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TLL's 2016 Survey

Art Licensing Up 2.1%; Commercialization is the Name of the Game

After years of flat or declining growth, sales of licensed art merchandise grew by 2.1% in 2015 from $5.55 to $5.67 billion, according to The Licensing Letter’s Annual Licensing Business Survey. The sector’s rebound was largely thanks to “strong performance of commercial art properties which made up for sluggish sales on the fine arts side,” according to one consultant.

Compared to the industry-wide growth rate of 3.4%, sales of art-based merchandise were sluggish. All told, art-related properties accounted for 5.5% of the total licensing business in 2015, with art and artists comprising 75% of that and museums 25% (or 4.1% and 1.4% of the total licensing business, respectively). The sector’s share has been slowly but steadily declining over the last decade as top gunners like entertainment/character (8.0% growth in 2015), sports (4.8%) and corporate trademarks/brands (3.0%) are enjoying robust increases in sales.

Property Trends

Following a years-long trend, retail sales of museum-licensed merchandise exhibited stronger growth than products tied to artists and their works (2.7% vs. 1.9% in 2015, compared to 1.0% vs. -2.5% growth in 2014). Not all museum merchandise is licensed; some is sourced by the museum for sale in its own and other retail channels. But Survey respondents attributed the increase to a handful of museums with robust licensing programs in the U.S. (including the National Gallery and Museum of Modern Art) and the U.K. (notably the National Gallery Victoria & Albert, Tate Gallery and Natural History Museum). “Museums are becoming more engaged in commercial enterprise,” notes one consultant.

Retail Sales of Licensed Art Merchandise, By Property Type, U.S./Canada, 2014–2015
Note: Numbers may not add up exactly due to rounding.
(Figures in Millions)
Product Category Retail Sales, 2015 Retail Sales, 2014 Change, 2014–2015 Share of Market, 2015
Art and Artists $4,226 $4,147 1.9% 4.1%
Museums $1,438 $1,401 2.7% 1.4%
TOTAL $5,665 $5,548 2.1% 5.5%

Product Category Trends

Unlike 2014, where no product category in the art sector posted growth equal to the overall licensing industry growth rate, this year four categories beat the curve; apparel (7.1%), accessories (4.3%), publishing (3.9%) and furniture/home furnishings (3.9%).

The only decline was from gifts/novelties with -6.2% growth in 2015; the category overall declined 4.0% for all property types. “Low consumer confidence and the decline of foot traffic are killing the gifts sector,” explains a retailer. Despite the dip, the category remains at the top (20.4% of art sector market share) with $1.2 billion in retail sales.

Stationery/paper remains the largest category at 24.3% of market share. Growing 2.3% to reach almost $1.4 billion in sales in 2015, the category is steadily growing as demand for greeting cards, calendars and stationery remains stable. “Printing is getting cheaper and more accessible,” notes an agent, allowing retailers to stock a greater range of merchandise.

Publishing rounds out the top three with 15.4% market share. One 2015 trend that sparked sales was adult coloring books, and several Survey respondents expect that this product will continue to grow throughout this year.

Retail Sales of Art-Licensed Merchandise, By Product Category, U.S./Canada, 2014–2015
Note: Numbers may not add up exactly due to rounding.
(Figures in Millions)
Product Category Retail Sales, 2015 Retail Sales, 2014 Change, 2014-2015 Share of Market, 2015
Accessories $305 $292 4.3% 5.4%
Apparel $212 $198 7.1% 3.7%
Domestics $404 $393 2.9% 7.1%
Furniture/Home Furnishings $247 $238 3.9% 4.4%
Gifts/Novelties $1,156 $1,232 -6.2% 20.4%
Housewares $562 $544 3.3% 9.9%
Infant Products $445 $437 1.9% 7.9%
Publishing $873 $837 4.3% 15.4%
Stationery/Paper $1,377 $1,346 2.3% 24.3%
Other $84 $31 170.3% 1.5%
TOTAL $5,665 $5,548 2.1% 100.0%

Fine Art vs. Commercial Design

The larger art and artists segment is fractured into a two-tier system—fine art versus commercial design—with the former enjoying strong sales thanks to the name recognition of famous artists, both alive and deceased. Ten years ago, fine art-based merchandise was largely limited to high end product niches like couture and decorative collector’s pieces. Standards have relaxed somewhat; much of the growth in this segment is from fashion (limited edition ready-to-wear collections from both high fashion brands and fast fashion retailers like Uniqlo and H&M), everyday “luxury” goods (e.g. make-up, home décor, stationery) and high-end department stores.

On the flip side, consumer demand for more functional, lifestyle products has led to an explosion of deals with commercial artists who create artwork and designs for use in consumer products. Instead of wall art and greeting cards, growth is being driven by everything from iPhone cases to home furnishings to handbags. Mass retailers in particular are eager to stock a constant flow of new products. One retailer identified tattoo and body artists, and to a limited extent graffiti artists, as an emerging niche for related products like apparel and headwear.

Ironically, despite increased activity and sales, royalties are stagnant and guarantees are fast becoming non-existent outside of a handful of well-known artists. “Art licensing is good business for retailers, bad for artists,” sums up one consultant. An agent notes that commercial art is “becoming commoditized,” by retailers’ demands for faster production cycles, shortened shelf live and depressed royalties. At the same time, licensees are more involved with the art being licensed satisfy consumer trends and demands for customization.

“It’s almost impossible to make a living,” for lesser-known commercial artists, notes one licensor. Outside of a small number of A-listers, an over-saturated market means that it is difficult to build a brand presence. One agent points to an influx of webinars and online forums that coach new artists to stake out on their own. “People don’t think they need agents anymore,” and are growing increasingly accepting of stricter terms and conditions in licensing deals.

Impact of Social Media

While social media impacts the licensing industry on the product side, the art sector is unique in that there is a disproportionate impact on the production side. Artists are making greater use of mediums like Twitter, Etsy, YouTube, Pinterest, Facebook, Snapchat, etc. to share their work as well as seek direction and affirmation. In particular, Pinterest is a huge design influence for the fashion, home décor and stationery markets.

And manufacturers are bypassing agents and consultants to discover new talent directly. “Artists fear for their reputation,” on social media, says an agent. Thanks to an oversaturated market, it is becoming increasingly difficult for individuals to distinguish their brand. According to one agent, “they use social media for legal advice, to ask for licensee contact information, trade show tips, and get product development templates.” This effectively floods the market, contributing to lower guarantees and royalties for the greater industry.

Sales by Distribution Channel

As always, the bulk of sales emerge from specialty stores (35.7%) and discounters (34.7%). Department stores (15.8%) and e-commerce (11.6%) have gradually increased their share as these retailers seek out new merchandise to differentiate themselves from the competition and keep stock fresh. While small, dollar, drug, and grocery (1.2%) continues to grow as a destination for licensed art as consumers demand more sophisticated design in basic goods.