of the contract period when needs or opportunities arise. This may include opening untapped retail channels or geographies, for example. Caps on the amounts to be sold to certain channels (e.g. the off-price tier) have also been removed in some cases. The additional rights sometimes have contributed toward the original minimum guarantee amount rather than being associated with a new MG.
• Adding more licensor support. This could mean offering guaranteed marketing or creative support (especially social media exposure); rethinking terms such as FOB rates and net sales definitions to distribute risk and financial costs more equitably; providing help on tariffs; executing quicker turnarounds on approvals; or giving licensees more flexibility in asset use, such as fewer restrictions and earlier sharing.
• Other terms. Examples include shorter renewal periods, to reduce risk for both parties, or outlining social responsibility requirements (sustainability, working conditions, etc.). There is also new contract language to deal with pandemics specifically, so the partners will not have to rely on the vague force majeure clause if another global health crisis arises, and a movement toward shorter, simpler contracts.
It should be noted that many of these changes have been under discussion for some time, while others are driven by the pandemic and were essential during the early months in particular. Some of these have not and will never be embraced by licensors in a big way, while others are likely to continue post-pandemic.
One thing licensing executives believe is certain: Both parties will be more willing, going forward, to negotiate terms that apply to the specific situation, enable the parties to change direction if needed during the contract period, and ensure both parties play an equitable role in achieving maximum success for the products and property.
Licensing Topic of the Month: April 2021
Merchandise as Experience
The ability to support licensed properties and products with experiential initiatives—an increasingly critical strategy for marketing and revenue-generation—dried up due to the pandemic. As a result, IP owners looked for ways to replace these lost in-person experiences, often by adapting the live events to digital channels. At the same time, the crisis underscored the fact that the merchandise itself could also serve a key experiential role:
• Gift boxes (one-off and subscription, licensed and non-licensed) helped consumers replicate missed experiences at home. Heineken and Major League Soccer created an “at-home stadium experience” that included real stadium seats from fans’ favorite MLS arena, for example, while U.K. food-delivery service Deliveroo provided “Seder-to-Go” Passover kits containing roll-up Seder plates, traditional foods and beverages, a Kiddush cup, and a Haggadah.
• Quick-service restaurant chains began stressing that their novelty merchandise programs, already common, were a way to replicate the restaurant experience. While drive-through meant their business was often booming, the pandemic severely curtailed the in-store experience. Consumers who wore a pair of pajamas with Taco Bell or Dunkin’ imagery or a shirt inspired by a White Castle uniform, perhaps while eating their take-out, were able to feel that all-important connection to the brand.
• Some trade shows, fan fests, and conferences sent out physical products to enhance the virtual experience. When designer JW Anderson did his spring runway show online, as most fashion labels did, he went the extra mile by sending out “show boxes” including fabric swatches, cut-outs of accessories, printed images on different kinds of papers, inspirational embossed cards, and dried flowers to key media to add a sensory element. Online, he featured hologram images of models wearing his designs. Together, the two components were meant to mimic the live experience.
• Licensors in the sports and sports-entertainment sector tried to add a bonus experiential element to some of the licensed merchandise they were offering. WWE sold limited-edition chairs from specific events to give super fans the feeling of being there. It also offered a line of t-shirts tied to WrestleMania 36, held without live spectators, with the phrase “I Wasn’t There.” 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, for instance.
• Some IP owners tailored their experiential initiatives to an at-home environment by creating licensed merchandise. Diageo built on its Bailey’s Treat Bar pop-ups, one of its growing roster of experiential initiatives, with licensed glassware, baking chips, mixes, and gift packs that allowed consumers to recreate a bit of the in-person vibe. These types of ventures existed pre-pandemic, but became all the more important.
• Several cultural institutions, from The Metropolitan Museum of Art to the Alvin Ailey American Dance Theater retained agents during the pandemic to launch or expand their licensing activities. With their buildings closed to visitors, the products themselves were recognized as one of the best ways to immerse fans in their art or other creative work, whether at home or in stores (many of which opened before museums were back in business).
While the emphasis on products as experiences came to the forefront by necessity as live experiences disappeared, this thought process will be beneficial in product development in the future, even after in-person events come back in some form. Remembering that a licensed product can be an experience in itself may lead to innovation that will not only make that item stand out from the competition and spur a purchase but also add an extra dimension to enhance the all-important personal connection with the property.
Licensing Topic of the Month: March 2021
The Year 2020 by the Numbers
Researchers have been rolling out their full-year 2020 estimates of retail sales across consumer products industries, and the results confirm what anecdotal evidence has been indicating since the pandemic hit last March. The categories that showed increases in the U.S., for example, were not a surprise. Sales of PC gaming hardware and accessories were up 62%, digital PC gaming content sales grew 19%, consumer technology such as tablets and smartwatches rose 17%, print books saw an 8.2% boost, and sports equipment sales increased by 1%, all according to the NPD Group.
The categories that were down in the U.S. in 2020—again, not unexpectedly—included apparel (with a decrease of 19%), footwear (27%), and prestige beauty (19%). Within these categories the numbers confirmed some positive trends, with apparel niches such as sweatpants and sleepwear on the rise (17% and 6%, respectively), slippers and clogs bucking the trends in footwear (up 21% and 33%), and haircare standing out within the beauty category (up 7%).
As these results show, there are a lot of nuances behind the industry-wide numbers. Take the toy industry as another example. Dollar retail sales in the U.S. were up an impressive 16%, again according to NPD. But the sales increase was solely attributable to an increase of 16% in average selling price. Unit sales were flat, indicating that consumers were not buying more merchandise but rather shifting to more expensive items. (The laws of supply and demand may have driven prices up for certain products as well.)
The strength in U.S. toy sales also was not reflected in every territory around the world. The U.K. market saw increases, but by far less than in the U.S., with spending up 5%, NPD says, while the Spanish toy market experienced sales declines (in euros) of 7%. Sales varied by category as well. In the U.S., sectors showing dollar growth were skates, skateboards, and scooters (up 31%), fashion dolls and accessories (56%), building sets (26%), games (29%), and summer seasonal toys (24%). But seven of the 11 super-categories NPD tracks saw unit declines.
In their recently released full-year financial results, public toy companies gave a few hints about the performance of licensing in 2020. While relatively sparse, these details start to paint a picture of how licensed products fared in this category:
• Mattel saw its net sales rise 2% year-over-year in 2020. In its North American segment, for which gross billings increased 6%, it noted that lower billings of licensed products partially offset gains of other brands across three of its segments (dolls, action figures, and vehicles). Star Wars: The Child was highlighted as driving sales in the “action figures, building sets, games, and other” category.
• Lego reported a 13% increase in revenue and 21% growth in consumer sales for 2020 compared to 2019. Four of its top five best-performing brands for the year were proprietary, with only one (LEGO: Star Wars) licensed. Another licensing bright spot was LEGO: Super Mario, a new license that has developed into one of the company’s most successful theme launches ever.
• Hasbro’s net revenues decreased 8% globally but were up 4% in the U.S. and Canada. Licensing underperformed, with the outbound entertainment, licensing, and digital segment down 14% and sales of partner brands (representing its inbound licensed products) declining by 12%.
• Spin Master’s annual revenue decreased 0.7% compared to 2019. It mentioned mixed results for licensed properties in its boys’ action and construction segment (with DC products up but DreamWorks Dragons down, for example), while Monster Jam RC was called out as a bright spot in remote control and interactive characters. Spin Master’s outbound licensing and entertainment revenue decreased by 14.7%, which was cited as a contributing factor in the company’s gross margin decline for the year.
• Jakks Pacific’s net sales for 2020 decreased 13.9%, but it cited licensed products as a strong component of its business. It reported robust sales in the fourth quarter for Disney Princess, Nintendo, and Sonic the Hedgehog, for instance, as well as its heavily licensed Disguise costume business. On the other hand, Frozen and Frozen 2 declined significantly in the quarter in the aftermath of a movie release year in 2019. In fact, the company’s net sales in the global toys and consumer products segment, which were down 19% in the quarter, would have been up 13% if Frozen was excluded, the company said.
As these tidbits suggest, licensing fortunes varied widely by company, category, and territory within the toy industry last year. Collectively, however, this and other full-year data coming in suggests that while there were some pockets of strength, overall 2020 did not seem like a particularly strong year for toy licensing, especially in the U.S.
Licensing Topic of the Month: February 2021
The Role of Licensing in the COVID Era
The insurrection at the U.S. Capitol on January 6, as Joe Biden’s Presidential election win was being certified by Congress, had a number of ramifications for President Trump, whose last full day in office is today. He, his campaign, and some of his family members and allies lost their social media voice as well as a portion of their political support and campaign contributions, and they could face legal jeopardy. More to the point from a licensing perspective, there were negative commercial impacts.
Even though the pandemic has caused major suffering for many companies in the licensing business, it has also reinforced the idea that licensing can play a crucial role in business and society by helping meet a number of distinct objectives:
• Moving the needle. Marketers have relied on licensed properties as a trusted source of messaging about mask wearing, hand washing, and social distancing, as well as information and encouragement on mental-health issues. Examples have ranged from Oddbods social-distancing kits from Brampton Nameplate to Sesame Street books on mask wearing from Random House and Sourcebooks. Licensed properties connected to sanitizer, disinfecting wipes, desk shields, and especially face masks also help drive usage.
• Creating an alternative experience. As sports, shopping, restaurants, theme parks, travel, and other in-person gatherings became impossible, brands and IP owners turned to licensed products, promotions, and services to help replace some of the fan experience that was lost. Cloudco’s Care Bears was one property offering virtual camp to replace the real thing, while others created boxed proms, graduations, vacations, and the like. QSR and snack food licensors adding to their novelty merchandise programs noted in their announcements that the products were one way they could bring the brand experience to the fans.
• Lending comfort. Consumers sought familiarity as a means of solace during stressful times, a need that nostalgic, retro, and even modern-but-familiar properties helped fill. Everything from vintage art and nostalgic corporate assets, to entertainment properties from childhood, to evergreen characters, to beloved current TV licenses have attracted interest from consumers, retailers, and licensees alike.
• Providing a reason to purchase. Consumers do not need cosmetics in an era of mask wearing and staying at home, but they will still consider purchasing something appealing. Thus, even in the context of U.S. cosmetics sales declines of 19% in 2020, there has been a run on collaborations in this space; Disney’s Mary Poppins with Besamé is one recent example of many. Similarly, footwear sales were down 27% in 2020, but collaborations such as Fila’s with streetwear brand Krost are driving interest. (Sales figures are from the NPD Group.) Meanwhile, among the items that sold best on Amazon at holiday 2020 were curated assortments from influencers including Charli D’Amelio.
• Opening critical new revenue streams. Companies in sectors facing the steepest challenges (e.g., apparel) looked to licensing to offset declines in core areas. Levi’s and Wrangler recently increased their position in home goods through direct-to-retail deals with Target and Pottery Barn Teen respectively, while Lee paired with H&M for a sustainable kidswear collection, all in the wake of corporate revenue declines in 2020.
• Offering a chance for survival. As the COVID lockdown has nudged already-challenged retailers and brands over the edge, venture capitalists, brand management companies, and other purchasers have scooped up distressed assets and, in some cases, almost immediately relaunched them as digital-first operations. Retail Ecommerce Ventures did so with Pier 1 and Modell’s, for instance. Some of the new owners intend to relaunch limited bricks-and-mortar presences as well.
None of these benefits of licensing is anything new. But all have been underscored during the coronavirus era. Of course, licensing has not alleviated all the COVID-driven challenges, which are severe for many companies and should not be minimized. That said, these examples show the positive impact that licensing can have, especially when it is used intentionally as a tool to address specific objectives such as those outlined here.
Licensing Topic of the Month: January 2021
Politics and Celebrity Licensing
The insurrection at the U.S. Capitol on January 6, as Joe Biden’s Presidential election win was being certified by Congress, had a number of ramifications for President Trump, whose last full day in office is today. He, his campaign, and some of his family members and allies lost their social media voice as well as a portion of their political support and campaign contributions, and they could face legal jeopardy. More to the point from a licensing perspective, there were negative commercial impacts.
Corporations separated themselves from Trump, along with a few aligned Senators, House members, and allies. Shopify shuttered the official e-commerce shop of the Trump campaign, which raised funds through the sale of red MAGA caps and other products (which are still available through other channels). And the PGA Tour ended its contract for key tournaments held at Trump-owned golf courses. As for Trump allies, Missouri Senator Josh Hawley saw Simon & Schuster cancel the publication of his upcoming book and several retailers have reportedly stopped selling products from Mike Lindell’s MyPillow.
Earlier in Trump’s term, both he and his daughter Ivanka saw the value of their formerly successful lifestyle brands disappear, as retailers stopped carrying their merchandise due to falling sales and/or disagreements with the President’s views, notably his comments about their Hispanic customers.
Of course, the Trump situation is unique. No other celebrity licensors have been the President of the United States—few are in politics at all—and the insurrection was a first in modern U.S. history. That said, the commercial ramifications of recent events offer some general lessons for celebrity licensors and the licensees that work with them:
• While bad behavior is not automatically the end of a licensing or collaboration deal these days, there are some behaviors that go too far. In recent years, #MeToo infractions and racist comments have been examples of activities that almost always cross the line.
• When a celebrity controversy occurs, consumers expect licensees, retailers, and others connected to that celebrity to take a stand, and their purchase decisions are colored by the response. Corporate partners are increasingly willing to do so, even though in these divided times they are bound to lose a significant chunk of customers no matter which side they take.
• Celebrities need to stay true to their brand. Both the Trump and Ivanka Trump consumer products programs were positioned in the luxury tier, but their political activities, for the most part, appeal to a different demographic. While the fortunes of their licensing programs were not necessarily part of their political thought process, the change certainly impacted the success of their brands as originally positioned.
Just in the last few weeks, yoga influencer Hilaria Baldwin lost a brand ambassadorship with Cuties Baby Care when it was revealed that she had been misleading her fans about her roots, and Ralph Lauren halted its sponsorship with golfer Justin Thomas after a homophobic remark. Like the Trump situation, they underscore the truth of the three principles outlined above and are food for thought for anyone involved with a celebrity licensing effort.
Licensing Topic of the Month: December 2020
Licensing and the Shop-Local Trend
The shop-local trend has been on the rise for several years, driven in part by environmental concerns, among other factors. One indicator: Small Business Saturday in 2019 generated a record high $19.6 billion in retail sales, according to a survey by American Express and the National Federation of Independent Business.
A shop-local mindset has become vital this holiday season, however, as consumers worry about their local stores and restaurants closing permanently due to the pandemic. As of late November, more than 163,000 businesses listed on Yelp have closed permanently, with a significant percentage of those being small businesses, according to the company’s Economic Impact Report.
Research has shown that customers shopping for the holidays this year plan to make as few trips to retail as possible for safety reasons, by shopping online and/or purchasing as many gifts as they can in one retail location, neither of which favors small, independent stores. Despite that general trend, however, PwC found that 46% of Americans plan to shop local and independent shops this season, due in large part to concern about the stores’ survival. (Analysts in other countries have noted similar trends.) An August 2020 study by Red Egg Marketing found that more than 82% of shoppers would rather support a local business than a large corporation, with 80% of those saying they would be willing to spend more to do so.
Over the past five years or more, the licensing business has seen a greater focus on local tie-ins and designs, a development that meshes well with the current environment. Initiatives can take a variety of forms:
• Promotions with local retailers. A number of licensors have paired with local or regional bakeries, coffee shops, ice cream parlors, and other types of stores, some with only one location, for unique limited-edition flavors or products. Sneaker company Saucony created a limited-edition shoe inspired by New Orleans beignet chain Café du Monde, sold in the local boutique footwear chain Sneaker Politics.
• Partnerships with artisans. An expanding pool of licensors are forging deals with marketplaces to curate collections of themed products sold by independent makers. Some are licensing individual sellers to create licensed merchandise. Simon and Schuster and its agent Moxie & Co. recently licensed Gumshoe Girls, an Etsy seller, to create facemasks from vintage Nancy Drew fabrics.
• Collaborations driven by shared location and history. Several pairs of marketers have created limited, collaborative products celebrating their common local roots. In the craft beer industry, to name one hotbed of such activity, examples have ranged from a partnership between Narragansett Beer and Bananagrams in Rhode Island to another between Fulton Brewing and General Mills’ Wheaties brand in Minnesota. Pairings such as these, across categories, often focus primarily on sales in the local market, but some have national distribution.
• Customized assortments by city or region. Print-on-demand marketplace Teespring partnered with the NFL to offer unique designs related to each city that hosts a team, collaborating with more than 30 musicians, from Jason Mraz to KISS. They designed t-shirts for their favorite NFL teams, under the #MyTeamMyCity banner.
The real impact of such ventures on local economies or independent businesses varies, of course, with some initiatives more about a feel-good halo or a marketing hook than about driving meaningful sales. Still, the trend toward local customization is likely here to stay, and the potential for attracting consumers with unique local designs—while also making a difference to a small business or a regional economy—is something to consider, especially in times like these.
Licensing Topic of the Month: November 2020
Brand Management Companies to the Rescue
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.
Licensing Topic of the Month: October 2020
Home, By Necessity, for the Holidays
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%.
Licensing Topic of the Month: September 2020
The Allure of Seasonless Fashion
Seasonless fashion has been a topic of growing interest in the fashion industry since at least 2017. As with so many trends, however, this discussion has accelerated during COVID-19. In fact, we seem to have reached a turning point, as more big-name designers (Gucci and Yves St. Laurent, for example) have said they plan to follow a seasonless strategy going forward.
Historically, the fashion industry has produced spring/summer and fall/winter collections with up to three smaller seasons in between. A seasonless strategy, on the other hand, involves producing fewer, smaller collections on a schedule not dictated by industry norms. Collections rely more on classic pieces that last and are brand-right rather than trendy. Pieces are created to work throughout the year, through layering and mixing and matching. The merchandise remains available well past its introduction for long-term sales potential. Often a seasonless strategy goes hand in hand with a robust ecommerce presence, and in some cases on-demand manufacturing.
The pandemic raised production, delivery, and inventory issues, as well as reducing consumers’ expenditures on fashion-forward apparel as they went casual at home. These factors helped turn seasonless fashion from a mostly theoretical discussion—although smaller labels such as Thakoon Panichgul took steps in this direction pre-COVID—to a mainstream phenomenon. It is important to note, however, that while the crisis has been a catalyst, the trend is being driven by more fundamental reasons:
• Consumer shopping patterns have changed. Shoppers want to make their own decisions about what and when to purchase, create their own style throughout the year rather than following designer-created trends, invest in pieces that last rather than purchasing often and on impulse, and buy whatever appeals to them that day rather than planning ahead by perusing a collection that is in stores well before the weather catches up.
• The old economics don’t work anymore. Seasonal collections drove sales, but they also required an investment in a large number of designs from which retailers selected a few, as well leading to overproduction and subsequent deep discounts and destruction of unsold clothing. Meanwhile, runway shows are expensive and often not the best way to spend limited resources in the current landscape. From a global perspective, seasonless collections work everywhere in the world simultaneously, despite opposing weather patterns in the two hemispheres.
• Shoppers want sustainable fashion. Young consumers are especially concerned about the environment, and seasonless fashion offers eco-benefits. Products last longer, reducing waste in the landfill, and producing fewer items reduces pollution from toxic dyes and finishes.
• Designing on a deadline reduces creativity. Having enough time to create simplified, curated collections, without pressure to crank out five seasons a year, will lead to better design, better quality, and better value, many designers believe.
Licensing executives do not operate in a vacuum and will be impacted by these same trends, no matter what type of property they are involved with. Fashion-centric property types such as celebrities and, of course, fashion designers, will be especially affected by the industry’s evolution. For other properties, the question arises: Since many licensed properties’ role in the fashion industry is to bring something fresh and novel to the marketplace, will there still be room for characters, artists, and corporate brands?
The answer is likely yes. Fashion watchers believe that seasonless pieces ultimately will account for the bulk of a given collection—say 60% to 80%—with the remainder devoted to trendier items that complement the seasonless classics and keep customers coming back for more. Some of these may be high-quality items meant to stay around for a while, while many are apt to be lower-cost, impulse-friendly, and relatively disposable. Either way, licensed collaborations will fill this niche well.
Licensing Topic of the Month: August 2020
Experimenting with Experiential
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.
Licensing Topic of the Month: July 2020
The Nuances of Name Changes
In last month’s newsletter (read it in our archives), we looked at the ways marketers were addressing racial inequity in the weeks after the George Floyd killing on May 25 and the protests that followed. A month later, another item can be added to the list, as a number of licensors and other IP owners have announced a rebranding of their names and/or logos. Many of these names have been considered offensive for years, but the events of this summer have served as a catalyst for change.
Corporate brands, especially but not exclusively in the food and beverage area, were the first to confront their history. Mrs. Butterworth’s, Uncle Ben’s, Aunt Jemima, Dixie Beer, bike brand Ocoee, and Eskimo Pie all have announced that they will rebrand. Unilever’s Fair & Lovely altered its name to Glow & Lovely and repositioned from being a skin-lightener to promoting healthy skin. Land O Lakes removed a graphic considered offensive from its packages prior to the George Floyd incident that launched the protests.
In sports, Washington’s NFL team is the highest-profile example, but the Canadian Football League’s Edmonton Eskimos also announced a change, while MLB’s Cleveland Indians club is considering one. In music, The Dixie Chicks transitioned to just The Chicks and Lady Antebellum to Lady A. And colleges and universities including Washington & Lee, Dixie State, and Boston University (with its mascot Rhett) all announced or are considering alterations.
Many of these properties have spurred licensing programs (albeit with the sizes and scopes varying widely). Once the decision has been made to drop an offensive name, the next steps on the way to a successful rebranding can be challenging for licensors and licensees:
• Dealing with the controversy. With passionate fans on both sides making their positions known on social media, it will be impossible to satisfy everyone. But managing the change from a public relations and marketing standpoint will help heal wounds and position the new direction as a positive.
• Selecting a new name. Fans who are angry about the name change are unlikely to embrace the new name, at least initially. Even those less invested in the old name can be skeptical of the new branding. Enlisting fans, along with members of the group most impacted by the offensive name, can help bring the public around.
• Trademark issues with the new name. Often trademark conflicts come up with a newly selected name, particularly when the IP owner is under pressure to make a change quickly. Washington’s NFL team has already discovered squatters who had registered many of the names it is considering, anticipating a name change at some point and hoping for remuneration from the team. In Lady A’s case, the group discovered after it had made the change that another singer has long been using its new name. While at first the two parties agreed to coexist peacefully, the relationship soon deteriorated into lawsuits.
• Dealing with the legacy name. IP owners want all merchandise related to the old name off the market immediately so as not to dilute or cannibalize sales of the new name. However, not using the old trademarks opens the door to losing those trademarks and enabling third parties to offer merchandise with the discontinued logos. Typically, a small collection of “retro” merchandise will be sold online, without marketing support, to protect the old trademarks even as the licensor hopes the items do not become popular.
• Disposing of inventory. As it is important for sales and publicity reasons to clear the market of merchandise featuring the old branding, merchandise must for the most part be destroyed immediately rather than be sold off or donated. This is costly for licensees and may lead to some difficult conversations with the licensor. Many licensees have been supportive of the recent name changes, however; Nike’s decision to stop selling merchandise with the old logo, along with pushback from other partners, contributed to Washington dropping its old name.
A redesign or rebranding involving a licensed property normally takes time. This gives licensors and licensees a transitional period to address the issues discussed here and make sure the process is done right. In today’s landscape, however, the pressure to take action is intense, compressing the timeframe and adding to the challenges for the licensors and licensees involved.
Licensing Topic of the Month: June 2020
A Renewed Call for Social Justice
The killing of George Floyd at the hands of the police three weeks ago has had massive ramifications in the U.S. and the world, including for the licensing, consumer products, and associated businesses. Many companies and individuals have taken steps to promote social justice and confront racism, while others have been called out for being out of step with the movement:
• Standing with Black Lives Matter. More than 950 brands participated in “Blackout Tuesday,” according to CreatorIQ and Ad Age Datacenter, by posting a black box on Instagram and other social media channels, in combination with a #BlackLivesMatter hashtag and sometimes additional messaging or announcements. Separately, the NFL apologized for and reversed its stance against players kneeling during the National Anthem to call attention to racial inequality and police brutality and said it would allow that practice when games resume.
• Launching or funding social justice initiatives. Target, which is headquartered in Minneapolis, where Floyd’s death took place, said it would commit $10 million to social justice causes and to further community rebuilding and recovery efforts. YouTube promoted a $100 million fund to develop and promote the voices of Black artists and creators. Lego donated $4 million to groups that educate children on racial equity and support Black children. The NFL pledged $250 million over 10 years for social justice initiatives to combat systemic racism.
• Facing consequences. Cross-Fit lost its licensing agreement with Reebok and the support of some of its gym owners after comments from its CEO—who later resigned—on social media and a company Zoom call. The BBC iPlayer, Netflix, and BritBox streaming channels dropped the show Little Britain due to its use of blackface, for which the creators then apologized. Key stars from the DC Comics-based TV series The Flash, on the CW, and Bravo’s reality show Vanderpump Rules were fired due to racist comments or behavior, while top editors at publications Bon Appétit and Refinery29 resigned after allegations of discrimination under their watch.
• Backing Black-owned businesses. Fashion designer Aurora James launched the 15 Percent Pledge, calling for major retailers to devote 15% of shelf space to products from Black-owned businesses. The initiative highlights the fact that while Black Americans account for 15% of the U.S. population, according to the Census, their products are underrepresented at retail. Last week beauty retailer Sephora became the first chain to sign on.
• Scrutinizing cop-related content. Entertainment content featuring the police has come under scrutiny from advocacy groups, who accuse many properties of either condoning police violence or showing law enforcement in an unrealistically positive light. This movement has led to the cancellation of the reality shows Cops (on Fox for 32 years) and Live PD (A&E). It also prompted an initially tongue-in-cheek backlash against Nick Jr.’s preschool series Paw Patrol that evolved into rumors of cancellation and finally a serious conversation about police-related themes in children’s programming. Lego put a hold on marketing of its building sets focused on police officers and other first responders, but did not stop selling them, as was first reported.
• Expanding color ranges. Crayola announced its Colors of the World crayon boxes featuring 24 different skin tones. Johnson & Johnson’s Band Aid brand introduced a pack of bandages containing light, medium, and dark brown and black hues, along with making a donation to Black Lives Matter. Dance companies Capezio and Bloch both said they would add a range of darker colors to their pointe shoes, which formerly came in only peach or blush colors.
These are just a few examples of the many developments that have arisen since May 25. Some are more meaningful than others. And, in today’s divisive world, many of the marketers have faced criticism ranging all along the spectrum, from accusations of “too little, too late,” to wrath for caving in to “cancel culture.” This is a reminder that while consumers, especially millennial-aged and younger, want companies to take a stand, any such initiative can bring risks as well as positives, as can doing nothing.
Licensing Topic of the Month: May 2020
Bringing Apparel Back: Can Licensing Help?
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 Topic of the Month: April 2020
Turning Point for Digital Events?
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.
Licensing Topic of the Month: March 2020
Toy Industry Sustainability: Lessons for Licensing Execs
Toy companies’ sustainability efforts were more visible than ever at this year’s Toy Fair New York, which took place in February. Most of the marketers’ strategies are relevant for licensed products across all categories and property types.
Key initiatives included:
• Products and packaging made from recycled materials. A number of toy makers, including Headstart, Green Toys, Rhode Island Novelty, and Wild Republic, are touting products made from 100% recycled materials, mainly plastic bottles, especially in the plush category.
• Bio-based plastics. Mattel introduced bio-based versions of the Fisher-Price Rock-a-Stack and three preschool Mega Bloks sets, using a plastic derived from sugar rather than oil. Other makers of hard plastic toys are experimenting with similar processes.
• Packaging that serves multiple purposes. Play Visions packages some of its compounds in metal buckets that can be used to store the product between uses, Crayola offers licensed products where the box becomes part of a DIY project, and the package for Educational Insights’ rocket ship becomes an environment that is part of the play pattern. This was a growing trend at Toy Fair this year.
• Products and packaging that are recyclable/biodegradable. All of the components and packaging of SmartLab’s outdoor science lab are biodegradable, while MGA Entertainment is transitioning L.O.L. Surprise! bags to all paper-based starting this summer and is replacing other resin-based (plastic) packaging with biodegradable versions.
• Recycling programs for used toys. MGA announced an L.O.L. Surprise! recycling program last year with TerraCycle, and expanded it this year. Hasbro also works with TerraCycle for a free recycling program that turns used toys into flower pots, park benches, and play spaces. Meanwhile, Mattel has adopted the How2Recycle labeling system, which offers instructions to purchasers on how to recycle the product when finished.
• Green messaging. A number of exhibitors were touting eco-friendly content and play patterns. Little Tikes’ Go Green! Playhouse teaches kids to become environmental stewards by incorporating recycling bins, a living roof and planting box, a pump sink and rain barrel, and solar-powered LED lights. (It is also made from post-consumer and post-industrial resin.) ReCycle Me is a range of craft kits that help kids turn household trash such as bottles and cans into art projects and games.
These are in addition to behind-the-scenes corporate sustainability initiatives. For example, Rhode Island Novelty’s headquarters is LEED- and Energy Star-certified, it produces solar energy from panels on its roof, and its distribution center is certified as carbon-neutral.
These techniques reflect the sorts of initiatives being tested across licensing-connected consumer products categories. Paper-based products have been transitioning to recycled products for many years, while the fashion industry has started to come on board more recently with initiatives such as Converse’s genderless line made from 50% recycled cotton, and Tommy Hilfiger sneakers made from a leather alternative containing recycled apple peel fibers. Shoe company Allbirds uses multi-purpose packaging that is meant as a shipping box as well as for retail display. Omni and Timberland have a recycling program that turns used Timberland-branded tires into Timberland shoe soles. The list goes on.
It should be remembered that in the toy industry, as in other categories, these activities still represent a very small proportion of the total in most cases. That said, the growth in recent initiatives seems promising.
Licensing Topic of the Month: February 2020
The Coronavirus Threat
The spread of the coronavirus (Covid-19), which began in and around the Chinese city of Wuhan, has already had significant ramifications on the business of licensed products, especially in categories such as toys, apparel, and electronics. Affected companies’ first priority is the safety of their employees and families in the region and around the world, but the impacts of the crisis from a business perspective are also looking grave.
One issue is the shutdown of key factories, with companies from Nintendo to Kraft/Heinz experiencing bottlenecks. In the apparel industry, manufacturers in nations such as India and Turkey are taking up some of the slack. But they do not have the capacity for all of the overflow. In addition, garment makers in countries like Cambodia are shutting down because they cannot get the raw materials they need (e.g., yarns, shoe soles, buttons) from China.
Uncertainty faces the toy industry, where manufacturing for the fourth quarter is ramping up now and leading marketers contract 60% to 90% of their production to Chinese factories. Some companies, concerned about tariffs, had already moved a portion of manufacturing to other regions, such as Vietnam, and/or stocked up on inventory in late 2019. And the crisis began after the peak holiday selling season and during Lunar New Year, when factories would have been closed anyway. These facts have helped ameliorate some of the challenges in the early days. But manufacturing delays are already hurting, and if the crisis goes on long enough, some Chinese factories may not survive at all.
Meanwhile, the situation is not just harming supply, but also sales. With 1.4 billion consumers, China accounts for significant percentages of many brands’ total business.
Uniqlo temporarily closed 370 of its 750 Chinese stores, Nike has closed half of its Chinese outlets, and VF Corp. shut 60% of its owned and franchised locations in China. PVH, Burberry, Ferragamo, and many others have done the same. Walmart has shortened hours in many of its 430 stores. Even when locations are open, foot traffic and sales are down significantly. Luxury brand Moncler has seen the number of visitors to its shops drop 80% since the outbreak started.
Not surprisingly, the challenges associated with the virus are causing an immediate impact on financial results. UnderArmour said it expected first quarter sales to decrease $50 million to $60 million, mostly due to the coronavirus (although it is facing other struggles), while Kate Spade and Coach owner Tapestry expects a $200 million to $250 million impact on sales.
The situation is also making it difficult simply to do business. Flights have been canceled to and from China and travel restrictions have been imposed by both companies and countries. Trade shows have been one area where the ramifications are clear. Denim show Kingpins, the telecommunications-centric Mobile World Congress, the Shanghai and Beijing Fashion Weeks, and Licensing China, all scheduled for March through May, have been canceled or postponed. New York Toy Fair and the China Toy and Juvenile Product Association canceled the China Pavilion at that show, which starts on Saturday. Meanwhile, events such as Texworld and Apparel Sourcing, Munich Fabric Start, and the Nuremberg International Toy Fair have all seen foot traffic declines, often of about 5% to 7%.
The magnitude and duration of the emergency, as well as how long it takes to reboot in the aftermath, are among the factors that will ultimately determine the true impact of the crisis on licensing.
Licensing Topic of the Month: January 2020
The Promise of Social Commerce
In the past six months or so, a number of the leading social media platforms have tested new social commerce features:
• TikTok is allowing some users to add links to e-commerce sites from their profile biographies (something other social sites already allow) and offering creators an easier mechanism for sending viewers to websites where they can shop.
• Facebook invested in an Indian social commerce site, Meesho, which facilitates e-commerce through social platforms such as WhatsApp. It also extended its Brand Collabs tool, which helps influencers find and work with brands, to include select Instagram as well as Facebook users for the first time. Facebook owns Instagram.
• Instagram tested curated, shoppable holiday collections themed around popular 2019 hashtags such as #MakeupQueens and #WanderLust. Fans could purchase within the app by using Checkout on Instagram, which the site launched in beta form earlier in the year. It previously debuted a shopping channel in its Explore and Stories functions, among other social shopping tests.
• Google-owned YouTube expanded its social commerce offerings by opening Showcase Shopping ads to more categories and allowing the ads to be displayed on home feeds and image searches. It is also testing sitelinks from shopping ads.
• Snapchat launched in-app stores for a select group of top influencers, including several members of the Kardashian-Jenner clan as well as Shay Mitchell, Spencer Pratt, and Bhad Bhabie.
• Pinterest added Complete the Look, a visual search tool that analyzes images users search for and recommends home décor and fashion products found in similar images. Pinterest has been actively testing and introducing social shopping features.
These are just the latest steps on a long road toward the Holy Grail of marrying e-commerce and social networking. This goal appeals to consumers, marketers, and retailers alike, at least in theory, but the devil is in the details.
Most social shopping efforts involving licensed properties and brands to date have been focused on smaller specialist sites (such as Depop) or the marketers’ own websites rather than these social media majors. But a few ventures are starting to pop up. Adidas sold a baseball cleat called the 8-Bit Collection within a Snapchat video game, Baseball’s Next Level, that it developed with AvatarLabs. The game centered around a home run derby challenge featuring five MLB players, with fans selecting both an athlete and a shoe style for play. In a first, users were able to purchase the cleats through the game.
Licensing Topic of the Month: December 2019
Subscription Shopping: What Have We Learned?
The subscription market is fluid. Almost every week new players enter, others fail, and still others adjust their business models. Early success stories such as meal kits and pop culture boxes are collectively struggling, while beauty boxes, personal styling services, and other offerings are, for the most part, going strong. Many licensors and licensees remain interested in the segment for its ability to engage consumers, create a two-way conversation, contribute to the product development process, solidify brand loyalty, and other benefits.
So what have we learned about the licensed subscription box market to date?
• Boxes that focus on consumables—baby gear, food, makeup—which are likely to need replenishment, work better as a rule than longer-lasting purchases. Even the most avid fan can only handle so many collectibles.
• Niche boxes focusing on consumers that are underserved at retail tend to do well. Initiatives specializing in plus-size women’s apparel or delivering specialized snacks from Japan are two examples.
• Flexibility is critical. Services succeed by offering boxes both online and at retail—often accomplished through partnerships—and as both subscriptions and one-offs.
• Consumers want control. Initially, boxes focused on a goal of “surprising and delighting” the consumer. While that is still part of the fun, consumers also want to set up parameters around what they receive (styles, number of items, etc.) and when, how, and how often they receive it.
• Exclusivity rules. In the early days, one exclusive item was often included as part of the mix, but now the trend is for most everything in the box to be exclusive, or at least rare or hard to find.
It will be interesting to see what develops in the coming year, and how licensing opportunities will evolve. According to a 2019 survey by ratings and reviews platform Clutch, more than half (54%) of online shoppers say they have used a subscription service. That number is not insignificant and shows that, despite its challenges, this is a segment of retail that cannot be ignored.
Licensing Topic of the Month: November 2019
Circular Fashion: Challenges and Opportunities
“Circular fashion,” a very pure type of sustainability initiative in which items are repurposed, reused, or resold, has been a key trend in 2019. Unlike many other eco-friendly initiatives involving recycling, circular fashion typically requires no processing that can itself cause harm to the environment.
Three types of circular fashion initiatives have gained mainstream traction in 2019, some after several years of more under-the-radar growth:
• Resale. Retailers such as Neiman Marcus, Bergdorf Goodman, Macy’s, and H&M; brands including Burberry, Eileen Fisher, and Stella McCartney; and celebrities such as Serena Williams have all partnered with resale websites and apps such as GOAT, ThredUp, Sellpy, Poshmark, and the RealReal. All provide a platform for customers to sell and purchase used and vintage items, often focused on higher-end brands and pieces. The resale clothing market overall is expected to reach $51 billion by 2023, according to ThredUp’s 2019 Resale Report, compared to $24 billion in 2018.
• Rental. Personal styling sites such as Stitch Fix, Rent the Runway, Trunk Club, Fabletics, and Dia & Co. give subscribers a periodic shipment of apparel items, curated to their tastes, to use for a short time, with an option to buy. Unwanted items are returned to be included in boxes shipped to other customers. Such ventures have been on the rise for some time, outpacing the rest of the subscription box market, but have gained wide mainstream awareness more recently. They have also become a hotbed of collaboration, with designers such as Derek Lam, Jason Wu, and Karl Lagerfeld and celebrities such as Demi Lovato, Kelly Rowland, and Olivia Culpo among those pairing with styling services. A number of retailers have also entered the subscription styling market, either through acquisition or by launching their own ventures.
• Upcycling. This is the process of directly turning waste, such as used clothing or unused materials from the production process, into higher-quality products or materials. Car company Hyundai; footwear brands Reebok, Puma, and Converse; designer Eileen Fisher; and retailer Gap have all marketed upcycled product lines in the past year, often in collaboration with upcycling-specialist fashion labels, retailers, or designers (e.g., Nicole McLaughlin or Atelier & Repairs) or with companies that focus on collecting used clothing to sell for repurposing (Beyond Retro). These efforts range from just a few unique items to broader, but still limited, collections.
All of these strategies are attractive to consumers, especially in the Millennial and Generation Z segments, who increasingly seek out sustainable options. But they represent a threat to traditional licensing, fashion, and retail models. Unlike other sustainability efforts, such as using recycled or alternative materials or making products that are recyclable themselves, these ventures encourage consumers to buy or rent used or repurposed items instead of shopping for new products.
If this trend continues to scale up, it will increasingly contribute to the apparel industry’s challenges. This has been one of the sectors of consumer products, retailing, and licensing that has been struggling the most, both in light of recent trends and longer-term. In fact, the share of consumers’ total expenditures devoted to apparel declined to 3.1% in 2017 from 5.9% three decades earlier, according to a Deloitte analysis of Bureau of Labor Statistics Consumer Expenditure Survey data conducted last year.
Despite the challenges, there may be good reasons for licensors and licensees to test circular fashion initiatives. Such ventures could help generate awareness and solidify a positive brand image with young adults, not to mention being in alignment with many corporate sustainability objectives. The growing number of ventures involving licensors and licensees to date indicates that the licensing community is giving circular fashion a try.
Licensing Topic of the Month: October 2019
Continued Retail Struggles in the Year Ahead
Twenty-eight retailers are at risk of going bankrupt within the next year, according to a recent analysis generated by Retail Dive based on data from CreditRiskMonitor. The list features more than twice the number of chains as on Retail Dive’s past watch lists, which have been compiled since the summer of 2017 at the height of the “retail apocalypse.” When adding in severely struggling retailers identified by Moody’s and Fitch’s, the number of retailers in trouble grows to 39. (The list does not include struggling stores that are not monitored by these three credit-monitoring firms.)
It should be noted that the list includes corporate parents, some of which own multiple retail chains.
The list is interesting, and concerning, in its breadth and depth. Apparel retailers lead the way, not surprisingly, accounting for 12 of the 39 (30.8%), followed by home goods with 8 (20.5%) and department stores with 4 (10.3%). The remaining 15 extend across categories, including pet, drug, outdoors, music, home improvement, jewelry, toys, sporting goods, and crafts. They range from lower-end retailers such as 99 Cent Stores to high-end chains such as Neiman Marcus.
As noted previously in this newsletter (see the August 2019 Licensing Topic of the month here), measurements of the severity of retailers’ struggles, as gauged by store openings and closings, vary depending on the researcher, with some taking a much more optimistic view than others. But clearly the impact on licensing will be significant if JCPenney, Neiman Marcus, Petco, Academy Sports, New York & Co., Lane Bryant, Justice, Destination Maternity, or other retailers on the list disappear.
In fact, by Raugust Communications calculations, 20 (51.3%) of the 39 companies at risk own at least one chain that is a significant purveyor of licensed merchandise. That suggests that licensors and licensees will need to remain nimble in case they lose some of their key partners, as well as maintaining a diverse portfolio of retail and etail customers to help them minimize risk when one goes under.
Licensing Topic of the Month: September 2019
Consolidation in the Clothing Department
Several fashion and lifestyle labels have recently rebranded after a period of consolidation in which their core brands have added complementary or competitive trademarks to their portfolios through acquisition. Following in the footsteps of brand-management and investment companies such as Authentic Brands Group and fashion conglomerates such as PVH, these companies are transitioning into global, multiple-label brand owners operating in apparel, accessories, footwear, and other lifestyle categories. Their corporate name changes reflect that new outlook:
• Michael Kors changed its name to Capri Holdings earlier in 2019 after acquiring Jimmy Choo in 2017 and Versace in 2018. All three brands operate in the luxury tier.
• DSW renamed itself Designer Brands this year, after purchasing (with Authentic Brands Group) the Camuto Group in 2018. The acquisition allows the retailer to sell its own products in addition to third-party goods in its retail stores. With the Camuto purchase, Designer Brands owns the Vince Camuto brand and holds the footwear license for Jessica Simpson and the footwear and handbag licenses for Lucky Brand and Max Studio.
• Cherokee changed its name to Apex Global Brands this summer. Its most recent of several acquisitions was the purchase of Hi-Tec and its Hi-Tec, Magnum, Interceptor, and 50 Peaks labels, in 2016. The company’s other brands include, in addition to Cherokee, Tony Hawk, Liz Lange, Point Cove, Carole Little, Everyday California, and Sideout.
• Coach, one of the first brands to follow this path to becoming a multi-brand marketer, changed its name to Tapestry in 2017. It acquired Kate Spade that year, and had added Stuart Weitzman to its portfolio alongside the Coach brand in 2015.
• In a somewhat different example, Kontoor Brands is the new name of the jeanswear company created from a spin-off of VF Corporation’s denim labels into an independent company in 2019. Kontoor’s labels include Wrangler, Lee, Rock & Republic, and VF Outlet.
These moves offer a number of potential benefits to the brand owners. Although consolidation and repositioning often presents challenges in the early days, the hope for the brand owners is that they will gain more negotiating power at retail and more shelf space; that they will be able manage risk better, with strong brands compensating for weaker brands and lending financial resources if needed; and that they will be able to take advantage of synergies between brands.
The repositioning of these companies affects not just their own brands, but their celebrity, sports, entertainment, and other partners in licensing and collaboration, not to mention their competitors and the outside parties that work with their competitors.
Licensing Topic of the Month: August 2019
State of Retail: It Depends?
This month two research firms, Coresight Research and IHL Group, released their latest figures on store openings and closings for the year to date. The two came to diametrically opposite conclusions.
Coresight came down on the side of a continuing retail apocalypse, identifying 7,567 closures as of July 31, up from 5,524 in all of 2018, with only 3,054 openings in the same period. IHL, meanwhile, was bullish on bricks-and-mortar retail, finding that 64% of retailers are increasing their store count in 2019, versus 12% that are decreasing and 24% with no change. IHL also found that the number of chains adding stores has increased 56% year-on-year, while the number closing stores decreased by 66%, and that the rate of total closures was declining in 2019 (with 8,428 to date) compared to 2018 (19,731 for the entire year).
The reason for the disconnect includes variations in the two organizations’ research methodologies and data presentation and differences in the respective pools of retailers being counted. Coresight uses a smaller sample of major, mostly public retailers, while IHL analyzes a larger universe of chains, each with 50 or more stores, and, unlike Coresight, includes restaurants in its total.
The two researchers did have some conclusions in common, and they do not seem positive for the licensing business. Apparel and footwear retailers and department stores both are suffering and account for a large percentage of store closings, affecting the fashion and celebrity segments of the business in particular. And challenges in other pockets of trade—e.g., books, sporting goods, furniture, and toys—while representing a small slice of the total world of retail, are very important to the health of the licensing business.
Both researchers also note that value retailers, including grocers such as Aldi, off-price stores such as Ross and Burlington, and especially dollar stores, are leading the way when it comes to openings. Both also acknowledge the impact of e-commerce, which is not included in either study, on bricks-and-mortar retail.
Chains having made big closure announcements this year to date have included many of importance to the licensing community, including Walgreen’s, Payless, Sears, and Shopko, to name just a few.
Licensing Topic of the Month: July 2019
For licensing executives in the U.S. and some other parts of the world, the implementation of new tariffs has been top of mind. The U.S., for example, has seen tariffs with China, Mexico, and Europe implemented or considered, with more potentially on the way.
Most companies in the licensing business rely heavily on imports of materials and finished products for sale on the domestic market, as well as exports of finished products destined for sale internationally. Although this is not the place for a full discussion of this complex topic, here are a few of the impacts that some in the business are expecting, or starting to see:
• Increased costs. Higher tariffs typically result in lower margins and/or higher consumer prices. In their most recent quarterly earnings calls, Target, Walmart, JC Penney, and Macy’s all warned of potential price hikes due to tariffs.
• Manufacturing relocations. Steve Madden announced it would transfer some of its manufacturing from China to Cambodia, while Crocs said it would reduce its Chinese manufacturing from 40% to 10% of the total, moving much of the difference to Vietnam. One of the drivers of the recent U.S.-led tariffs is to bring manufacturing back to the U.S., but analysts say that has not happened in many consumer products segments to date.
• Potential shortages domestically. In industries where virtually all manufacturing occurs in China or another affected region, there may be temporary shortages as companies shift their businesses to more cost-effective locations. HarperCollins, the major supplier of Bibles to the U.S. through its Thomas Nelson and Zondervan divisions (including licensed products such as Nelson’s Precious Moments Bibles), has cited shortages as a threat in this industry.
• Lower sales abroad. A survey of 1,000 Chinese consumers conducted by Brunswick found that 56% avoided U.S. products, while 68% said their opinion of the U.S. had decreased due to the trade war. This is bad news, albeit perhaps temporary, for the many brands that look to China as a growth market.
• Declining earnings. While companies such as Nike and others say they have seen no impact on earnings, others, such as Electrolux, John Deere, Brown-Foreman, and several retailers have included tariffs as one of the factors contributing to lower profits.
• Uncertainty. Some tariffs are announced or hinted at but never implemented, while others are put into place and then rescinded, either in total or for specific categories, depending on the state of negotiations between countries and the success of industry lobbying efforts.
It should be noted that none of these impacts are universal, and harm to some companies, industries, or regions is generally accompanied by benefits to others. But all executives in licensing and related businesses must, at the moment, make business decisions in a climate of uncertainty and continuous change.
Licensing Topic of the Month: June 2019
Happy Birthday, with a Twist
Anniversaries have long been a good hook for promoting a property and creating fun and collectible new merchandise. Some property milestones are truly impressive, such as Zorro turning 100 in 2019. But with seemingly every property taking advantage of the opportunity to mark a birthday every half decade—at least after their 10th or 15th year—the market for anniversary celebrations has become saturated and individual efforts can lose their cachet.
A few licensors are following a slightly different path by offering new wrinkles on the standard approach of acknowledging property birthdays ending in 0 or 5:
• Calling out an alternative but significant date. Publisher Hyperion and licensees including plush maker Yottoy promoted the 16th birthday of the character Pigeon, star of Don’t Let Pigeon Drive the Bus, on April Fool’s Day 2019. The date correlates with the age when Mo Willems’ book character would be old enough to attain a driver’s license.
• Celebrating individual product anniversaries. Phoenix International plans to mark the 15th anniversary of its 2.4 million unit-selling sound book, Potty Time With Elmo, a Sesame Street licensed product, in 2021. Separately, Sesame Workshop plans to celebrate Random House’s The Monster at the End of this Book, in honor of its 50th anniversary in 2021, with a “Year of the Monster” initiative involving content, promotions, and licensed merchandise.
• Touting the anniversary of a licensing partnership. Disney/Lucasfilm and Lego are highlighting the 20th year of the launch of their agreement, which has resulted in many building sets tied to the various iterations of the Star Wars franchise over the past two decades.
• Honoring a particular subset of a property. Hasbro and Disney/Marvel are supporting the 10th anniversary of the Marvel Cinematic Universe, which is just one facet—albeit a significant one—of the greater Marvel brand.
Such initiatives, which take a slightly different approach than is the norm, can be a way to stand out from the crowd. They also can help keep the anniversary excitement going strong between more significant property milestones.
Either way, they illustrate a trend that is likely to strengthen. As anniversary celebrations have become more commonplace in the licensing business, they represent less of an opportunity to create a meaningful and memorable event unless a new wrinkle is added.
Licensing Topic of the Month: May 2019
Blue Chip Investors
Brand management companies—firms that acquire brands and properties, often after bankruptcy, and keep them going long-term, primarily through a 100% licensing model—continue to represent significant competition to traditional licensors, licensing agents, and even licensees. This is especially true in the fashion, retail, and corporate licensing sectors, but the impact of these companies can be felt across the business.
The landscape is ever-changing. The leading firms utilizing this model are:
• Adding and subtracting brands. Sequential Brands Group agreed to sell its holdings in the Martha Stewart and Emeril Lagasse labels to Marquee Brands, while Authentic Brands Group is in talks to purchase Sports Illustrated from Meredith. Bluestar Alliance is rumored to be bidding on Roberto Cavalli, after buying boardsports lifestyle label Volcom from Kering, while XCel Brands acquired several Halston trademarks earlier this year.
• Becoming partners in new business models. Authentic Brands Group and Bluestar have both paired with retailers in acquiring licensed properties and brands, facilitating a change in business model for the retailers. ABG paired with DSW to acquire the Camuto Group, while Bluestar and Bébé Stores (the latter is part of Bluestar’s brand portfolio), together purchased Brookstone.
• Facing new competition. Global Icons, a licensing agency, took a page from the brand management playbook when it acquired retailer Fred Segal, suggesting more intense competition ahead when it comes to acquisitions of struggling and defunct brands. Global Icons plans to extend the Fred Segal brand through apparel, retail, and licensing.
• Expanding their holdings through new licensing deals. Firms continue to adhere to their core business model, adding manufacturers to their licensee rosters as they bring individual IP into additional categories. Some recent examples: Authentic Brands named Altair the licensee for Spyder eyewear, Iconix licensed the Starter brand to Fila division Sparks Glencoe as its Korean business partner, and Bluestar licensed its newly owned Brookstone brand to Homedics for massage chairs and home-environment products, to name just a few.
Companies such as these differ from traditional holding companies, which have an ownership stake in a variety of brands, with licensing and manufacturing both part of the mix; from venture capital groups, which purchase IP and brands and operate them short-term before spinning them off at a profit; and from agencies, which do not (as a rule) maintain an ownership stake in the properties they license.
But the lines between all of these segments are increasingly blurring, creating a crowded and competitive market that has an impact, to varying degrees, on almost everyone in licensing. If nothing else, several of these companies rank at the top of the list when it comes to total retail sales of licensed merchandise, making them a formidable and often deep-pocketed presence at retail and in share of mind.
Licensing Topic of the Month: April 2019
The licensing business has changed profoundly, resulting in capsule collections and limited editions becoming ever more popular as a way to limit risk, provide consumers with fresh products, generate publicity, and bring other benefits. Such collaborations—due to their frequency and their tendency to offer unique twists that may not be viable in a long-term product line—take up a lot of the licensing business’s mind share.
In this era of collaborative capsules and limited editions, it can be easy to forget that traditional long-term licensing deals—those in place for at least three years and potentially much longer—are alive and well.
Recent months have brought news of a number of notable traditional licensing deals, often in categories that are closely adjacent to the brand being licensed, and where significant investment in product development and design is required. Examples include Clorox licensing its Burt’s Bees brand to Proctor & Gamble for toothpaste, Arm & Hammer being extended into fruit and vegetable wash through a deal with CR Brands, Diageo’s Baileys and Danone teaming for a line of coffee creamers, and Turtle Wax being licensed to JT Beaven, Argento SC, and Huabaio Industrial for auto accessories.
Of course, long-term licensing deals are not limited to pure brand-extension arrangements such as these. Characters, sports properties, and all other property types enter into long-term deals across categories, including in the lifestyle sectors where collaborations have become so ubiquitous.
Even as short-term collaborations often dominate the conversation, traditional licensing deals remain viable when there is a good fit between property and product, when the two partners’ objectives and strategies are in alignment, and when the financials work for both parties. Just ask the marketers of Flintstones vitamins, Peanuts greeting cards, Girl Scout cookies, and Peter Rabbit dinnerware, all going strong for more than 50 years and counting.
Licensing Topic of the Month: March 2019
While the term “retail apocalypse,” so ubiquitous in 2017, has gone out of favor, the problem of store closings seems just as critical in 2019 as it was two years ago.
In 2017, 8,139 retail stores shut their doors, according to Coresight Research. The number of closures dropped 32% in 2018, but 2019 is not looking good so far. Already, as of mid-March, US retailers have announced 5,279 store closures and 2,395 openings, compared to 5,726 closures and 3,243 openings for all of 2018. A diverse group of chains—most, but not all, in financial distress—have made store-closing announcements this year, from JCPenney and Gap to Family Dollar and H&M.
In addition to store closings, retail chains are also liquidating completely (e.g. Payless, Gymboree), announcing weak sales or profit performance (Neiman Marcus, House of Fraser), entering bankruptcy while they try to turn things around (Claire’s, Shopko), and/or looking at opportunities to restructure or be acquired (Modell’s, Topshop). The reasons cited for these actions typically include more sales moving to e-commerce sites such as Amazon, high debt levels, and too many physical stores (at least in the U.S. market).
Of course there are always exceptions to any trend, and stores such as Foot Locker, Sephora, and Burlington are among those performing well at present.
For the licensing community, ongoing retail struggles, among other factors, mean more sales will continue to move online. That said, with e-commerce totaling just 10% to 20% of total retail sales (with the number varying depending on the researcher and its methodology), the latter is unlikely to replace bricks-and-mortar any time soon. It will continue to be essential for licensors and licensees to secure distribution in as many channels as possible, while meeting retailers’ need for exclusivity.
Licensing Topic of the Month: February 2019
Taking a Stand
Eight-seven percent of retailers say taking a position on divisive social issues is worth the risk, according to a new RetailMeNot study of 200 senior retail marketers and 5,000 consumers. Moreover, 83% of retailers believe not taking a stand can have an adverse effect on their bottom line.
Over the past couple of years, retailers and other marketers of all stripes have been increasingly following suit, choosing sides on some controversial issues:
• Columbia Sportswear jumped into the government shutdown waters with messaging asking politicians to compromise and “Make America’s Parks Open Again.”
• Puma partnered with rapper Meek Mill to promote criminal justice reform.
• CVS entered the body image discussion by discontinuing the practice of retouching photographs of models in makeup advertisements.
• Nike featured former NFL player Colin Kaepernick, who famously knelt during the national anthem to protest racism, in an ad about standing up for what you believe in.
• Bud Light paired with Ellen DeGeneres to support gay marriage.
While some of these moves attracted consumer pushback and/or negative press, virtually none negatively affected sales in the long run, and in some cases the opposite was true in the aftermath of the campaign.
What does all of this mean for the licensing community? Not only does it suggest that licensors and licensees might not want to shy away from taking a stand when the opportunity arises, as long as ownership, management, and/or employees truly feel strongly about the issue. At least as importantly, it means that licensing execs must be prepared for a time when one of their partners takes a controversial position that has ramifications on their business, forcing them to address the issue head-on themselves.
Licensing Topic of the Month: January 2019
Licensing traditionally is an agreement between two parties, but in today’s world of continuous collaboration, the more the merrier. As a result, merchandise initiatives involving licensed properties increasingly incorporate three or more partners. A few of many recent examples:
• PlayStation, Nike, and Oklahoma City Thunder basketballer and lifelong gamer Paul George have put forth two collaborations to date, with George designing Nike sneakers using PlayStation imagery.
• Marvel Comics and the estate of rapper Tupac Shakur paired with POP by FootLocker for a clothing collection combining imagery associated with Tupac and icons tied to Marvel’s Black Panther, such as the lead character in a battle pose surrounded by the phrase “Until the End of Time,” the name of one of the musician’s albums.
• Bally paired with music producer Swizz Beatz and artist Ricardo Cavolo for a 27-piece men’s and women’s apparel and accessories capsule. Swizz Beatz, who initiated the effort, was billed as the curator of the range of Cavolo’s graphics used on the pieces. The collection was sold in Bally stores and on its website.
• K-Beauty brand VT Cosmetics paired with social messaging company LINE and music group BTS for a line of lipstick, eye shadows, foundations, and creams featuring the BT21 character avatars LINE produced in conjunction with the K-Pop group.
As these few examples suggest, multifaceted collaborations involving three or more parties can take many forms, whether cross-licensing, co-branding, collaboration, or other configurations, often combined with promotional elements. They can involve many kinds of players, from retailers, designers, and manufacturers, to celebrity partners and licensed properties across all property types.
What they have in common is that they play to many of the Holy Grails of licensing these days. Integrating more partners into an initiative helps attract a wider audience; gives an infusion of creativity, newness, and differentiation; can offer more distribution options; and adds an element of desirability and/or collectability that keeps fans coming back for more.
Licensing Topic of the Month: December 2018
Rewriting the Retail Relationship
Two deals this past fall involved retailers pairing with specialist investment companies to acquire licensed properties. The shoe store chain DSW partnered with Authentic Brands Group to purchase footwear and fashion marketer Camuto Group for $375 million. The deal gives DSW a 40% stake (to ABG’s 60%) in Camuto’s proprietary Vince Camuto, Louis et Cie, Sole Society, and Enzo Angiolini labels; licensing rights for Camuto’s Jessica Simpson, Lucky Brand, and Max Studio footwear and handbags; and a joint venture stake in the ED Ellen DeGeneres and Mercedes Castillo brands.
Meanwhile, Bebe Stores, a contemporary women’s fashion chain, teamed with Bluestar Alliance, which has held a minority interest in Bebe and its trademarks since 2016, to acquire the Brookstone brand. The new owners plan to expand wholesale distribution for the brand and continue to operate the 30 Brookstone airport stores. Brookstone markets gadgets and gifts for travel, entertainment, and the home. It had entered bankruptcy and closed 101 mall stores in August, two months before this deal was finalized.
These initiatives are just the latest and most significant moves by retailers to become powerful players when it comes to licensed intellectual properties. Over the last decade, retailers such as Aeropostale and Sears have been increasingly licensing out their own brands, viewing them as a way to generate revenue streams as much as, or more than, a means of drawing customers into their stores. Retailers such as Target, of course, have also been forging exclusive direct-to-retail deals that essentially turn outside properties into private labels. These serve as a competitive advantage and consumer enticement. They also give the retailer a strong say in the brand’s direction.
The outright acquisition of licensed brands allows retailers to reap the rewards of the properties’ success in other retail channels, as well as giving them opportunities to create an exclusive or unique brand presence in their own stores. For the licensing community, these moves further solidify retailers’ position as competitors as well as customers. They also make it even more difficult to secure a spot on the shelf as retailers continue to fill that space with products in which they hold a stake.
Licensing Topic of the Month: November 2018
Changing Distribution Channels
Licensed product distribution continues to evolve, thanks to an increasingly omnichannel strategy on the part of retailers and especially etailers that further blurs the lines between bricks-and-mortar and the online space.
Several e-commerce specialists have made moves into the physical world in recent months, for example, following a variety of paths to do so:
• Shop-in-shops. Fanatics launched 325 shop-in-shops in JCPenney stores in May and doubled the number to 650 this fall.
• Pop-ups. Online merchandise purveyors including Amazon Fashion and Fabletics are opening pop-ups, in a variety of configurations.
• Exclusive retail distribution partners. Subscription box marketer Loot Crate is seeing six of its themed boxes appear exclusively in 3,500 Walmart stores, alongside other vendors’ goods, as part of the latter’s new entertainment-department collectibles section.
• Experiential retail stores. BuzzFeed, the online content provider and licensor, is opening a bricks-and-mortar location called Camp that is half toy store, with merchandise assortments changing regularly, and half social media-driven experiential space.
• Consolidation. Plus-size etailer Eloquii and the primarily e-commerce men’s clothing shop Bonobos are both under the Walmart umbrella now, after acquisitions in 2018 and 2017, respectively.
What does all of this mean for licensing executives? It reinforces the idea that all brands need to be in multiple venues to reach consumers effectively, and it underlines the fact that any strategic thinking needs to encompass both online and offline shopping, not as two separate entities but as an integrated whole.
Licensing Topic of the Month: October 2018
It’s A Little Easier Being Green
The licensing business, and consumer products industries in general, have long viewed eco-friendliness as a desirable trait in the eyes of shoppers. But economic factors—namely, the higher cost and the unwillingness of customers to put their money where their mouth is—have limited the activity in a practical sense.
That seems to be changing. This fall, for example, new ventures in the fashion industry have put pro-environmental products front and center, with the initiatives taking a variety of forms. Adidas teamed with Stella McCartney for leather-free Stan Smiths, DKNY and Diane Von Furstenburg announced they would stop using fur, and Courrèges eliminated plastics from its designs. Bolt Threads developed a fabric from mushrooms and is testing its marketability through collaborations with the likes of Patagonia, while Allbirds is creating footwear from eucalyptus pulp.
In the character- and brand-licensed space, meanwhile, Viacom Nickodeon Consumer Products partnered with Trashcode, a joint venture between Cookie Company Group and Waste2Wear, to create licensed clothing from sustainable materials in the EMEA market. And 16 of Clark’s National Geographic-licensed footwear designs will be made from recycled bottles, with packaging of recycled cardboard printed with natural vegetable oil inks.
Some eco-ventures are more about operations than the product itself. Burberry said it would stop destroying unsold product, a common industry practice that has recently come under fire. Gap said it would reduce water usage by 10 billion liters by 2020. And Thredup, an online resale marketplace, put its new clothing recycling program, called Upcycle, in motion by partnering with lifestyle brand Reformation.
The recent burst of eco-activity is not limited to the fashion business. One of Honda’s recent licensees is Jackery, for a line of portable, sustainable, lithium-battery and solar-ready power stations. Singer and actress Mandy Moore teamed with beauty marketer Garnier, for which she serves as a brand ambassador, to encourage recycling of empty beauty containers and offer dos and don’ts about which packaging is recyclable; other partners in the venture are the nonprofit DoSomething and upcycler TerraCycle. And Mondelez announced it will make all of its packaging recyclable by 2024 and partner with organizations to help ensure the boxes are indeed recycled.
These examples, just a few among many, illustrate the variety of strategies marketers are using to become more eco-friendly. The proliferation of programs is likely to continue as such initiatives become more viable financially; as consumers, particularly young adults, demand such steps from their favorite brands; and as the science about global warming—while still not acknowledged by all—becomes more dire.
Licensing Topic of the Month: September 2018
Multiple Layers of “Fit”
As licensors and licensees strive to stand out in a crowded marketplace, they are increasingly trying to add that little something extra by taking the idea of the “fit” between property and product to new levels:
• Chaud Devant, a Dutch specialist in footwear and apparel for chefs, created a Michelin-branded line of shoes in 2017 called the GT1 Pro Magister that had soles of non-slip Michelin rubber. The line was a collaboration with chef Claude Bosi, who heads up Claude Bosi at Bibendum, a Michelin-starred restaurant located in the Michelin building in South Kensington, London.
• When Fulton Beer and General Mills partnered for a HefeWheaties craft brew in 2015, their partnership hinged not only on the two companies’ Minneapolis origins, but also on their common use of wheat in their products and the fact that the wheat-milling industry was integral to their shared home’s early development.
• J. Crew in 2017 introduced a collaboration with artist Michael de Feo, recognized for his flower-themed imagery. Marketing materials touted the fact that the company had sought out De Feo after the street artist covered over one of its billboards with his graffiti.
• When Master Spas launched its Michael Phelps signature swim spa line in 2010—it is still on the market—it turned not only to Phelps for his expertise in developing the line, but also to his swim coach Bob Bowman. In addition, some of the proceeds go to Phelps’ charitable foundation.
• One of the branded products UPS offers is a personalized baby onesie sporting a print of a UPS delivery label. Rather than the weight and other data about a package, it features customized details about the delivery of the baby, including birth weight, package count (e.g. 2 for twins), birth location, time, and date, and parents’ names and location.
• Her Universe introduced its first videogame-licensed fashion line in September. It was based on Tomb Raider, a rare game starring a female action hero (Lara Croft). Her Universe is a female-owned company that makes “fashion for fangirls.” The designer of the licensed collection was the winner of the company’s fan fashion design contest, which features the winners at a runway show at San Diego Comic-Con. She is also a Lara Croft cosplayer.
This list just touches the surface of the many and varied examples that have been piling up over the past few years. The intent here is to inspire licensees and licensors hoping to create something that is truly unique to the two (or more) partners, raising the chances that it will stand out on retail shelves or online.
Licensing Topic of the Month: August 2018
Lessons Learned From A Deal’s Demise
News came to light this summer about the end of a number of licensing or other types of deals, some of them longstanding. Each of the five examples below, all announced in July or August, illustrates one of the many challenges that can get in the way of a successful partnership:
• A partner’s change in strategy. Target and Hanesbrands will part ways on their exclusive C9 by Champion activewear line—marking the end of a 15-year relationship—when their current contract ends in early 2020. One of the reasons media reports have cited for the change is Target’s increased focus on in-house-developed private labels, with more than a dozen debuting in the past year; the company noted at the time of the announcement that it would soon introduce a portfolio of new performance brands.
• Ownership consolidation. When Montblanc announced the conclusion of its 17-year-long eyewear deal with Marcolin, effective in early 2019, it reported that it had signed a new deal with Kering Eyewear for the category. Luxury goods holding company Richemont has a stake in both Montblanc and Kering, bringing the two into the same family.
• Global alignment. Levi Strauss & Co. announced it would replace Kidiliz, its licensee since 2002 for children’s wear in Europe, with Haddad Brands. Haddad has been Levi’s U.S. licensee for 15 years and recently added Asia to its portfolio, so the change consolidates most of the brand’s children’s business around the globe under the same licensee.
• Lack of control. Goop ended its alliance with Condé Nast for its quarterly magazine, after only a year-long, two-issue partnership. WWD and other publications have reported that the split resulted from Goop’s frustration with a lack of access to subscriber numbers and other business data, with Condé Nast’s editorial direction and rules and its sales and marketing strategy, and with the disconnect between its own social-driven business model and Condé Nast’s traditional publishing model. Editorial is now handled independently by Goop and distribution overseen by Oehler Media.
• Lower-than-expected financial results. Fashion publications Fashion Network and WWD have reported that Prada is discontinuing its fragrance joint venture with Puig, a 50/50 partnership for skin care and fragrance in place since 2003, when the current agreement expires in late 2019. The companies have not yet confirmed. Industry analysts speculated that sales below projections likely played into the decision.
Of course there are other reasons that licensors and licensees divorce. But these recent developments illustrate some of the key challenges that can arise, even in a long-running licensing deal.
Licensing Topic of the Month: July 2018
The Rise of Shoppable Content
Shoppable content allows consumers to link to and purchase an item depicted in a digital video or other format, in real time. This integration of e-commerce into entertainment, lifestyle, and reality content has long been a goal of IP owners and manufacturers, and it is, at long last, starting to gain traction.
Harper’s Bazaar, H&M, and design label Ted Baker are among the companies that have created video ads featuring shoppable clothing items. Bravo’s TV series The Girlfriend’s Guide to Divorce has permitted consumers to buy the clothes the stars are wearing in real time, while Lifetime and Wayfair partnered to create The Way Home, a shoppable series centering on interior design and home goods. Publicity firm Rogers & Cowen produced Click My Closet, a short-form entertainment and fashion series featuring celebrities and their stylists, with shoppability the primary goal.
In the world of live events, fashion brand Who What Wear is one of a number of design labels to stream their runway shows for immediate shoppability. FX Group, which manages awards shows, paired with Mavatar to allow viewers to purchase, in real time, items celebrities wear on the red carpet. Mobile communications company EE enabled viewers of the BAFTA Awards to click on a celebrity’s red-carpet outfit and be directed to a similar but affordable look.
Even novels can lend themselves to this technique. Author Riley Costello’s Waiting at Hayden’s includes videos as well as shoppable photos.
Not all attempts at shoppable media have been successful. But it stands to reason that this technique will grow as a means of promoting and selling licensed products as marketers learn from past efforts and as technology continues to advance.
Licensing Topic of the Month: June 2018
A number of recent moves by retailers illustrate three of the key benefits of an omnichannel retail strategy:
Anytime, anywhere shopping. Grocers have recently been investing in meal kit subscription companies; examples include Kroger acquiring Home Chef and Albertson’s purchasing Plated, among others. By doing so, they are striving to offer convenience in any manner their consumers want it—online or in-store, by subscription or for a one-off occasion—among other motivating factors.
Separately, Fanatics and JC Penney announced this month that the latter would host Fanatics-branded shop-in-shops in 325 locations this summer, with 650 planned by back-to-school, following the success since 2015 of Fanatics shops on JCPenney.com. The in-store displays will have experiential elements and offer Fanatics-branded products as well as Majestic (owned by Fanatics), Adidas, New Era, and Nike merchandise. The move continues Fanatics’ transition from an online purveyor of sports-licensed goods to an omnichannel manufacturer, distributor, and retailer offering its products anywhere consumers shop.
Product development. The online space is helpful in not only offering a broader array of merchandise, some of it appealing to narrow consumer segments, but also in discovering unexpected retail opportunities when it comes to characters or designs consumers will embrace.
Amazon’s just-announced Merch Collab user-generated design venture, along with its Merch by Amazon print-on-demand program and Amazon Stores experiential and sales destinations, have had an impact on product assortments at retail, according to licensors who are registered in all three initiatives. They have unearthed yet-unthought-of product ideas online and have been able to parlay those into low-risk retail programs.
Brand experience. More retailers are using bricks-and-mortar locations to create an enjoyable showroom destination. Consumers can not only try out products before making a purchase (either on-site for later pick-up, online, or in a traditional store), but also have a relaxing and fun time while surrounding by brand messaging.
Nordstrom recently launched its first experiential-only store, Nordstrom Local, which has no inventory on site but features samples to try on in large, well-lit and mirrored dressing rooms, personal stylists, on-site alterations, a nail salon, a coffee and juice bar, and lots of seating in a relaxed atmosphere.
And Comcast just launched Xfinity stores that offer hands-on activities including personal service solutions, equipment upgrades or trades, equipment troubleshooting, bill pay and data plan adjustments, and business services. Part of the benefit is to reposition the brand as more customer-service friendly, although shoppers can also try out new equipment in a comfortable environment with seating and video screens.
We only touch on three of the many benefits of an omnichannel retail strategy here. But the recent, high-profile ventures listed here serve as yet another reminder of how important an omnichannel approach is these days, both for direct sales and for brand-building to drive future purchases.
Licensing Topic of the Month: May 2018
Telling a Brand Story
Content licensing has become a key component of trademark licensing programs across all property types. It is critical as a means of intensifying fan engagement and adding consumer touchpoints to generate awareness.
Content is a way to tell a story that helps drive interest in a property. It is important to remember that this storytelling does not necessarily have to focus on the traditional and most-recognized goals of plotting and characterization. It can:
• educate, as in Saban Brands’ deal (announced pre-Hasbro acquisition) with DoSomething.org that employs the Power Rangers characters to demonstrate how young people can confront bullying.
• enhance brand positioning, as Nike has done by pairing with Headspace on a meditation app supporting Nike’s evolution from purely physical fitness to holistic, mind-body health and wellness.
• celebrate and personalize the past, as in Disney’s collaboration with British photographer Rankin on a new book that features celebrities’ remembrances and experiences with Mickey Mouse on the occasion of the character’s 90th anniversary.
• expand to new markets and audiences, as National Geographic has done by pairing with The Wall Street Journal for a publication called Far & Away, on how to add a sense of discovery and adventure to business travel.
This small sampling serves as a reminder that storytelling goes well beyond entertainment-related world-building; it can be used to achieve a variety of goals for IP owners of all stripes, and their licensees.
Licensing Topic of the Month: April 2018
The Individuality of Influencers
Social media influencers have become ubiquitous as partners for corporations—as endorsers, for promotional initiatives, as collaborators, and as licensors—with an average of 70% of brands across 10 benchmarked industries working with Instagram influencers, according to research company L2 Intelligence. Industries critical to licensing, including activewear, beauty, and retail, indexed even higher, with 84%, 83%, and 82% of firms, respectively, working with Instagram influencers.
A lot of discussion revolves around the differences between working with influencers versus “traditional” celebrities, and there are some. But as the number of influencers, and the number of companies working with them, have grown, it is important to remember that influencers are not a homogeneous group.
They have different areas of expertise or recognition, from lifestyle, beauty, design, or cooking, to niches such as slime crafting (Kat Garcia) or acrobatics (Sophie Dossi). They rely on different social media platforms (YouTube, Instagram, Twitter, etc.). Some use only social media to reach their fans, while others have expanded into traditional media as well. And the way they work with their corporate partners, through paid endorsements, short-term collaborations on product capsules, long-term licensing agreements in a wide range of product categories, or all of the above, varies as well.
From home goods designer Joy Cho of Oh Joy! to crafting expert Lauren Riimaki of LaurDIY, to fashion maven Danielle Bernstein of WeWoreWhat, there is as much diversity within the influencer segment as in celebrity licensing in general (if not more). And licensees and licensors need to apply the same principles as for any licensing arrangement, both when selecting the right influencer for a given objective and when formulating the right type of partnership for each situation.
Licensing Topic of the Month: March 2018
Going Beyond The Gimmick
New technologies used in conjunction with licensed products typically start as a novelty play, something that is of interest to early adopters but not the kind of “killer app” that will change an industry. Over time, however, technologies need to add value in order to grab consumers’ attention and endure long-term.
Take augmented reality. A gimmicky, novelty usage occurs when a tablet-based spelling game allows children to grab letters that are flying through their bedroom, as seen through a device’s camera. The addition of AR may be fun for a while, but the game itself is not different from what it would be if played on a plain yellow background.
A slightly more sophisticated usage is when a toy truck drives on a terrain displayed on a tablet screen, allowing it to leave tracks or splashes in its wake or push a log forward. In this case, the AR enables a play pattern that is not possible with the toy alone (except in the imagination), but the added value is incremental.
At the top end of the scale, picture a kit that allows kids to create a simple circuit and then use AR to show what is going on inside that circuit, in real time, when the circuit is active. In this case, the AR provides an a-ha moment and truly enhances the experience of the toy.
The same thought process applies to any new technology, from 3D printing to artificial intelligence to virtual reality and beyond, and to any new product that integrates that technology. The question: How can a given tech innovation go beyond bells and whistles and really push a product into new territory?
Licensing Topic of the Month: February 2018
The Mainstreaming of Social Commerce?
Licensors and licensees have long wanted to create a seamless connection between fans’ experience with a licensed property and their ability to purchase a product based on it.
For the past 10 years or so, companies have tested approaches ranging from allowing consumers to purchase a product just by clicking on a word or image in a text message, to facilitating a transaction when the consumer clicks on an item in the background of a streaming TV show. There have been a number of niche social shopping sites and apps that have sprung up as well, with varying degrees of user-friendliness and licensing relevance.
Most likely, the key to linking content and commerce in a way that is meaningful to the licensing community will be the involvement of the major e-commerce and social networking players. Companies such as Amazon, Pinterest, Instagram, Facebook, and Twitter have launched social commerce initiatives over the years, with varying degrees of success.
In late 2016 and throughout 2017, most of these powerhouses made further, sometimes significant, moves into the space. Amazon launched Spark, a new social commerce tool within the Amazon app; Prime members can shop on Amazon for items that appear in pictures on the Spark platform. Instagram streamlined its shopping experience, allowing users to tap once to unearth product details and purchase, as well as implementing mechanisms to increase the trust factor. Pinterest introduced Buyable Pins, along with the ability to save items to a shopping bag across devices. Facebook began testing Facebook Shoppable Feed ads, where advertisers post product images; when users click on an image they are taken to a page of product details, with a further click leading them to an e-commerce site.
Moves such as these could be an important step toward the mainstreaming of social commerce. But it still remains to be seen whether a broad audience will feel comfortable shopping this way.
Licensing Topic of the Month: January 2018
Learning from the Retail Trends of 2017
Last year brought significant changes at retail. These developments will continue to affect the licensing community in the year ahead:
• Challenging times for key retailers. Although researchers disagree on the balance of store openings and closings during the year, there is no question that many major chains closed stores, entered bankruptcy, went out of business entirely, or otherwise struggled. And when a key customer suffers financially or closes locations, the impact on licensed products is immediate. Toy companies’ third-quarter results after Toys ‘R’ Us’ bankruptcy filing illustrated this phenomenon.
• Continued expansion of deep discounters. Bricks-and-mortar retailing on the discount end of the spectrum gained strength, with Dollar General, Dollar Tree, Aldi, TJX, Five Below, 7-Eleven, Couche-Tard, and Aldi all among the retail operators opening the most stores in 2017. Licensors and licensees have been selling to deep discounters over the past decade, but some licensors are taking steps to do broader deals, as Heidi Klum did in launching an exclusive apparel line with Lidl.
• Online grabs more share. Researcher Forrester predicts e-commerce sales will be up 13% in 2017 over 2016, a growth rate five times faster than that of offline sales. As e-commerce becomes increasingly significant to any licensing program, the number of licensors doing deals with e-tailers (e.g., Drew Barrymore’s Dear Drew lifestyle range with Amazon Fashion) continues to grow.
• Changing retail strategies. Target refocused its private labels, debuting 12 mostly in-house-developed new brands. Walmart ended its longtime DTR with Iconix for DanskinNow. Amazon added to its large roster of private labels. While these retail giants continue to work with licensors, their winnowing of licensed brands mean today’s new retail exclusives are more likely to involve the likes of Williams Sonoma or Pottery Barn than Walmart or Target.
• Unusual retail pairings. Through consolidation or partnership, retailers entered new categories and price points and bolstered their multichannel capabilities. Luxury department store Lord & Taylor partnered with Walmart, for instance, while Amazon bought Whole Foods. These moves further blur the lines between retail tiers.
• A positive note at year-end. Mastercard SpendingPulse said U.S. retail spending was up 4.9% year-on-year in 2017, and several retailers—some of which had been struggling—posted strong holiday results. This does not mean the struggles of many retail chains will not continue, but it does inject some optimism to cap off a difficult year.
To read a longer version of this story, with additional research and examples, click here.
Licensing Topic of the Month: December 2017
The regular use of pop-ups—temporary shops, restaurants, and the like—as a marketing tool goes back at least to the early 2000s, and the frequency continues to grow each year. For licensors and their licensees, pop-ups generate publicity and consumer awareness, give some of their fans a personal experience that can cement consumer loyalty, allow data collection and other forms of market research, sometimes generate revenue from product sales, and serve as a test to see if new product initiatives might succeed at retail.
The objectives, occasions, property types, and themes for pop-ups vary widely. Eminem launched a pop-up in Detroit this month called Mom’s Spaghetti, selling merchandise tied to his new album, Revival, as well as spaghetti and meatballs; the effort was themed to a spaghetti-centric meme inspired by a line in his 2002 song Lose Yourself. Nintendo’s holiday experience pop-ups at 17 U.S. malls this season allow consumers to try out games on its Nintendo Switch and Nintendo 3DS series, in an effort to spur gift-giving as well as keep its brands and characters top-of-mind. Moose Toys’ first Shopkins pop-up, the Shopkins Macaron Café, was inspired by a new playset and was up and running in New York’s Tribeca neighborhood for three days.
The players involved, meanwhile, run the gamut from small to large and everything in between. Artists set up pop-ups in local gift shops to meet their fans, introduce themselves to new consumers, and sell their handmade and licensed goods. And at the other end of the spectrum are the big corporations. Warner Bros. Consumer Products, with Boomerang and BoxLunch, opened a shop in Soho during New York Comicon that featured experiential installations tied to Bugs Bunny, the Jetsons, Scooby Doo, The Flintstones, and Tom and Jerry, and sold merchandise from licensees Junk Food, New Era, and Trunk.
The Beatles, Wired magazine, AMC’s Better Call Saul, Kellogg’s PopTarts brand, model/actress Olivia Palermo, NBA player Dwyane Wade and his wife actress Gabrielle Union, Calvin Klein, lifestyle blog Glossier, and Smiley are just a smattering of the properties that have set up pop-ups of one form or another across the globe in the last year or so.
Of course, part of the driver of this trend is the large amount of empty square footage to fill as retail chains, especially mall-based varieties, have been closing stores. Interestingly, some of the players setting up temporary shops have been those same struggling or defunct chains. Sharper Image (formerly a retailer, now transitioned to a consumer products brand), Toys ‘R’ Us (which entered bankruptcy and has closed some key stores, such as its New York flagship), and Limited Too (a tween retailer popular in the 1990s and purchased by Bluestar Alliance in 2015) all were the focus of temporary physical or digital shops this holiday season.
Licensing Topic of the Month: November 2017
Sold by Subscription
Subscription boxes have been a hot topic in the past year, and the number of licensors and licensees selling products to boxes or lending their names for branded or curated box services has grown significantly. Meanwhile, subscription boxes are just one component of a broader range of subscription retail offerings that are creating opportunities for the licensing community.
Subscription sales channels are attractive for a number of reasons. For consumers, they bring added value (e.g. discounts or premiums) and exclusive products, as well as an element of community and an experience beyond a simple purchase. For marketers, they provide access to a loyal, often millennial-centric consumer base that is often hard to reach through traditional retail; inventory-management benefits, since the subscription business model often relies on presales; and opportunities for marketing, storytelling, and promotion, as well as product sales.
Subscription channels vary in how they operate, in the benefits they offer consumers and marketers, and in their life-cycle phase. Flash sales sites have been around for over a decade and have seen flattening growth and the exit of key players, but they remain an important channel for many licensors and licensees. Subscription boxes and meal kits are still in a growth phase—although some players have had challenges of late—and they continue to attract new licensing participants. Some observers question their future prospects, however.
Social shopping sites are also of interest, especially with the entry of companies such as Amazon, Pinterest, and Instagram; the licensing community is starting to dip a toe into this market, often in the form of fashion collaborations. For the future, subscription models ranging from product-rental services like Rent the Runway to retailer-connected social and loyalty platforms, such as Sephora’s new Beauty Insider Community, represent potential opportunities.
Property owners investigating licensing partnerships or other involvement with subscription-based businesses run the gamut. Celebrity Sofia Vergara has new underwear subscription service, EBY, while NFLer Tom Brady partnered with Purple Carrot for a nutritional meal kit service. Lifestyle/blogger brand Girl with Curves and Dia & Co are marketing a plus-size clothing subscription and styling service.
Fashion marketers such as Ann Taylor, Old Navy, and UnderArmour are among the recent entrants into subscription boxes. Corporate licensor Dunkin’ Donuts put together a promotional merchandise boutique on flash sale site Rue La La. And of course character/entertainment properties have had a strong presence in both flash sales and subscription boxes, with Box Boulevard’s Adult Swim and Loot Crate’s Star Trek ventures being recent examples of the latter.
The subscription market is fluid. Almost every week new players enter, others fail, and still others adjust their business models. It will be interesting to see what develops in the coming year, and how licensing opportunities will evolve.
Licensing Topic of the Month: October 2017
In Search of Incremental Sales
In an ongoing quest to find white space in the marketplace and expand retail sales incrementally, licensors and licensees are increasingly looking for consumer groups that are narrow but underserved, in the hopes that they will be receptive to licensed products or promotions created just for them.
Warner Bros. and Hot Topic included coats with “wand pockets,” promoted as being for cosplayers, as part of their collection of merchandise tied to the film Fantastic Beasts and Where to Find Them, while BBC Books aimed at the same market segment by including behind-the-scenes costume secrets and cosplay tips in a Doctor Who paper doll book.
Activision/King and Moschino paired for a limited-edition Candy Crush collection including backpacks, swimwear, and device cases, which was promoted at Coachella and touted as being fashionable and weatherproof for attendees of music festivals. The Smiley Company and apparel label Brekka also offered a series of collaborations specifically for festivalgoers that were outdoors-appropriate as well as fashion-forward.
Jinx launched its Jinx Pro brand as an identity for clothing and accessories created specifically for professional videogame (e-sports) players and their fans, including licensed products tied to teams such as Team Liquid and Echo Fox.
For mainstream marketers, focusing on a relatively small consumer group such as cosplayers, music festivalgoers, or e-sports players often represents a relatively small addition to the total retail sales of a property or product line. But these sorts of initiatives can be beneficial in generating awareness among new potential customers. And, by filling a need for a consumer group that has rarely received attention from marketers, they can also present an opportunity to burnish brand loyalty.
Licensing Topic of the Month: September 2017
Hot Markets: A Strategy Beyond Sports
The sports licensing business has perfected its sophisticated “hot markets” strategy over the years. Initially, the idea was to get merchandise into consumers’ hands as quickly as possible after a championship, without knowing the winning team ahead of time. Today, championship products are available almost immediately after the completion of a World Series, Super Bowl, Stanley Cup, or NBA Championship.
Over the past several years, the same well-oiled hot markets machine has also been used to capitalize on other unexpected events, such as on-field exploits (New England Patriot Julian Edelman’s “impossible” catch in last year’s Super Bowl); unforeseen athlete popularity (Jeremy Lin’s period of “Linsanity” with the New York Knicks); spontaneous yells (Washington Redskin Kirk Cousins’ “You Like That”); or even bloopers (“Sauce Castillo,” a misspelling of Sacramento King Nik Stauskas’s name by a television close caption typist).
Licensors of other property types, such as celebrities and entertainment, face similar situations, from meme-friendly tweets (such as singer Tim Burgess’s “Totes Amazeballs,” which ended up on a box of Kellogg’s cereal) to a TV episode theme (Rick and Morty creating a craze by mentioning McDonald’s 1998 limited-time-only Mulan Szechuan Sauce). Such moments can go viral and create immediate and strong demand for select merchandise items, albeit for a very short period of time.
Few in the licensing community find themselves dealing with these sorts of situations on a regular basis. But in today’s environment a viral moment can happen to a corporation, fashion designer, or artist just as easily as it can to a sports league, celebrity, or entertainment studio, even if more rarely. As a result, it is a good idea for all licensors and licensees to position themselves to satisfy demand quickly if and when an unanticipated sensation involving their property arises.
Good customer service means giving consumers what they want, when they want it. Conversely, not being ready for a pop culture moment can create a public relations crisis. More generally, these sorts of situations, if handled well, can offer any property an infusion of excitement that is beneficial for the entire licensing program.
Licensing Topic of the Month: August 2017
Capitalizing on Fan Content
As time goes on, marketers are becoming more comfortable with having a two-way conversation with consumers via social media. One corollary of this trend is that licensors and licensees are increasingly sophisticated about integrating user-generated content to support and inspire their properties, products, and promotions. These initiatives tend to fall into four categories:
• Marketing. Polaroid is mining fan content through a partnership with the Social Native platform, on which 14 million creators are paid when brands utilize their work. The company’s incorporation of this fan content throughout its social media channels, packaging, and all other marketing and promotional activities has led to spikes in sales of its cameras and other licensed products.
• Fan engagement and product development. One of the most common practices involving user-generated content is to set up contests that allow fans to create and vote on product designs, with the winners being sold at retail or online, typically on a limited basis. Her Universe hosts a competition for women’s clothing designs tied to its pop culture licenses, with the favorites spotlighted in a fashion show at San Diego Comic Con. Marvel and Uniqlo are pairing for a promotion calling for design entries featuring Marvel villains and heroes; the winners will be featured in t-shirts sold at retail in 2018.
• Property DNA. User-generated content is at the core of some properties. Stikbot is a line of toy figures that work with an app to allow fans to easily create and share stop-motion-animated films. As of May of this year, the brand’s YouTube channel had close to 600,000 subscribers, and more than 100,000 fan-created animations had been uploaded to social media, according to brand owner Zing.
• Licensed products. Even beyond limited-edition goods that result from contests, some licensors are experimenting with developing licensed merchandise from fan content. User-generated online gaming platform Roblox and its toy licensee Jazwares are selling collectible figures based on fan-created games and characters, with the second wave of products hitting store shelves this month. Roblox has 56 million active monthly players and has seen more than 29 million games produced.
A recent study from the National Retail Federation and the IBM Institute of Business Value found that 44% of Gen Z/post-millennial consumers would be interested in submitting product designs and 36% in creating digital content for a favorite brand. This is one indicator that user-generated content initiatives such as these are particularly intriguing to teens and young adults.
Licensing Topic of the Month: July 2017
The Role of Retro
Licensing programs based on retro characters, designs, and logos, historically a cyclical trend, have steadily grown in importance and are now a constant in the licensing business. Licensors not only resurrect older IP for special occasions such as anniversaries or designer collaborations; they also increasingly offer their licensees a variety of retro images simply as part of their broader portfolio of artwork available for merchandise inspiration.
These retro assets provide a new hook for licensees and collaborators, give the licensing program higher visibility at retail and in the media, and offer consumers an incentive to purchase. Retro-inspired goods may even become a trendy must-have item for certain consumers, as is the case with the NHL’s licensing programs tied to its defunct teams in some markets.
Trademark protection is an additional and sometimes overlooked benefit associated with retro licensing. When a logo or character is replaced or refreshed, the typical process is to take the older version off the market as consumers get used to the new look. At the same time, however, licensors and their licensees want to protect the older marks so third parties cannot exploit them. In order to do so, according to U.S. trademark law, they must ensure that those logos and designs remain in use. That often means putting an item or two online, unpromoted but available for purchase under a “retro” banner.
Whether or not older IP will ever be exploited for design or marketing purposes, it is important to remember that retired assets need to be legally protected so they do not ultimately end up in the public domain.
Licensing Topic of the Month: June 2017
Social Media Success Stories?
These days, marketing, advertising, PR campaigns, fan-created content, commercial entertainment, and business information are all being disseminated through many channels, both traditional and social.
As a result, success is measured along a variety of metrics, including clicks, impressions, streams, “engagement,” number of fans, number of subscribers, viral pass-along, downloads and uploads, views, units of content created, hours watched, visitors per day, and more, not to mention long-familiar yardsticks such as ratings and retail sales.
Often those numbers are conveyed in sales materials as standalone figures that have little meaning to licensees trying to evaluate a given property. While 200 million total impressions or 15,000 hours of content viewed per day sounds impressive—and it may well be—what does that data really mean?
Without context, the numbers are difficult to assess. How does the total compare to measurements for similar, competitive properties? How does usage or viewership compare to the average for that platform? What percentage of the total potential audience does a figure represent?
Comparisons such as these are more useful than trying to rate a property in a vacuum.
Of course, licensors hoping to make their properties look as strong as possible may not be willing to do these calculations for their potential partners, especially if a little context brings their spectacular-sounding stats down to earth. But licensees would benefit from taking the time to do some in-depth number crunching, with a goal of gaining a more complete understanding of a property’s performance before signing on.
Licensing Topic of the Month: May 2017
The Intersection of Licensing and Luxury
Much has been written of late about the challenges facing the luxury market and particularly about the risks of licensing in the luxury space.
It is true that some luxury brands have taken businesses in-house that were formerly licensed, as Burberry has done, terminating its Japanese apparel deal with Sanyo Shokai for example. (It also bought back its perfume license from Interparfums in 2013 and invested heavily in its in-house beauty business before returning to a licensing model with Coty last month.) Other luxury labels have stayed out of licensing almost entirely.
The prevailing view among some luxury pundits seems to be that licensing is inherently risky because of the licensor’s lack of control. They suggest that licensees are free to expand into inappropriate distribution channels or categories, or oversaturate the market, resulting in harm to the brand.
The term licensing also seems to be considered synonymous with mass or mainstream in recent discussions about licensing and luxury. Licensed products are indeed mainstream when compared to couture (the runway styles and custom pieces sold just to a few wealthy customers). That is one reason why many luxury labels’ licensed accessories, footwear, and fragrances outsell the core brand. But labels with a core luxury positioning can extend into lower-priced categories without negative ramifications, if done strategically.
Licensed goods can also reside successfully at the highest end of the market, with properties of all kinds able to thrive with the right luxury partnerships.
Some of the areas where luxury and licensing are intersecting very successfully these days include:
• Collaborations. Artists, entertainment properties, and corporate brands are pairing with luxury labels (through traditional licensing or some other form of deal) to create something new. NBC Universal paired The Mummy with The Blonds for a runway collection earlier this year, for instance. These ventures are often limited in number of SKUs and time or quantities available, to enhance desirability and reduce risk.
• Fast fashion and affordable luxury. Target, Uniqlo, Zara, and H&M are just a few of the mass and specialty retailers that have ongoing programs to bring couture and high-end labels to the masses without injury to their reputations. The Royal Horticultural Society has a line of luxury chocolates with Amelie Chocolat that reflects a premium positioning while embracing consumers who are not core luxury shoppers.
• E-commerce exclusives. Gucci and men’s style destination Mr. Porter created an exclusive 43-piece luxury capsule collection in April of this year, while the New York Botanical Garden lately paired with Frontgate, a luxury home goods e-tailer, for a line of archival prints.
Meanwhile, good old-fashion brand extension in the luxury tier continues, with design labels such as Tom Ford, Valentino, Carlos Falchi, and Psycho Bunny maintaining their luxury positioning with support from strong licensing deals.
Properties from outside the fashion world also continue to sign licensees in the luxury space. The Victoria & Albert Museum recently paired with Kuwayama for luxury jewelry, and Aston Martin has forged deals with everyone from luxury linen and lace maker Emilia Burano to Quintessence Yachts.
Challenges such as oversaturation, poor fit, and inappropriate distribution—which are sometimes portrayed as a given when luxury and licensing come together—are as preventable at the high end of the market as they are for any licensing deal. They can be avoided, in most cases, by thinking strategically about where to expand, selecting the right licensees, negotiating a sound contract, and being diligent about product approvals and quality assurance.
Licensing Topic of the Month: April 2017
The concept of “collectibility” has become important for all kinds of licensed merchandise, even in categories beyond those where collectibles typically reside.
It is true that collecting is always with us, and tends to rise and fall cyclically. In the 1980s and 1990s, for example, categories such as trading cards, comic books, limited-edition figurines and plates, limited-run art prints, and other traditional collectibles categories experienced a high point. These products still attract avid and loyal collectors, both of new items and secondary-market finds, but their peak of mainstream popularity waned long ago.
The reasons for the decline were varied. The rise of the Internet gave collectors a sense of the true value and rarity of objects, which was often lower than previously thought. Oversaturation also contributed, partly driven by a tendency for marketers to bill items as “collectible” or “limited edition,” even when relatively big numbers were involved.
Collectibles are top of mind again in the 2010s, but this time they are taking a different form. Rather than being focused primarily on rarity or value, the current trend is focused on a hybrid of collectibility and everyday use. One notable example is the mini-collectible figure craze that permeates the toy industry. The element of surprise associated with blind bags, the excitement of finding a rare figure, and the quest to purchase as many as possible all add to the fun, but there is a focus on play.
Another example is in the sports business, where companies such as Funko, Oyo, and Bleacher Creatures offer toy-collectible hybrids that satisfy adults’ desire to collect items tied to their favorite teams and players, while offering their kids play value as well as an entry to collecting. Such items also are present in the entertainment collecting sector.
The growth in subscription boxes—no matter the category in which they specialize—is fueled in part by collectibility as well. Consumers who sign up for a box receive new items, often limited and exclusive, each month or each quarter. They experience the same feelings of anticipation and satisfaction that are associated with any form of collecting.
Even in the world of apparel, home furnishings, and other lifestyle products, collectibility is increasingly a factor. The capsule collections and limited editions that are so ubiquitous across all lifestyle product categories, for example, mirror the characteristics of traditional collectibles. They help retailers, licensees and licensors offer a changing assortment to spur multiple purchases. Their limited availability creates a sense of rarity, urgency, and value. They even have been known to spark a secondary market, as has happened with initiatives such as Target’s Lilly Pulitzer collaboration.
Meanwhile, traditional collectibles categories continue to innovate to provide something new for their loyal fans and bring in new consumers. Trading card specialist Upper Deck, for example, recently moved beyond its core category by launching the Grandeur Hockey Coin Collection. The limited-edition precious metal coins, featuring the images of current and past hockey stars, are packaged in blind bags to create the element of surprise and are intended to spur a new area of collecting interest for sports fans.
While collecting as a hobby waxes and wanes, almost any licensing initiative can benefit from the addition of some sort of collectible component, whether as a core part of its mission, as a recurring strategy, or as an occasional one-off to mark a special event or milestone.
Licensing Trend of the Month: March 2017
Command and Control: Taking Licensing Operations In-House
A desire for more control over a licensing program, with an ultimate goal of improving financial performance, can lead a property owner to break ties with a licensing agency or even discontinue its relationship with a licensee, bringing oversight of the licensing program, or manufacturing, in-house.
Ending a deal with a licensing agent often occurs after the licensing program is up and running. IP owners typically need expertise as they launch and do not have the resources to manage a licensing program during its start-up and early growth phases.
Once licensees are in place, however, and the focus is more on maintenance than expansion, some licensors prefer to take more control of their efforts. They have moved along the learning curve with the assistance of their agent and are ready to take the reins. Hoped-for benefits of this strategy can include better speed to market, better relationships with retailers and manufacturers, and improved margins, among others.
The Football Association, the governing body for English soccer, took its licensing program in-house in 2015, after a long history with outside agents, citing the potential to generate greater revenue to invest back into the sport and to build closer relationships with licensees and retailers.
Similarly, when Nickelodeon took its Canadian business in-house a few years back, opting to run licensing for the territory out of its Toronto office rather than through an agent as in the past, it noted the product innovation, better retail merchandising, and increased sales in the territory that would result from in-house control. And when DHX Media took its international licensing activities for Yo Gabba Gabba in-house around the same time, it noted that it had the distribution and licensing resources to manage the brand globally and was planning to strengthen the program in existing territories and expand into new regions.
Licensors of all types of properties have been known to opt for in-house licensing oversight versus agency representation. When it comes to severing licensing relationships and bringing manufacturing in-house, however, most of the examples come from the fashion or corporate sectors. Perry Ellis International took its Canadian Perry Ellis-branded men’s pants and accessories, formerly with Grand National Apparel, in-house in 2015, for instance. It said at the time that it wanted to increase synergies with its in-house men’s sportswear business to grow the brand in Canada.
Making the decision to take a program in-house requires weighing a number of factors, from the level of control needed to the financial ramifications. Not all property owners are set up to handle manufacturing or oversee licensing activities internally.
It is also important to note that property owners can maintain strong control of their licensing efforts even if they choose to work with external partners. Their tools include diligent licensee selection, ensuring compliance with a strong quality-assurance process, and close communications with agents, licensees, retailers, and other partners. Although the decision to take a business in-house may be the right one, paying attention to these responsibilities will prevent many of the concerns that cause licensors to opt for an internal solution.
Licensing Trend of the Month: February 2017
Elements of Experiential Licensing
New deals for licensed experiences seem to surface on a daily basis, with nearly every property, product, and retail category involved in this all-important segment.
A few recent examples illustrate the diversity of the market. Moomin, the classic Finnish characters, and the NBA are both launching branded cafés in Europe, while Peanuts is developing live experiences through a new agreement with Bay Laurel Advisors. Taco Bell opened a Las Vegas retail store to showcase a range of merchandise, and Banana Republic created pop-up shops with brand ambassador Olivia Palermo to support its spring 2017 apparel collection.
The Smithsonian has educational travel adventures, Nickelodeon is opening a new theme park in Foshan, China, and NASCAR is entering the themed cruise space. And these represent only a thin sampling of the possibilities.
Not all experiences serve the same purpose, and not all properties are appropriate for every experiential platform. Some of the questions to ask in order to clarify your goals and identify appropriate initiatives:
• Is the best approach short or long term? Can the property sustain more than an in-and-out program?
• Should the venture focus on multiple properties, either in the same family or franchise, or different properties from the same company? Or does it lend itself best to just one property?
• How much interactivity do consumers want, and how much is the licensor willing to allow? Is customization and personalization an important element, or is the initiative more about community and sharing?
• How important are product sales as an objective?
• Bottom line, what are you trying to achieve?
Just as with any licensing initiative, it is critical to think about experiential licensing strategically before jumping in.
Licensing Trend of the Month: January 2017
Ten Tech Trends to Watch in 2017
A number of technology innovations have moved past the point of novelty and are expected to permeate our lives in the near—or at least not-too-distant—future. The question is what impact these interrelated innovations will have on the licensing business, not just in terms of opportunities for collaboration and partnership but also in more profound ways.
• Personalization and print on demand. Already established as a means of providing limited runs of fan-created or unique products, POD’s growing speed and sophistication will allow it to support an ever-wider range of customization initiatives.
• 3D printing. Mainstream adoption of home 3D printers, if it happens, is still far away. But manufacturers and service providers are accelerating their use of the technology, enabling customers to select a unique clasp for a purse or order a realistic replica of a videogame weapon. One potential concern: how to prevent consumers from scanning licensed products and replicating them for sale.
• Shopping integration. More companies are embedding “buy it now” technologies into entertainment, sports programming, advertising, and social media, allowing consumers to immediately purchase an item featuring an emoji they like or a jacket their favorite athlete is wearing. Marketers are pondering how to make the process seamless, and nonintrusive enough to avoid a backlash.
• Wearable devices. Licensors, especially fashion designers, are tying their names to smartwatches and fitness bands, and wearables are making headway in the kids’ market. But a more far-reaching trend, still in the emerging stages, is the integration of smart technology into fabrics, allowing soft goods to track biometrics, access information, and communicate, all without a separate device.
• Internet of Things. Beyond wearables, Internet connectivity is extending to the smart home, smart cars, smart toys, and more. Licensors and licensees will increasingly need to IoT-connect their products, whether furniture or fashion. This requires software and content development, not just for communication among devices and objects but to add value, all while being conscious of privacy and security concerns.
• Artificial intelligence. AI is a big component of the smart-product concept. The technology leaped forward in 2016, and more AI-enabled product introductions are expected this year. Toys, refrigerators, and other products are able to “get to know” their owners and learn their preferences, and will gradually be able to do so in deeper ways.
• Voice recognition. Another key component of making the Internet of Things user-friendly and streamlined, voice-recognition technology became more widespread in the past year. Consumers will eventually expect to have conversations with more and more connected products in all categories.
• Augmented reality. Pokémon Go showed that AR can hold consumers’ attention, at least for a while. The question is how to move it from the realm of novelty and entertainment to providing real added value in licensed properties and products.
• Virtual reality. After years of hype, VR headsets are becoming more mainstream in certain segments, such as gaming. They are also increasingly immersive and mobile. Will there ultimately be licensing applications beyond gaming, entertainment, and sports?
• Drones and robots. Both are increasingly present in stores, and drones in particular are attracting licensing deals. It will be interesting to see how opportunities evolve, both on the consumer side (with more specialized uses, for example) and on the back end (e.g., for delivery and manufacturing).
This checklist only touches the surface, of course. The key takeaway is that all of these areas are bound to have an impact—as yet uncertain—on virtually all facets of the licensing business.
Licensing Trend of the Month: December 2016
Five First-to-Market Strategies
In today’s crowded and often copycat-filled licensing landscape, it can be difficult to develop products that truly stand out from the competition. But licensors and licensees are occasionally able to create items that are in fact new and different, at least for a short time.
Here are five ways they are doing so:
• Brand-new categories. When an entirely new technology or product comes on the market, some licensors are willing to be one of the first to enter the new sector, whether it be 3D printing (videogame marketers and sports leagues were early players), tech-infused fabrics (fashion labels such as Kenneth Cole and Ralph Lauren), or marijuana (musicians).
• First to license. Some licensors have innovated by being among the first to tie a license of any type to an established consumer product category. Duck Dynasty was one of the few properties associated with a metal detector, Jean Paul Gaultier is one of the only licensors that has authorized a signature gold bar, and Fuller Brush broke new ground by licensing its name for a full-size greenhouse.
• Innovative match-ups. An IP owner can be on the leading edge by being the first within its property type to pair with a manufacturer in an unexpected licensing category. Dolce & Gabbana created a collection of refrigerators with Smeg, certainly a more novel combination for a design label than for an electronics or beverage brand. Apple’s “new Mac” scented candle with Twelve South was an unusual example of a corporate-licensed candle (outside of the food or fragrance industry), despite the abundance of licenses of other types active in the category.
• Defying duplication. Bringing a fictional item to life in the real world is an increasingly common path to uniqueness. No other marketer can legally replicate The Simpsons’ Duff Beer or Star Trek’s Tridimensional Chess set, aside from their respective official licensees. The same is true for products that incorporate a unique element of a property (even if the product itself does not appear in-world), such as Star Wars light saber chopsticks.
• Capitalizing on crazes. Licensors can be on the leading edge of a pop-culture phenomenon by being one of the first to add a license. A handful of licensed artists and entertainment properties jumped into the adult coloring book craze early a couple of years ago, having a short window to themselves before the rest of the business got in. Forever Collectibles is still recognized for being the company that brought licensing to ugly Christmas sweaters, now a key seasonal category. Pepsi and Kim Kardashian were among the first to offer sponsored emoji-themed merchandise.
It is hard to pinpoint which licensors are truly the first to capitalize on a new opportunity, but it is certainly true that the early adopters will stand out. They face a high risk of failure in doing so, and in some cases (e.g., a brand-new product) the pairing tends to benefit the new product or category (by giving it credibility and awareness) more than it does the established IP. That said, the pioneers are likely to solidify a reputation for innovation, generate significant publicity for their property, and capture sales before the market becomes crowded or consumers move on. They also tend to remain market leaders if the trend takes hold.
Licensing Trend of the Month: November 2016
The Five Stages of a Product Craze
It has become a truism that product, property, content, and design trends come and go more quickly than ever. This is due in part to the immediacy of consumer demand—the “I want it now” phenomenon—compounded by the speed of communication via social media. These two factors, among others, cause fans to move from one trend to another at an accelerated pace.
At the same time, however, crazes that are widely expected to be short in duration tend to hang around longer than anticipated. In fact, several recent phenomena have remained “hot” for close to three years before settling to a lower, more sustainable sales level.
Two examples that have had a high profile of late: adult coloring books and ugly Christmas sweaters. They serve as good illustrations of the stages such pop-culture sensations go through.
• Stage 1. A new item (or one new to licensing) comes on the scene. Licensed ugly Christmas sweaters can be traced back to Forever Collectibles marrying sports and collegiate properties with the eye-catching apparel, which had taken hold among millennials, in 2014. Adult coloring is typically attributed to Johanna Basford’s The Secret Garden, published in late 2013.
• Stage 2. The trend expands beyond the original incarnation, with new properties joining the space. Artists followed Basford into the adult coloring realm first, followed quickly by entertainment licenses; entertainment entered the ugly sweater sector on the heels of sports. New licensees join the fray. Core retailers (e.g. Barnes & Noble in the case of adult coloring) display the items more and more prominently, while shops in unconnected categories carry products as well.
• Stage 3. As the core category moves toward saturation but consumers and retailers are still hungry for product, the trend diversifies into adjacent areas. Ugly sweater patterns appeared on caps, socks, t-shirts, stationery, and wrapping paper, while adult coloring moved into posters, puzzles, mugs, and fabric goods. “Adult”-style coloring patterns, but with age-appropriate themes, moved down to the tween market, while publishers added new adult-focused activities, such as sophisticated dot-to-dots.
• Stage 4. New product introductions and additional licensing deals slow to a trickle, and the range of retailers carrying the items starts to narrow back to the core channels. The latter continue to meet demand with large and prominent displays, and a wide assortment is available through e-commerce.
• Stage 5. The craze is no longer top of mind. Products move from the front of the store back to their long-term departmental homes, and the product array narrows to the best-selling items and properties, with periodic refreshes. New licensing deals are rare. The category remains a part of life, selling more than before the craze but leveling off well below the peak.
It should be noted that both examples mentioned here involve multiple properties. Individual licenses that become quick hits may have a shorter lifespan. That said, Frozen’s peak also lasted longer than many anticipated. In addition, hot properties tend to be joined very soon by others in the same vein—Angry Birds was followed almost immediately by other mobile gaming licenses—and collectively they behave very much like the examples described here.
As with all things licensing-related, there are exceptions to every rule, with some phenomena lasting longer and some burning faster. Whatever the timespan, this blueprint serves as a rough guide to determine where a particular craze is in its natural trajectory, giving licensors and licensees an idea of whether there is still time to jump in.
Licensing Trend of the Month: October 2016
A Never-Ending Need for Novelty
As social media-influenced consumers turn quickly from trend to trend and property to property, the pressure is on for licensors and licensees to find ways to keep consumers coming back for more.
Presenting an ever-changing assortment of new and different product offerings is a critical component of maintaining interest over time, and licensors are using a variety of tools to provide a continuous stream of inventive design assets:
• Tying in to pop culture. Pepsi created a range of Pepsimojis, resulting in licensed products sold through the Story shop in Manhattan. American Greetings’ licensees, such as SpaghettiHeadz, are incorporating its Care Bears-inspired Care-Moji designs. Meanwhile, a number of licensees have created puzzles, posters, and socks with adult-coloring themes, while artists have added adult-coloring designs to their portfolios of licenseable images.
• Focusing on specific property elements. Products are incorporating phrases from films (50 Shades of Grey, The Fault in Our Stars), music (Beatles’ lyrics), and sports (Marshawn Lynch’s trademarked “I’m just here so I won’t get fired”), even without accompanying graphics. Another example: merchandise inspired by single TV episodes (a Halloween installment of Peppa Pig, Adventure Time’s “Card Wars”).
• Breaking out character groups. Rovio is creating a licensing initiative tied to the girl-friendly Hatchlings characters as part of its more boy-skewing Angry Birds program. Universal Studios’ Minions have outshadowed the main characters in the Despicable Me franchise.
• Highlighting signature colors. Martha Stewart has licensed products such as 3D printing filaments that reflect her recognizable color palette, while several years ago Fox created a limited-edition Simpsons 20th anniversary collection in its characters’ distinctive yellow skin color. These licensors are taking a page from the likes of Fiesta and Pantone, whose licensing efforts are based solely on their easy-to-identify colors.
• Aging down. A number of entertainment properties have created youthful versions of their classic characters, such as Warner Bros. has done with its DC Superhero Girls program. NFL Players Inc. paired with Pop Warner Little Scholars and the Collegiate Licensing Company for cross-licensing programs portraying NFL athletes as they were in youth football and college.
• Developing new art through co-branding. Among other benefits, pairing two diverse properties gives rise to a range of licenseable patterns or characters. Artist Bea Szenfeld integrated Hello Kitty into her surface designs, licensed to companies such as Klippan fabrics; art property Tokidoki teamed with Major League Baseball, leading to licensed products including caps, t-shirts, smartphone covers, and totebags.
• Offering retro styles. Licensors are integrating retro choices into their style guides, not necessarily as separate initiatives but as one design option. Scholastic offers original Norman Bridwell illustrations as part of the Clifford program. Some Nickelodeon licensees are using artwork from the 1990s Splat! era. Tommo is selling battery packs and other gaming accessories featuring retro Sega imagery.
This checklist just touches the surface of a deep pool of techniques that can be used across property types to expand the range of imagery available to licensees. Many of these tools offer other benefits, such as an opportunity to generate awareness, expand distribution, introduce new audiences to a property, or add revenue. But, importantly, all also contribute to licensors’ efforts to create a steady stream of licenseable design assets.
Licensing Trend of the Month: September 2016
Troubles in the Retail Trade
In spite of a U.S. economy that continues to improve, at least on paper, with better employment numbers, rising incomes, consumer spending on the upswing, and other positive signs, many retailers have been showing woeful results over the past several months.
Some are facing bankruptcies or trying to find a buyer to help turn their fortunes around. Others are seeing sales and/or earnings plummet or are offering lower financial guidance in anticipation of poor results later this year. A few are reportedly delaying payments to vendors. And several are slashing jobs and/or shuttering significant numbers of stores.
The bad news is cutting across all types of retail, including specialty stores (Perry Ellis, Aeropostale, Gap); department stores, both high-end and mid-tier (Neiman Marcus, Sears/Kmart, Macy’s); value stores (Dollar General, Dollar Tree); big-box stores (Golfsmith); even supermarkets (Supervalu, Sprouts). The U.K. is not immune, either: BHS is closing after 88 years in business, Marks & Spencer is cutting 500 jobs, and Asda recently reported its worst quarterly sales drop ever.
The reasons for this misery are likely many-fold. Although the economy in the U.S. has been improving steadily, consumer confidence remains low and unemployment higher than the statistics show, at least when those who have stopped looking are included. E-commerce, especially through pure-play e-tailers such as Amazon, continues to grow and to account for an ever-larger percentage of total retail sales. Some experts have pointed to a lack of new fashion trends as one reason for apparel retailers’ weaknesses. And, of course, some of the challenges are due to decisions made by the retailers themselves.
For the licensing community, retail struggles are certainly not a good thing. But there may be a silver lining for some, since licensing can be an effective tool for improving a retailer’s fortunes. It can attract more traffic and sales through desirable exclusives, encourage repeat shopping by enabling a changing and varied product assortment, give rise to in-store experiences that branded or private-label goods do not allow, or generate new revenue streams through outbound licensing.
As a result, opportunities continue to exist for licensors and licensees that are able to address the needs of specific retail chains—even the ones that are suffering, depending on circumstances—with well-thought-out, innovative, and results-oriented programs.
Licensing Trend of the Month: August 2016
At the Mall: Trends for Fall and Back-to-School
Following are observations from a mid-August visit to Mall of America. It should be noted that most of the mall’s more than 520 retail stores fall into the specialty and department store tier; some of the findings may not apply to mass or big-box stores.
• In Character. Retailers spotlighting exclusive character merchandise this season range from Tilly’s calling out an exclusive Ghostbusters x Asphalt t-shirt with a large sign, to M.A.C. displaying its Trolls nail colors at the door. Many stores are gathering t-shirts or other items on signage-identified licensed-product tables or racks, including Sears’ men’s area, Children’s Place boys’ department, and Lids.
• Rock On. Among the many exclusive celebrity apparel collections dotting the mall are musician tie-ins, including Jennifer Hudson’s Solo Jeans collection at New York and Company and Tyler Carter and Ash Costello at Hot Topic. Meanwhile, music acts and events are popping up in graphic tee assortments: Woodstock in the front window at Ragstock, Rolling Stones on a table at Tilly’s, Ramones at Gap, a table of rap-themed shirts at Sears, and even a Metallica onesie at H&M Kids.
• Emojis and More Emojis. Emojis are prominent this season, especially on apparel, accessories, gifts, stationery, and home décor appealing to tween and teen girls. At Justice, emojis are a main design theme across the floor, while Ragstock, Gap Kids, Shi, Claire’s, Paper Source, iCandy, and Hallmark are among those carrying backpacks, purses, socks, pillows, and the like. Very few of the products seemed to be licensed, based on a review of their hangtags and labeling.
• Sports Season. National Football League and Major League Baseball products featuring local teams are naturally commanding lots of space at this time of year, and not only at apparel and sporting goods stores. Hallmark has a table of NFL collectibles, Tommy Bahama has NFL casual shirts in the front window, and Old Vine Wine’s window display is devoted to MLB-licensed wines. Soccer is also taking hold, from FIFA 17 videogame signage at GameStop’s door to a Major League Soccer-licensed game at Creative Kidstuff, to a rack of FC Barcelona jerseys next to similar NFL product at Marshall’s.
• Inspired By….The Olympic Games, currently ongoing in Rio, are top-of-mind, as retailers feature patriotic USA-themed or Olympic-rings-inspired designs, mostly non-licensed. Pac Sun is running a #pacthepodium peel-off campaign for prizes such as 30% off a graphic tee. The Ralph Lauren boys’ department at Macy’s has signage touting that a percentage of proceeds goes to the U.S. Olympic team; Lauren designed the athletes’ official apparel. College and varsity themes are also prominent, but not of the licensed variety, outside of sporting goods and fan shops.
• Bricks and Clicks. The integration of retailers’ bricks-and-mortar, e-commerce, mobile, and social media initiatives is highlighted in eye-catching signage. Sears encourages shoppers to download its app and refer to it while shopping; Charlotte Russe and Old Navy refer customers online to find items not in the store; and Nordstrom and Long Tall Sally, a tall women’s apparel shop, are highlighting their click-and-collect (order online/pick up in person) services.
• Power of the Plus. Retailers are upgrading and highlighting their plus-size ranges. Maurice’s front window touts its 1-24 size range, with the tagline “Style is a mindset, not a measurement.” Charlotte Russe is visibly promoting its Charlotte Russe+ brand, launched last year, while Sears devotes significant space to its new Simply Emma label. Licensing plays a role as well; Lane Bryant is spotlighting its Glamour tie-in merchandise at the door.
• And More….A number of retailers are focusing on smart-girl products, from “Smart is the new pretty” t-shirts at Justice to Project MC2 science kits in Nordstrom’s girls’ department. The gay rights movement is represented on “Love is Love” and rainbow heart t-shirts at Old Navy and others. Adult coloring books seem to have longer-than-expected legs, with a still-strong presence in Barnes & Noble and examples popping up everywhere from Greater Goods to Cut Above Home. And anything denim is front and center.
Heavy discounting seems to be the norm, with 20% to 80% off on back-to-school items, specific categories, or sometimes even the whole store, as well as plentiful buy-one-get-one offers.
Licensing Trend of the Month: July 2016
Six Social and Streaming Media Strategies for Licensing
Licensors and licensees have come a long way in the past year when it comes to integrating social media and streaming content into their multiplatform licensing efforts. While experimentation is ongoing, as executives try to discover what types of initiatives are most effective—and these vary by situation—six common strategies have taken shape.
• Involving Influentials. A real or implied endorsement from a social media celebrity can raise awareness and drive consumption. Sesame Workshop’s Sesame Love to Learn promotional campaign pairs Sesame Street characters with “digital-native” properties, such as Rosanna Pisino, the Eh Bee Family, and Simon’s Cat, in new content that is disseminated through both parties’ social channels. The venture has added subscribers to Sesame’s YouTube channels as well as adding exposure.
• Understanding UGC. Most licensors have become comfortable, to a degree, with allowing user-generated content based on their properties to be distributed through YouTube, Instagram, and other social channels. Some go further, viewing UGC as an essential part of their relationship with the consumer. To that end, more property owners are making official assets available to fans, social media celebrities, and licensees, allowing them to create UGC while staying within the law.
• Maximizing Platforms. A multiplatform approach to social marketing no longer means simply having a presence across social media platforms and channels. Video on demand, YouTube, Instagram, Twitter, and Snapchat all have unique characteristics, and licensors are addressing that by creating new content and messaging specifically for each channel, rather than simply repurposing.
• Going Viral. Licensors and licensees are trying to make it easier for their messaging, characters, and brands to go viral by providing and promoting social media hashtags related to particular themes or initiatives. Examples include American Greetings’ #ShareYourCare, tied to Care Bears, and Cartoon Network’s #powfactor for Powerpuff Girls. In terms of metrics, many licensors and licensees are starting to put more emphasis on the number of times consumers share a piece of content than on the amount of time they watch.
• Speeding Up the Process. Fostering fan engagement through social media and on-demand consumption of marketing messages and content has become a key goal for any property. But with that comes the need for increased speed to market. Licensors and licensees have significantly compressed the time it takes to satisfy consumer demand for merchandise, while it lasts, both online and, increasingly, at retail.
• Mining for Properties. As social and streaming media have become such an integral part of life, the number of properties coming from this sector is naturally growing. From Gallina Pintadinha (Lottie Dottie Chicken) in Brazil, with its 14 million daily views and more than 90 merchandise licensees, to Jazware’s TubeHeroes brand, consisting of videogaming celebrities such as Minecrafter Dan TDM, more properties rooted in social and streaming media are not only launching programs but generating some consumer product success. And the process of convincing retailers to come on board, and do so quickly, has become easier.
Of course, the landscape is continually evolving as the licensing community tests new ways to engage fans, spread the word about a property, and, ultimately, encourage purchases.
Licensing Trend of the Month: June 2016
Taking Stock at Mid-Year
As we approach the mid-point of 2016—and mark the first day of Licensing International Expo—it seems like a good time to take stock of some key licensing developments from the last six months.
• Entertainment rising. The entertainment/character segment remains strong, with sweet-and-safe preschool properties and girl-centric superheroes being two segments of particular note. Meanwhile, streaming, web-based, and app-origin properties have almost become the equals of TV and films in terms of licensing potential. The ubiquity of digital devices in kids’ and parents’ lives has made licensees in many categories give digital properties equal weight to those with more traditional roots as they evaluate whether to sign on.
• Changing tech perceptions. Rather than assessing new gadgets and technologies as separate categories, licensors are now more often considering, instead, how new incarnations of tech can add value to existing categories. That is, wearables such as smartwatches and fitness bands become one component of a fashion- or sports-licensed watch line, rather than a separate deal. Similarly, while some physical-plus-digital toy brands, launched with such fanfare, have suffered—Disney shut down its Infinity franchise—connectivity is a core element in everything from collectibles and cars to dolls and drones.
• Retail struggles. Despite an economy that has shown improvement along many measures, traditional retailers have faced challenges in the first half of the year, from declining profits and/or sales (Nordstrom, Target, Kohl’s) to store closings (Aeropostale, Men’s Warehouse, Walmart) and even chain-wide demises (BHS, Sports Authority). As a result, licensors are redoubling their efforts to find alternatives to bricks-and-mortar retail. At the same time, e-commerce sales continue to grow. Meal-delivery services and subscription/membership boxes such as Loot Crate are showing increasing potential for licensing (even as some formerly strong players have begun to struggle). And brands with roots in retail are trying to extend their names, through licensing or partnerships, into ever more closely competitive channels.
• Property and product niches. A number of sectors within the licensing business emerged or strengthened in the first half of the year, including: health/beauty-related categories, especially men’s grooming, color cosmetics, and suncare; brands tied to wellness, from bike-lifestyle properties, to gyms, to fitness celebrities; targeted apparel sectors, such as body-positive plus-size clothing and items for specific ethnic groups; and practical, functional, everyday products, such as refrigerators, batteries, cleaning supplies, and trash bags.
What trends do you think are impacting the licensing business in the first half of 2016 and beyond?
Licensing Trend of the Month: May 2016
A Year-Round Celebration
Licensors and licensees are keying in to holidays throughout the year as a means of keeping their properties at the top of consumers’ minds and providing a reason for repeat purchasing.
From Valentine’s Day, through Mother’s Day, Father’s Day, and Halloween, to the all-important Christmas season, holidays offer a full calendar of promotional opportunities and hooks for new merchandise. Depending on the property and the product, other opportunities, such as Three Kings Day, Hanukkah, Memorial Day or Fourth of July, Cinco de Mayo, or even Thanksgiving, may make sense.
Holiday-themed merchandising and marketing are not new, of course; licensed products have been promoted for holidays such as Christmas, Valentine’s Day, and Halloween for years. What has changed is that many in the licensing community are capitalizing on less-saturated holidays and trying new ways to stand out from the crowd.
That said, holiday-marketing initiatives for licensed products tend to take a few primary forms:
• Holiday positioning. Egmont and agent Pink Key introduced a licensing program in 2015 tied to Roy of the Rovers, a nostalgic UK comic book property, with an emphasis on Father’s Day gifting; Walker Books’ children’s storybook Guess How Much I Love You? has a line of adult jewelry promoted as a natural for gift-giving at Valentine’s Day; eOne launched a line of Halloween items tied to an episode of the preschool TV show Peppa Pig featuring that holiday. These follow in the footsteps of a handful of classic properties that have long been identified with particular holidays, such as Peanuts with Christmas or Scooby Doo with Halloween.
• Making holiday purchasing easy. Licensors have created catalogs or online boutiques that gather licensed products from a number of licensees to spur gift-giving for specific holiday occasions. Disney has assembled groupings of dad-friendly Star Wars and Marvel products for Father’s Day, as has Warner Bros. for DC Comics. BBC Worldwide and Nickelodeon are among the property owners that have done similar collections based on multiple properties for the Christmas/Hanukkah season.
• Holiday-themed content, imagery, or products. Properties from the NFL to Wu-Tang Clan to Transformers have been featured on ugly Christmas sweaters. Corduroy, Spot, Curious George, and Sesame Street characters have starred in Hanukkah-themed children’s books. Dora, Peg + Cat, Caillou, and many others have been featured in Halloween-themed animation. The Minions are among many characters that have been recreated as holiday lights. A range of opportunities exists to extend a property beyond the traditional Halloween costume or Christmas ornament.
While holiday marketing is a logical way to maintain awareness and promote shopping, the landscape has become crowded, even beyond the fourth quarter. The challenge is to stand out by creating an innovative take on a particular holiday, and by ensuring that the holiday has an innate connection with the property or product, rather than being forced.
Licensing Trend of the Month: April 2016
The Opposite of Logo-Slapping
Years ago, just being associated with a license was enough to differentiate a product from its competitors’ offerings at retail. But as the market has become saturated with licensed merchandise over time, especially in the character/entertainment arena, that era is long gone.
Licensors and licensees these days have to work to design something that stands out on-shelf or online. One way to do so is to create a real-world version of a fictional product that appears within a TV show or film.
Such “in-world” merchandise allows fans to engage in an intimate way with the property, almost as if they are sharing an experience with their favorite characters. It also can have value to collectors.
But more importantly, from a competitive point of view, it results in a product that is unique: No other licensing program can replicate the same item exactly.
Examples of in-world spin-offs are varied. Publishers are frequent participants, recreating fictional books that play a central role in a TV show such as Fringe or My Little Pony. In the food and beverage category, illustrations include Duff Beer from The Simpsons and Klingon Bloodwine from Star Trek. Toys and collectibles have included a Card Wars board game springing from an episode of Adventure Time, a near life-sized working replica of the droid BB-8 from Star Wars: The Force Awakens, and a replica of the Tridimensional Chess set, again from Star Trek.
Another genre of in-world merchandise consists of facsimiles of products marketed by a fictional company that serves as the backdrop for a TV show or film, or plays a key role in the plotline. A handful of representative deals includes the Jabot jewelry and skincare line a few years back, tied to The Young and the Restless; Dunder Mifflin paper and office supplies from The Office (still available, long after the U.S. version of the show ended in 2013); and a line of Mid-America novelties and joke gifts based on the short-lived series Outsourced.
This list represents just a small sampling of real-world versions of fictional props and products that have been brought to life through licensing over the past few years. In fact, licensors have been making fictional products real for quite some time. After all, the TV series Murder She Wrote gave birth to a series of novels “authored” by the main character, Jessica Fletcher, who was a mystery writer when not solving crimes in Cabot Cove. Still going strong, this early example of in-world licensing began back in 1989.
The technique has become much more common these days, however. Technology has made it easier and more cost-effective to create innovative products, even in short runs. And marketers of licensed properties and products are, more than ever, looking for ways to create singular, hard-to-copy items to stay ahead of the competition.
Licensing Trend of the Month: March 2016
Licensors and licensees are increasingly looking outside their normal product development processes to develop new products and properties. They are asking their fans for new ideas and feedback, for example, and considering concepts from entrepreneurial companies outside their normal pool of partners.
In some cases, the process is informal. It has become routine to monitor social media sites such as Pinterest and Instagram to see what the fans are up to, for example. Character licensors are looking for insights about what new crafts are hot or what items the fans are creating to show their love of a property, while fashion designers are monitoring Twitter and other social media platforms to see what the fans think about new looks being worn by celebrities on award-show red carpets.
Cartoon Network signed Pottercraft as a licensee for an Adventure Time DIY craft book after noticing that series fans were virally sharing photos of self-made room décor and other items featuring the characters Finn and Jake. And a number of licensees have reached out to and forged licensing deals with emerging celebrities after noticing their strong fan followings on YouTube.
A bit less informally, licensors and licensees are encouraging fans to submit and vote on new product ideas, storylines, and design concepts. Such contests can be overseen independently or through a crowdsourcing platform such as Threadless. Increasingly, property owners and manufacturers are also turning to crowdfunding to test and solicit new ideas; Hasbro ran a gaming design challenge through Indiegogo, led by its recently launched Hasbro Gaming Lab, resulting in a new product, Irresponsibility: The Mr. Toast Card Game.
Licensees, particularly toy companies such as LEGO, Mattel, and more, have taken crowdsourcing a step further by creating ongoing innovation programs that solicit ideas and fan feedback on a regular basis. Licensed products such as Minecraft LEGO, as well as product innovations such as new features on Barbie and Hot Wheels bicycles, have come through such initiatives.
Most recently, licensors are launching business incubators or accelerators to provide expertise, funding, and distribution to entrepreneurs with promising new ideas. Disney has implemented the Disney Accelerator and Disney Channel Storytellers programs; other examples range from Jazwares’ Jazwings to Sesame Workshop’s Sesame Ventures.
Lane Crawford department stores in China and Hong Kong have sought new design ideas through open calls, supporting the winners with free space in-store and/or online, mentoring, editorial coverage, and marketing support. And the University of Oregon launched the Oregon Incubator program to support entrepreneurs who have come up with strong licensed product concepts. The program covers upfront expenses and licensing advances, expedites the licensing process, and tests the products by giving them space in Duck Stores on and around the campus. One company launched a hybrid trucker/cowboy hat through the program that has since expanded to include other collegiate licenses.
These types of innovation techniques, whether informal or formal, are growing across property types and product categories within the licensing business. Companies of all kinds are realizing that long-term success requires constant innovation and differentiation, that good ideas can come from anywhere, and that being open to and supporting new concepts from unexpected places is good business practice.
Licensing Trend of the Month: February 2016
Reconsidering Gender Roles
Gender equity, gender roles, and acceptance of diversity and individualism, especially among girls, have long been areas of discussion in the toy and children’s product industries. But, until recently, not much had changed. Most of the consumer products tied to these concepts have been centered in the specialty market, driven by companies such as GoldieBlox or Wonderhood Toys.
While that is still true to a large degree, the way girls’ products are being positioned and marketed is changing on a more widespread basis of late. Major manufacturers and mainstream retailers are accelerating the trend by jumping on the bandwagon in response to consumer feedback.
The conversation is manifesting itself in a number of ways.
One notable aspect is the push to get girls interested in the sciences; toy companies are increasingly making a concerted effort to market science kits and apps to girls, for example, including Her Interactive with a Nancy Drew coding app and Thames & Kosmos with a line of S.T.E.A.M. kits tied to Barbie. Meanwhile, property owners such as MGA, with Project MC2, and Henson Productions, with Dot., are featuring strong girl characters in S.T.E.M.-themed programming.
Target’s removal of its gender-specific signs in the toy and other departments and its creation of gender-neutral home décor for its new children’s brand, Pillowfort, are also symbols of this trend. Similarly, U.K. publisher Buster Books recently reacted to a consumer backlash by stopping publication of its range of gendered titles, including The Brilliant Boys’ Colouring Book and The Gorgeous Girls’ Colouring Book, which, it was argued, placed focus on achievements in the boys’ titles and looks in the girls’.
Self-confidence and self-acceptance among girls, who tend to feel embarrassed about their size and their looks in general, is coming to the forefront as a marketing theme and product-development consideration.
Mattel has taken newsworthy steps in this area lately, pairing with Lady Gaga and her Born This Way Foundation in conjunction with Monster High last fall and, more significantly, introducing Barbies of all shapes, sizes, and ethnicities this year.
Warner Bros. is making DC Super Hero Girls one of its major licensing initiatives in 2016, along with the Batman v. Superman feature film. Mattel introduced Barbie: Spy Squad dolls with serious action features, as did Bandai with its licensed Miraculous line. Girl-centric, comic-based, live-action TV series are all the rage, from Super Girl to Jessica Jones. In these cases, and the other examples that abound these days, the properties feature empowered females at the center of the action but are meant to appeal to both genders.
The trend toward character equality even extends into sports, where the Boston Red Sox recently debuted a female, Tessie, to go along with its long-time male mascot Wally the Green Monster.
The uproar over the lack of Star Wars toys and games featuring the new female character Rey is indicative of fans’ desire for products tied to female characters, whether alone or within a broader assortment. While some of the impetus for the missing Rey products was due to Disney’s secrecy concerns leading up to the film, many fans noted that there was adequate product on the market tied to a new male character, Kylo Ren.
These developments, taken collectively, seem as if they could represent the start of a long-term trend rather than a short-term fad, but we will have to wait and see.
Licensing Trend of the Month: January 2016
Licensing and “The Internet of Things”
From wearable devices to connected toys to appliances, consumer products are slowly approaching the day when they will become part of the so-called “Internet of Things” (IoT). Many observers believe that, in the not-to-distant future, a cohesive network of smart devices, products, buildings, and vehicles will be able to collect and react to data and communicate seamlessly with each other.
For property owners and manufacturers, the primary initial impact is the need to consider whether to add connectivity, artificial intelligence, and/or other IoT elements to their licensed products, from footballs, bras, and mattresses to refrigerators and automobiles. There will also be early demand for licensed content, especially reference data such as real-time weather conditions or travel information.
Ultimately, branding opportunities may emerge across the entire Internet of Things. Currently, companies such as Amazon, Samsung, Google, and Apple are positioning themselves to serve as a central hub, working to establish the technology and a common language to foster IoT applications, as well as to become the leading brand in the space.
In terms of brand-extension licensing, most of the activity will probably be tied to certain segments within the greater IoT world. UnderArmour, for example, is associating its brand with the wellness sector, introducing Health Box, a collection of compatible connected products including heart rate monitors, footwear, earbuds, scales, and wristbands (some of them licensed). Relevant brands will think about taking a similar approach to other facets of IoT, such as smart cars, smart toys, or the smart home.
Licensing may prove effective in spurring acceptance of IoT, as well, by helping to allay consumer fears. IoT brings with it increased dangers: financial data breaches (fostered by an increasing number of touchpoints), access to personal information (including about children), spying through connected video, and the like. A well-known and trusted brand, in combination with strong security protocols, may give consumers confidence that the IoT products they are purchasing are safe.
Licensing will also be a tool to improve the fashionability of various components of the Internet of Things, many of which have tended to be clunky and not user-friendly to date. This is already happening in narrow slices of IoT, such as fitness bands and smart watches.
No one knows how fast the Internet of Things will arrive or exactly what form it will take, but most observers believe the day is coming when our eyeglasses, chairs, doormats, and bracelets are connected and “smart.” That means that a significant percentage of licensed products will eventually be connected to the Internet of Things, a fact that will almost certainly have a greater impact on the business than any individual IoT-related licensing or brand-extension opportunities.
Licensing Trend of the Month: December 2015
The Year in Review
The licensing business witnessed significant change in 2015. Here are 10 trends that emerged, took hold, or accelerated in the past year.
1. Makers. The Maker/DIY movement helped drive sales of STEM (science, technology, engineering, and math), construction, and arts and crafts toys, and furthered the interest in 3D printing. Even adult coloring books, the category-of-the-moment at retail this holiday, fits this trend.
2. The crowd. Crowdfunding really took hold as licensors and licensees—both established and new—turned to Kickstarter and Indiegogo to raise funds and, more importantly, gauge the market. Meanwhile, crowdsourcing has become almost a prerequisite for product development and fan engagement, from toy companies’ ongoing innovation programs to IP-centric contests through design communities such as Threadless.
3. Digital shopping. Social commerce emerged on platforms including Twitter, Instagram, and Facebook and specialists such as Stylinity. The long-awaited convergence of entertainment and shopping also progressed, led by properties such as Postman Pete and the NBA. Meanwhile, digital-only streaming TV became viable for licensing, which may further the entertainment-product connection.
4. Group licensing. Social media celebrities and brands gained traction as licensed properties, but typically not enough to stand alone. This led to an acceleration in group licensing efforts such as Throwboy’s range of pillows with three YouTubers or Jazwares’ Tube Heroes brand of 40-plus social media stars. Established licensors with portfolios of properties also are using group-licensing initiatives to capitalize on their lesser-known brands.
5. Home delivery. Membership boxes full of branded or, more often, curated merchandise tied to a licensed property (e.g., Quarterly Co. or Wizard’s Comic Con Box) were prominent in 2015, as were licensed meal delivery services (e.g., eMeals’ examples under Time Inc.’s All You and Health brands). Subscription programs for fashion may be the next untapped area licensors can exploit.
6. Pop-ups and playgrounds. On the experiential licensing front, pop-up shops gained steam as a ubiquitous means of promoting and selling licensed products. Licensed playgrounds also took hold around the world, with examples including Angry Birds and WWE, among many others. And the list of licensed theme parks and attractions continues to grow, encompassing multiproperty deals with the likes of Ubisoft and Fox and individual properties such as Boj and Moomin.
7. Wearables: wait and see. After an initial burst of early-adopting licensors in the fitness and fashion industries (from Bally’s to Tory Burch), most IP owners are waiting to see which types of wearable devices and which marketers rise to the top of this quickly evolving market. Content licensing deals in the wearables space, by the likes of PBS Kids, Weight Watchers, and The Weather Channel, continue.
8. Inclusiveness. More properties and marketing initiatives this year have featured, or resonated with, certain populations (special-needs children or gay and lesbian consumers, for example), but are meant to appeal to a mass audience. The market formerly known as “plus-size” generated significant interest, but increasingly as part of an all-sized range rather than as a stand-alone initiative. Gender-specific signage came down in some toy departments, a growing number of designers experimented with unisex lines, and comic-based products reflecting the “girl power” trend were female-friendly but meant for all.
9. Design viewpoints. Licensors mined their properties for elements to fit current design trends: a distinctive color palette; all-over patterns incorporating their characters or other graphics; fonts associated with a property (separately from other artwork); self-expressive characters transformed into emojis.
10. No more taboos. The business witnessed a rise in categories that used to be off-limits for all but a few licensors. Examples included adult pleasure products tied to 50 Shades of Grey and Mötorhead, Hustler and Taylor Gang vaping accessories, and cannabis and related products associated with Snoop Dogg and Bob Marley.
It will be interesting to see how long some of these trends continue and which ones will be replaced by whatever is new in 2016.
Licensing Trend of the Month: November 2015
The Evolution of E-Commerce
In many ways, 2015 has been a pivotal year when it comes to ecommerce sales of licensed products. Twelve to 18 months ago, the licensing community was trying to figure out how to turn avid Facebook friends into paying customers. Now, many are actively selling through all manner of social commerce channels, often with positive results.
Licensors such as artist Douglas Coupland and licensees from HarperCollins to Roots have experimented with Twitter Commerce; other property owners and manufacturers have launched similar initiatives through nascent ecommerce channels on social media platforms such as Pinterest and Instagram.
Meanwhile, licensors including model Sophie Simmons and Real Housewife Sheree Whitfield have worked with specialized social commerce sites such as The Style Club and Kitsy Lane—whose primary intent is to combine community and consumerism—to create exclusive merchandise lines.
Social shopping can be particularly important in emerging markets outside of the U.S. In China, for example, consumers have started to move to social commerce from traditional ecommerce, purchasing through stores on the texting site WeChat and the mobile shopping app Koudi, for example.
Aside from social shopping, other ecommerce avenues that have shown promise in the past 12 months or so include:
• Flash sale sites. Properties from colleges to Peppa Pig are selling products through sites such as Zulily; many are reporting strong revenue increases from this channel in 2015.
• Membership boxes. Subscription-based companies including Quarterly Co., Birchbox, and SuperAwesome are pairing with the likes of Pharrell Williams, Cynthia Rowley, and Mind Candy for periodic shipments of curated or branded merchandise.
• Outlet sites. Snoop Dogg (a.k.a. Snoop Lion) is one of several licensors partnering with outlet e-shops; the rapper has a store called the Snoopermarket on Overstock.com that features apparel, slippers, plush, and dog shampoo.
• Aggregators. Among the hundreds of licensees and licensors on the fashion-aggregator site Lyst.com are Adidas, A Bathing Ape, and New Era; properties represented range from Dita von Teese to Disney.
• Product-content links. Companies trying to create a stronger connection between media and merchandise include Johnson Publishing, which launched Ebony and Jet sites that allow consumers to purchase both branded content and products; HIT, which partnered with Amazon for a Fireman Sam hub offering streaming episodes and licensed items; and the NBA, which paired with American Express for Home Court Advantage, a destination that highlights free and premium content as well as team- and player-identified products.
These examples represent just a tiny slice of the varied licensed-product ecommerce scene in 2015. And things are moving fast; expect the landscape to look entirely different next year at this time.
Licensing Trend of the Month: October 2015
Heavy on the Homegrown
A recent trip to London for Brand Licensing Europe offered an opportunity for visits to a range of department stores, supermarkets, specialty chains, and indie boutiques in the city. It was a good reminder of the importance of local properties in any country’s licensing landscape, even given the prominence of the big global brands across all sectors of consumer products.
In fashion, for example, while all the global designer labels are present, most key retailers in London highlight British design. At high-end department stores such as Harrod’s and Harvey Nichols, labels with British roots (and worldwide renown)—Alexander McQueen, Stella McCartney, Paul Smith, and the like—are prominently displayed among the other international brands.
Similarly, the home goods category is weighted toward British and Irish art, lifestyle, and design. Luxury department store Liberty is featuring an exclusive tabletop pattern from Emma Bridgewater, while department store Debenhams’ exclusive designers in home goods (many of which extend into apparel and other categories as well) include Patrick Grant, John Rocha (born in Hong Kong, based in Ireland), Jasper Conran, Ben De Lisi, Matthew Williamson, and Betty Jackson. Another department store, House of Fraser, features brands such as Ted Baker London in home goods, as well as in accessories and bags.
Supermarkets including Tesco, Sainsbury’s, and Waitrose highlight the importance of local chefs, celebrities, and culinary brands across categories. Chefs Anjun Anand and Mary Berry and restaurant chain Nando’s are present in the sauce aisle, while Linda McCartney and chef Ken Hom (an American whose fame derives from his work as a BBC presenter) are in refrigerated prepared foods, and chef Jamie Oliver is in spices. Food brand extensions range from Hovis digestive biscuits (associated with a leading name in bread) to Jammie Dodgers celebration cakes (based on a biscuit/cookie trademark).
On the character side, Peppa Pig holds her own against Disney and other global brands, representing by far the most visible individual character/entertainment property in children’s apparel, toys, books, and foods. U.K.-based properties from Tatty Teddy and Thomas & Friends to Bing and Beatrix Potter are among the many British characters highlighted in toy shops such as Hamley’s and The Entertainer, and elsewhere.
In fact, the strength of local licensing is notable across categories and retail channels. One Direction annuals are featured at W.H. Smith bookstores, London Underground notebooks at stationery chain Paperchase, Jane Asher bakeware and gadgets at value channel Poundland, and House of Holland fake nails at pharmacy Boots.
Of course, the London licensing scene is unique among global territories in many ways, being the most mature licensing market in the world outside of North America and having long hosted a raft of homegrown properties. But the propensity for local properties to perform as well or better in their own markets than the big global brands, and to command a high percentage of floor or shelf space, holds true across the world, from Chile to China. It is a factor that licensors, no matter where they are based, should bear in mind as they expand their international licensing efforts.
Licensing Trend of the Month: September 2015
A Need for Speed
The licensing process is accelerating, thanks in part to consumers’ increasing desire for immediate gratification.
Fans’ use of social media is causing properties to rise and fall quickly, on a global basis and often for a niche audience. Changing entertainment distribution models—notably the transition from scheduled television to binge-watching—are creating a faster bond between properties and consumers, but also causing some enthusiasts to immediately move on to the next thing. The ability to find content through multiple channels enables avid fans to demand merchandise well before mainstream shoppers are even aware of a property.
On the supply side, meanwhile, the licensing community is often able to get products to market swiftly. Improvements in manufacturing continue to shorten the product-development and production process in many categories. The mainstreaming of print-on-demand technologies makes it possible to create and sell merchandise more rapidly than ever. And the emergence of “made in my own country” production as an economically viable strategy reduces time to market in many cases.
Some of the ramifications of this ever-faster pace:
- Television-related merchandise programs are launching on a compressed schedule, with licensors (especially larger ones) offering limited products through POD channels, their own stores, or even traditional retail in conjunction with a show’s launch, and having wide retail programs in place as little as six months later.
- Novelty properties that become hits on social media (e.g., the music video “What Does the Fox Say?”) are able to get to retail quickly and get out as soon as demand wanes.
Little-known, non-franchise-based properties can generate merchandise sales online from consumers around the world, without much risk, keeping devotees happy and creating another marketing touchpoint.
- Emerging designers and celebrities can launch retail merchandise programs, albeit short-term and limited in scope, well before they would have in the past, which, in turn, helps them gain a wider audience.
- So-called “hot markets” programs (from t-shirts featuring sports catchphrases to toys based on secondary characters or story arcs) give licensors maximum flexibility to respond to fans’ desires.
- Fast-fashion strategies, now ubiquitous across all retail and etail channels, encourage consumers to shop frequently, lower risks for licensors, licensees, and retailers, and offer opportunities for less-established properties.
The ability to get products to market quickly—and the need to do so as consumer expectations grow—is, in large part, a benefit to the licensing business. But the adage still holds true that having too many products on the market too soon can kill a licensing program prematurely. For some properties, that may not matter. But for licensors thinking long-term, the balance between satisfying demand without cutting short a promising future can be increasingly difficult to achieve.
Licensing Trend of the Month: August 2015
Complicated by Controversy
Years ago, a hint of impropriety would mark the end of most celebrity licensing programs. While celebrity licensing remains risky, primarily due to the threat of controversy, the scenario today is more complicated.
When a celebrity licensor makes comments that are racist, homophobic, or otherwise insult an entire consumer group, it almost always has a negative impact. The recent discovery of a several-years-ago racist rant from Hulk Hogan led the WWE to sever ties and stop its licensees from selling anything featuring Hogan’s name or image. Donald Trump lost his relationships with Macy’s, PVH, Serta, and others after he put forth his views about Mexican immigrants during his presidential campaign.
On the other hand, when homophobic comments by Duck Dynasty patriarch Phil Robertson became public, licensees and avid fans stayed loyal. Paula Deen lost a number of her key licensees, including Smithfield and Walmart, when her past racist comments came to light, but others, such as Hoffman Media and Universal Furniture, stayed put.
Violence is nearly certain to doom a celebrity licensing program. NFL player Ray Rice saw his NFLPA-related licensing and promotional income plummet 95% in fiscal 2015, according to the association, while Adrian Peterson’s fell by 50%, after their respective abusive behaviors surfaced. And Michael Vick saw his commercial partners jump ship after his participation in illegal dog fighting was revealed several years ago. After he served his jail time and was back in the NFL, a few partners (such as Unequal Technologies) gave him another chance.
Actions that taint the celeb’s core accomplishments are typically detrimental to licensing. Major League Baseball players associated with steroid use (admitted or alleged), such as Roger Clemens, Barry Bonds, or Mark McGuire, are not favored with many endorsements, while Pete Rose suffered the same fate due to betting on baseball (although his endorsement activity is starting to rebound years later). Lance Armstrong’s at first alleged and then admitted use of performance-enhancing substances wiped out his licensing ventures, from his Nike endorsement to his exclusive distribution deal with Dick’s for Livestrong fitness equipment.
Conversely, however, Paula Deen suffered little commercial impact after controversially admitting, prior to the scandal mentioned above, that she had diabetes and had changed to a healthy diet, even while continuing to promote buttery, fried southern cooking to her fans. And Tom Brady, who is appealing an NFL suspension as of this writing due to his alleged role in “Deflategate,” rose to the top of the NFLPA rankings in licensed merchandise sales for the first time in fiscal 2015. We will see what happens as the new NFL season begins.
In some cases, celebrity bad behavior is part of the appeal. Fans tend to give a lot of leeway to reality stars from The Jersey Shore or Real Housewives, for example. This fact probably played into the Duck Dynasty situation mentioned earlier.
It is sometimes difficult to separate the impact of impropriety from the natural trajectory of a licensing program. Duck Dynasty was passing its licensing peak when that controversy occurred, so it is hard to pinpoint the specific reasons for any post-comment declines in sales. Tiger Woods lost a number of key endorsements (but kept major tie-ins with Nike and, for a time, with videogame maker EA) after his womanizing became news. The fact that he was not able to recover fully on the commercial side may have been related, but it also occurred during a steep decline in his golf game. And Martha Stewart’s brand has suffered since her jail time for insider trading, but much of the decrease has to do with business decisions, a mature brand, and the changing licensing and publishing landscape. The scandal itself did not seem to deter her most loyal fans.
Celebrities are influential with consumers and they drive sales. A scandal may not dictate the end of a licensing deal, as it did in the past. But licensees certainly need to have a plan in place to determine a course of action when one arises.
Licensing Trend of the Month: July 2015
Just a few short years ago, pairings of fashion labels with classic characters, films, or TV shows were relatively rare. Such partnerships represented a way to stand out from the competition, as both the designer and the character/entertainment property were able to offer something unusual to their fans.
How times have changed. Today, it is almost a requirement that licensors marry their classic characters, from Nickelodeon’s SpongeBob SquarePants to DreamWorks’ Felix the Cat and Underdog, with a range of trend-forward designers or boutiques. And any live-action TV show or film with a distinctive design sensibility is almost certain to inspire one or more collections of apparel and/or home goods, often with the participation of the production’s costume or set designer. Think CBS’s The Good Wife or ABC’s Scandal on the TV side, or Disney’s Descendents among films.
Rather than unique one-off opportunities, these marriages of fashion and entertainment represent a key component of the overall marketing and licensing strategy surrounding appropriate properties. Licensors from 20th Century Fox (The Simpsons, Home Alone) to Iconix’s Peanuts Worldwide (Snoopy) to King Features (Betty Boop) have overseen fashion collaboration after fashion collaboration. Films such as Disney’s Maleficent or Alice in Wonderland inspire design-driven lifestyle goods from a wide group of collaborators in the weeks leading up to the theatrical release. And TV shows such as Mad Men have overseen fashion collaborations that recur each season.
For the character/entertainment licensors, these ventures lend cachet, help keep the properties top-of-mind, and refresh the product assortment in interesting ways. And, while the products in question are often high-end, there is frequently a trickle-down effect that benefits apparel, accessories, and home goods licensees that sell through mass channels as well.
For the fashion labels and retailers, linking with characters or entertainment productions gives existing shoppers a reason to return to the store, may attract some new customers, and offers design inspiration. It also allows the fashion companies to ride the coattails of any promotional or marketing activity surrounding a high-profile entertainment property.
Fashion collaboration-as-strategy is not limited only to the entertainment/character sphere. Selected corporate brands, artists, celebrities, and sports properties are all looking to partner with fashion labels, and vice versa. Some, such as beverage brand Mountain Dew or artist Takashi Murakami, are frequent participants, almost along the lines of some of the most active character properties.
Ultimately, the incidence of character- and entertainment-based fashion collaborations will inevitably wane as other marketing techniques gain favor and take their place, at least to a degree. But these alliances will almost certainly remain an important tool for entertainment licensors, fashion labels, and retailers alike as they try to build awareness, bring in some ancillary revenue, and infuse a little excitement into their property’s life.
Licensing Trend of the Month: June 2015
Licensing Expo: Technology Behind the Scenes
Much has been made of how technology is changing the licensing landscape, in terms of properties available, viable product categories, distribution changes, and the like. Less attention-grabbing but still fundamental is the role of technology in automating the licensing process, making it more efficient and potentially less expensive.
The increasing role of automation—or at least indications that the business is moving in that direction—was evident at Licensing Expo in Las Vegas last week. The number of exhibitors specializing in automating various facets of the licensing process seemed much higher than in the past, and the booths of many of the returning exhibitors were bigger.
This year’s crop went well beyond the licensing and royalty management companies that have been a factor at the show for several years. Sectors of note included:
- Match-making and product development. iQ License, Advanstar’s LicenseConnect.com, and LIMA’s LIMANet are billed as facilitating connections between licensors and licensees. These are essentially automated and membership-based versions of the traditional printed licensing directories, but with the capability for continuous updating of open categories, graphics, and other information.
- Print on demand. Brother showed its POD garment printers and Pixels.com touted its POD services allowing artists and licensors to upload images and sell wall art, greeting cards, throw pillows, and other items integrating their artwork.
- Content management and delivery. RSG Media works with cable, broadcast, entertainment, gaming, and publishing companies to create revenue streams from content and advertising inventory; Visual Icon manages clip, still, character, scene, and branding rights for movie libraries.
- 3D printing. 3DPlusMe offered 3D print-on-demand solutions for retailers and events, while Source3 is an enterprise licensing and rights management platform for 3D content (digital and physical). Nickelodeon’s booth featured a display of 3D-printed Teenage Mutant Ninja Turtles figures and Cube printers from 3D Systems, while Big Tent showed some of its 3D-printed Domo figures. (This was the first year 3D printing made a meaningful appearance at the Expo.)
- E-commerce solutions. relentlessGENERATOR exhibited its enterprise e-commerce platform, BandMerch includes e-commerce solutions among its merchandising services for musicians, and Delivery Agent, which develops and manages e-commerce destinations for a variety of licensors, was highlighted in a keynote.
- Brand protection. Companies such as JPatton and OpSec specialize in brand protection, authentication, and security; a new exhibitor, ACG-IP does the same, with a focus on the Chinese market.
Meanwhile, the proliferation of licensing management software continues. CTI Solutions, Dependable Solutions, MyMediaBox, Octane5, RoyaltyZone, Vistex/Counterpoint Systems, and Westend Software were among the exhibitors offering integrated platforms that can handle asset management, contracts, approvals, royalty tracking, compliance, brand protection, and the like.
Although automation clearly has the potential to improve and ease the licensing process, the relatively well-established licensing-management arena offers some lessons about the challenges of adopting new technologies. Such systems offer benefits compared to historical methods such as using spreadsheets to track the various aspects of a licensing program. But selecting a vendor can be confusing, the cost is prohibitive for all but the largest players, and the process of transferring data and getting the systems up and running can be long and frustrating.
A key goal of many of the vendors in all of the sectors listed above was to use their presence at the Expo simply to explain what they do. There is a need to move the licensing community through a steep learning curve before it can embrace any of these still-new forms of automation and technology.
Licensing Trend of the Month: May 2015
An Infusion of Art
A growing number of artists, both established and emerging, are taking advantage of new opportunities to spread awareness of their work, not to mention generate additional revenue streams. But it is often not the artists themselves who are driving this trend. Much of the impetus is coming from manufacturers, entertainment studios, and other potential partners.
These companies have a constant appetite for imagery to freshen up their products or promotions visually and offer something new to fickle fans. And they increasingly are willing to work with established artists from outside their own staff or contractors, borrowing the artists’ equity and gaining an infusion of creativity.
Entertainment/character licensors and brand owners, for example, have brought in artists or groups of artists to reinterpret their properties. Some of the many recent examples include DC Thompson and The Beano magazine, which created new style guides featuring the work of Wayne Hemingway and Jon Burgerman; Pepsi, which hired six street artists to create soccer-themed imagery tied to the brand; and CBS, which entrusted artist Juan Ortiz to create retro looks for all of the Star Trek: The Original Series episodes.
Other IP owners are pairing with artists for cross-licensing programs that equitably integrate both parties’ imagery. Hello Kitty partnering with Swedish artist Bea Szenfeld and Alexander McQueen with Damien Hirst (for a scarf integrating patterns from both fashion designer and artist) represent two such ventures.
Fashion designers are turning to artists for inspiration in other ways as well. Earlier this year, Karl Lagerfeld teamed with Tiffany Cooper, a French cartoonist, incorporating her drawings of him and his white cat Choupette into a capsule collection of apparel and accessories, to name just one illustration.
Marketers of all types are integrating artists’ imagery into their promotional activities as well. Disney supported its movie Big Hero 6 in Japan with a hand-drawn trailer by the artist Tekken. And when AXE, the body spray brand, did a promotion with skateboarder Paul Rodriguez, it had tattoo artist Mister Cartoon design the bottles. Other companies have enlisted artists to create unique wine bottle labels, on-air promos, building wraps, and more.
These opportunities may not be viable for every artist; it can be as difficult to forge a deal like these as it is to gain a foothold in any standard art-licensing category. But they illustrate the wide range of possibilities that are out there for artists who are willing to think beyond stationery and sheets to add revenue and promote their work.
Licensing Trend of the Month: April 2015
The Changing World of Content Licensing
Content-licensing opportunities continue to expand and evolve. A wide spectrum of new digital and physical platforms is emerging, with applications for properties of all types.
The proliferation of social media and communications services has led to a wealth of possibilities, for example. Linkin Park emojis are available from LINE, KISS photo-bombing apps from Pixelwarps, Garfield email addresses from MyBrandEmail, and Lotta Jansdotter blogskins from Japan’s Ameba, to name just a few.
In the toy industry, the rising number of dedicated kids tablets—from the likes of VTech, Ematic, Ingenio by Smart Play, Fuhu, and more—has led tablet marketers to turn to licensors such as Animal Planet, Sprout, and Nickelodeon for both branding and content purposes.
The emergence of virtual reality headsets from Oculus Rift, Samsung, Sony, Razer, HTC, and others is generating interest from gaming companies, studios, and producers of live performances. Licensors experimenting with this technology, with original or repurposed content, range from DreamWorks to Cirque du Soleil.
The wearables sector has not only given rise to branding opportunities for fashion labels and corporate trademarks. It also has provided an avenue for content providers such as Weight Watchers and AccuWeather. An AndroidWear app from Google features a changing roster of images from artists such as Cheko and Mercedes deBellard, allowing users to customize the faceplate of their smart watch.
The types of branded website and app content available continues to diversify, thanks to consumers’ insatiable need for information, combined with licensed properties’ capacity to promote “discoverability.” Fashion designer Carolina Herrera added her name to Appy Couple, a platform for wedding-centric websites and apps; American Greetings marketed a Care Bears interactive advent calendar available for computer or iPad; and Chinese animation producer Up Studios signed 100 million-member dating website/app Jiayuan.com as a licensee for its property Piggy in Love.
Content can even extend beyond the usual words, graphics, moving pictures, and music. Pantone created a branded color, Minion Yellow, licensed by Universal Partnerships & Licensing. Designers working in fashion, home, or other creative industries can now add this hue to their specs.
Established venues for licensed content are still going strong as well, of course, from Flo Rida fitness videos to Paddington Bear wallpapers for computers and smartphones. But all eyes are on new opportunities for content licensing, tied to an increasingly varied range of products, services, and content types.
Licensing Trend of the Month: March 2015
Wearables: Promise Amid Pitfalls
Wearable devices are often cited as a potential growth sector for licensing. Securing the rights to an appropriate property certainly makes sense from the point of view of the manufacturers, since it helps them stand out from the crowd, brings credibility or content to the product, and/or adds an element of fashion to the technology. But does the category make sense for most licensors at this point?
There are a number of challenges. First, it is hard to say which technologies will survive. Smartglasses, led by Google Glass, do not seem to be taking off as fast as some observers thought they would, for example. There is also significant overlap in the functionality offered by fitness bands, smartbands, smartwatches, and other devices.
Meanwhile, the already-ubiquitous smartphone can perform many of these operations as well. And a recent survey from FatWallet indicated that while 10% of consumers planned to buy a wearable device in 2015 (up from 6.7% in 2014), five times as many (50%) planned to buy a smartphone (up from 48% the prior year).
Even sectors that are seeing signs of success—such as fitness trackers, with 8.7% of U.S. adults owning one as of October 2014, according to Futuresource—are already crowded. Fitbit and Jawbone are the market leaders in fitness bands, but there are many others operating in the space. And key players such as Nike (with its Fuel Band) have already exited.
Across all wearables sectors, consumer electronics giants from Samsung to Intel to Microsoft to Garmin, not to mention many smaller players, are all vying for supremacy. The intense competition among them is illustrated by the fact that the Apple Store stopped selling fitness trackers as soon as its parent company introduced its much-anticipated smartwatch.
All this does not mean that licensors will stop forging deals for wearables, particularly if they have very relevant properties. Fitness brands that have dipped their toes into the market to date include Bally Total Fitness, The Biggest Loser, and Skechers, while fashion labels include Tory Burch, Guess?, Diane von Furstenberg, Opening Ceremony, and Rebecca Minkoff. Musicians will.i.am and 50 Cent also are involved. It is likely that some licensed devices will succeed.
But it is also reasonable to expect that many licensors will take a wait-and-see attitude—while keeping a close eye on developments—until the wearables landscape settles down and shakes out.
Licensing Trend of the Month: February 2015
The “Maker Movement”—a hybrid of engineering and invention on the one hand and arts and crafts on the other—has made its way to the toy industry. The trend is a natural progression from several other recent developments in the D.I.Y. toy space. In some ways, it pulls them all together under one umbrella.
One driver is the continued growth in the arts and crafts category, which has been ongoing for the last several years and continues today. All kinds of toy companies and book publishers are adding D.I.Y. products to their assortments, from jewelry-making to fabric crafts, keeping up with trends by monitoring Pinterest, Etsy, and Instagram and then translating those trends for kids.
Meanwhile, the quest to create toys that support a Science, Technology, Engineering, and Math (STEM) curriculum is an increasingly important goal for toymakers. The engineering and physics components of STEM are a particular focus this year, if the exhibits at Toy Fair this week are any indication.
And building kits, from LEGO to BrickStix to GoldieBlox, continue to proliferate and diversify, with 93 exhibitors at the 2015 Toy Fair touting construction kits and sets. Notable trends across the show floor this year involve everything from blocks made from folded paper to kits featuring light-up bricks. Construction sets incorporate components of all shapes and sizes, made of materials ranging from metal to cardboard.
In essence, crafting, building, and engineering are merging to create a mini Maker Movement within the toy industry. Some companies are even tying in to the Maker trend directly. ThinkFun promoted its first three SKUs under its Maker Studio brand, codeveloped with a Maker pioneer and former editor of Make magazine. Sales company License 2 Play, which represents a variety of publishers and toy companies active in the craft category, decorated its booth with a sign promoting “Maker Madness.”
Others are simply incorporating Maker principles into their toys under the crafting, construction, STEM, or other banners.
Licensing has a role as well, of course. Crayola is among the crafting brands expanding their licensing programs; its new licensees include Madame Alexander for a line of dolls with color-in clothes and accessories and Lulu Jr. for a self-publishing kit. Meanwhile, items such as Klutz’s LEGO Chain Reaction: Make Amazing Moving Machines (a book-plus-toy title), Thames & Kosmos’s National Geographic Kids-licensed science kits, and Teenage Mutant Ninja Turtles folded paper kits from Paper Punk all are compatible with the Maker trend.
Licensing Trend of the Month: January 2015
Digital Distribution Evolution
The year 2014 was a landmark one when it came to the rise of digital distribution as a viable means of supporting a licensed entertainment property.
First, studios and property owners began forging deals to distribute their existing archival content online. Scholastic signed with Netflix, the Jim Henson Company with Hulu Kids, Disney with Tencent in China, Saban with LOVEFiLM in Europe, and IMPS launched a dedicated Smurfs YouTube channel, among many other examples. The digital venues create another venue for consumers to discover and enjoy these properties and help keep them alive beyond the original broadcast lifespan.
Content providers then began to produce original series based on existing franchises. While the new properties were digital-only, their roots in traditional media or products (TV, books, toys) helped draw viewers. Netflix’s franchise-based original series and spin-offs include those inspired by Ever After High from Mattel, Dinotrux from DreamWorks, Popples from Saban, King Kong from 41 Entertainment, JustinTime from Guru Studios, and Winx Club from Rainbow, for example. Lionsgate and Google partnered for a limited series based on The Hunger Games, distributed on YouTube. And two co-branded series, Mattel’s WWE Slam City and Disney’s LEGO Marvel Superheroes: Maximum Overload, debuted on multiple online channels.
Meanwhile, companies are using online channels to expand into new territories where their properties are unknown or unfamiliar. In the U.S., HIT Entertainment is launching Fireman Sam on Amazon Prime, Spanish company Imira is utilizing Hulu for Lola & Virginia, French studio Ankama Animation is launching Wakfu through Netflix, Fuji Television is introducing Ponkickies via Oznoz, and Aardman is debuting Rex the Runt and other properties (with varying degrees of familiarity in the U.S.) through Amazon.
The initial wave of truly digital-first properties were meant as precursors and promotion opportunities to help seed the market before a traditional TV debut. Disney Jr.’s Sheriff Callie’s Wild West took this path, debuting on the WATCH Disney Junior app shortly before its TV debut, while Nickelodeon introduced Welcome to the Wayne on its digital platforms while developing a traditional TV series. Saban and Jakks plan to launch Emojiville online, with a TV series in development, while PBS Kids launched short-form digital content in anticipation of its TV launch of Odd Squad. (Other online-first properties, such as WWE Slam City, announced television deals after becoming established digitally.)
Most recently, IP owners have begun creating all-original properties, often funded in whole or in part by the online platform. Amazon has debuted commissioned shows including Tumble Leaf, Creative Galaxy, and a number of other originals, Rovio and its ToonsTV have introduced Angry Birds content and a new series from Stan Lee, as well as distributing existing content for a variety of studios; PBS Kids launched Fizzy’s Lunch Lab and Plum Landing on its own digital channels. Such productions increased exponentially in the latter half of 2014.
While the proliferation of digital distribution deals have occurred at a brisk pace, the launch of licensing programs based on digital originals is taking hold more slowly. That said, an increasing number of digital-only properties are starting to become available for merchandise licensing. Initial efforts typically start small, with categories that will help generate more awareness as well as bring in revenues, notably book publishing and mobile apps, as well as small ranges of collectibles for early fans.
Jim Henson’s Doozers, Federator Studios’ Bravest Warrior, and Fizzy’s Lunch Lab all had early book publishing licensees (Simon & Schuster, Perfect Square, and Candlewick, respectively), while Stan Lee’s World of Heroes YouTube channel and one of its flagship shows, Bad Days, signed Choice Collectibles and Shark Robot for signed collectibles.
This progression through the various stages of digital distribution happened so rapidly that the introduction of each stage overlapped, almost to the point of being simultaneous. As of 2015, all of these distribution strategies co-exist and all serve as viable means for licensors to feed their fans more content. How long it will take for an online-only property to break through and be able to sustain more than a niche licensing effort remains to be seen.