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ENTERTAINMENT/CHARACTER

A(nother) Note on Disney

Updated: 10/13/2017
By Karina Masolova, karina@plainlanguagemedia.com

If we were to define one trend of consumer products licensing in the last decade or so, it’s Disney’s unparalled dominance. TLL estimates that Disney accounts for roughly half of all entertainment/character brand-based licensed retail sales in the U.S./Canada, and a slightly larger share worldwide (less than 75%).

While the origin myths surrounding licensing vary (the marketing tool has existed since at least the early 20th century), it is generally accepted that the entertainment/character licensing industry, as we know it today, took off from the first Star Wars film (1977). That program helped introduce licensing to the minds of business executives as a profitable business strategy. In part, this was because of its sheer scale—even close collaboration between toy and studio execs was nothing new. But it helped spark a dedicated industry—indeed, TLL was founded in 1977 and LIMA in 1985 to serve a growing community of individuals who pursue licensing as a career in and of itself. And Disney has been a key part of that narrative.

Disney eats up nearly half of all retail sales among the top entertainment/character licensors in the U.S., according to TLL‘s $100 million list.That list which retail sales of licensed merchandise for entertainment/character properties in the U.S./Canada.

Its top brands benchmark the health of the industry—if retail sales for Disney merchandise is down in a territory, that indicates instability for all licensed entertainment/character goods. Given its dominant market position, dips by Disney are bound to ripple and reduce retailer’s confidence in less-proven licensed brands. In the same way, most licensees’ first steps into licensing involve a Disney license because it’s one of the safest bets for retail success.

And while that picture is gradually shifting and admittedly incomplete, we can’t dismiss the influence of the House of Mouse.

Tracking Growth Rates

Disney’s top properties on the $100 million list closely follow the growth rate of the industry average. At least, on average.

The range of growth, even limited to the top Disney brands, is extreme. Take 2015 for example: the biggest climb was recorded by Marvel Avengers (54%) and the biggest loss by Disney Cars (-65%). The most stable properties are those like Mickey Mouse and Winnie the Pooh, who move just a couple of percentage points a year.

One interesting trend of note is the fact that the rate of growth in Disney’s A-list brands is trending downwards—real growth is coming from other properties, although, as we see below, they aren’t concentrated in any one source.

Note that we do not compare total retail sales because the $100 million list is based off of different calculations than those in TLL’s Annual Licensing Business Survey.



Cream of the Crop

Let’s limit our purview to the top five licensors based on their share of retail sales (or almost 67% of the share of the top $100 million list for 2015).

The top entertainment/character properties from the top five licensors generated almost $12 billion in retail sales in the U.S./Canada in 2016. Almost half of that came from Disney. The giant was helped in part by the fact that it counted the most properties of any other licensor on the list—a number that has been steadily increasing.



But it is equally true that Disney’s share of total sales, as well as the number of properties on the $100 million list, has been steadily decreasing over time. When we first began tracking this data in 2011, Disney counted over 50% of the top-performing brand’s sales. That figure went down to a “mere” 45% in 2015.

The Power of Acquisitions

Also true is the fact that much of Disney’s growth is not fueled by it’s “core” studio, like the rest of the top four entertainment/character licensors. While the “core” studio has spawned some hit properties (see Frozen), it’s hasn’t been solely responsible for the 13 included on 2016’s $100 million list. Rather, it’s been churning out hits at a rate of one every several years, which is on par with other studios.

Without its acquisitions, Disney would be unrecognizable, and, at worst, nothing more than a historical relic. The fact that the House of Mouse has been so good at identifying, successfully purchasing, and then successfully continuing to develop valuable properties is a skill that can’t be understated.

Here’s a brief timelime of Disney’s acquisitions and sells:

  • 1995—ABC Television Group acquired.
  • 2006—Pixar Animation Studios acquired.
  • 2009—Marvel Entertainment acquired.
  • 2010—Power Rangers franchise sold to Saban Brands for $100 million.
  • 2010—Miramax Films sold to Filmyard Holdings for $660 million.
  • 2012—Lucasfilm acquired from George Lucas, including Star Wars and Indiana Jones, for $4 billion.
  • 2013—Disney Interactive Studios shuts down development studio Junction Point Studios.
  • 2014—Maker Studios acquired for $500 million.
  • 2015—Disney combines its Consumer Products and Interactive Media divisions into one unified segment, Disney Consumer Products & Interactive Media.
  • 2015—Marvel Studios is reorganized under Walt Disney Studios.

Note how long some of these acquisitions took to fully realize their earning potential. For example, Marvel Avengers only appeared on the $100 million list in 2012 (at $201 million retail sales in the U.S./Canada)—or three years after Marvel Entertainment was acquired.

But it would be equally nonsensical to attempt to carve out exactly how much of Disney’s growth can be attributed to its acquisitions alone, isolating its “core” business. Disney has succeeded neatly weaving their new studios and properties in with their licensing business model and overall marketing strategy (Wired; See also for an overview on the House of Mouse’s organization structure). As an example of how its acquisitions support each other, see top brands like Star Wars being easily cross-promoted on ABC and ESPN.

Who’s next up to take on Disney’s sheer size?

  • NBCUniversal’s acquisition of DreamWorks seems to be a play at copying the cross-promotions strategy (WSJ reporting on Trolls). Let’s see how it plays out over the next several years.
  • Hasbro is now a fully-fledged film studio thanks to new division Allspark Pictures.

 

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