After declining every year from 2008 through 2012, entertainment/character licensing in the U.S. and Canada roared back to life in 2013 by posting 3.6% growth. Now the sector has proven that the turnaround was no fluke by achieving an even more robust 6% increase in 2014. According to The Licensing Letter’s Annual Licensing Business Survey, entertainment/character now constitutes 11.0% of all retail sales of licensed goods, the fourth largest share of the market behind only trademarks/brands (26%), fashion (20.3%) and sports (14.1%).
The “Frozen” Factor2014 will probably be remembered in licensing annals as the year of “Frozen.” But while “Frozen” was the headline story generating between $800 million and $1 billion in sales depending on which report you believe, it was not the only engine driving growth in the entertainment/character sector in 2014. In fact, the pattern of growth in character/ entertainment is as much a reflection as a result of the “Frozen” factor. The entertainment/character property type as a whole returned to growth in 2013 and really took off in 2014. 2013 was also the year of the Disney film that began the “Frozen” phenomenon; and 2014 was the year that the phenomenon reached its full potential. Retailers who were initially caught off guard by the movie’s popularity rushed to catch up. Toys ‘R’ Us, for example, stocked just a few dozen “Frozen” products in the beginning of 2014, but expanded its selection to hundreds of items for the year-end holidays. The 99 Cents Only chain reportedly began stocking “Frozen” party goods in the fall, after seeing the success other retailers were having. “It was just unstoppable,” says one licensee, who like many other TLL survey respondents explains that the property both expanded the sales of entertainment licensed products overall and stole share from other brands, primarily properties appealing to girls, such as Hello Kitty, Monster High and My Little Pony, as well as Disney’s Princesses brands. “‘Frozen’ took from other brands, even Disney’s own brands like Disney Junior characters Sofia the First and Doc McStuffins,” says another licensee, voicing an oft-repeated sentiment. Other Factors for GrowthOther factors besides “Frozen” driving growth in the entertainment/character sector in 2014 include:
New Properties, Same ChallengesLooking ahead, licensors and others expect Disney to make every effort to keep “Frozen” hot in 2015. Sure enough, Disney has done just that by releasing a short film shown before the studio’s live-action “Cinderella” and announcing a “Frozen 2” sequel to come at a later date. Even so, optimistic competitors believe time is on their side as “Frozen” sales will inevitably begin to slow down. “No brand can do more than two years at a huge high like that,” one licensee predicts. In addition to consumer fatigue, in 2015, “Frozen” will be exposed to competition from a quartet of franchise films headed to theaters: Disney/Marvel’s “Avengers: Age of Ultron” (opening May 1) Disney/Lucasfilm’s “Star Wars: The Force Awakens” (Dec. 18), Universal/Illuminations “Minions” (July 10) and Universal/Amblin’s “Jurassic World” (June 12). Continued Dominance of “A” PropertiesOf course, Disney’s dominance of entertainment/character goes way beyond “Frozen.” Survey respondents expect no let-up in the command the Disney-owned portfolio exercises over retail shelf space with the new “Avengers” and “Star Wars” films and accompanying merchandise headed to market. Those two properties, along with “Minions” and “Jurassic World,” will likely exacerbate the ongoing challenge, one that pre-dates “Frozen” by many years, posed by retailers devoting increasing amounts of precious retail shelf space to “A” entertainment properties at the expense of less high profile properties. “‘Star Wars’ will be the biggest licensing program in history,” predicts one licensor, in awe of the range of “Star Wars” merchandise he saw at the MAGIC trade show. Outside of platinum properties, “Retailers are becoming more risk averse in terms of titles they will support,” says another licensor. One licensing agent in the U.K., comments in a similar vein: “The domination of big licenses such as ‘Frozen,’ is not allowing space for others.” Some executives see an upside to the 2014 dominance of “Frozen,” however, believing retailers are looking more closely at new properties in an attempt to identify earlier the next license with the potential to be as popular as Disney’s sassy princess property. Risk and Short Life Spans of Movie PropertiesAs in past years, many of this year’s survey respondents bemoan the short life span of movie properties and the continued difficulty for many movies to get off the ground beyond the pre-release promotional window. One key to success for properties, particularly those appealing to boys, is exposure through a variety of media venues, including movies, TV, social media and apps, several respondents noted. One licensee used as an example Disney’s use of its cable network Disney XD to keep properties including Spider-Man and Star Wars on boys’ radar between feature films with shows including “Ultimate Spider-Man” and “Star Wars Rebels.” One licensor predicts that movie licensed merchandise will begin to appear at retail earlier than ever. “The six weeks before the movie rule will be completely thrown out the window,” this executive says, predicting that for at least two end-of-year movies, merchandise will begin to appear in stores in September. Slicensing cuts two ways“Slicensing,” the practice by which licensors award ever more narrow licenses, continues to be mentioned as a key trend in entertainment licensing, particularly in regards to Disney and other very large entertainment licensors. Respondents cited this as a challenge, because it reduces the leverage of licensees with retailers, and as an opportunity, because it can spur product innovation. Product Category TrendsProduct category performance in entertainment/character licensing in 2014 told a tale of extremes. For the most part, the product categories that grew gained even more than those categories as a whole. For categories that showed weakness, declines in entertainment/character- licensed products were even more severe than for the categories as a whole. Apparel was the fastest-growing product category in entertainment/character licensing in 2014, with 11.6% growth, 5 percentage points ahead of the overall apparel category, due to both “Frozen” and the continuing fashion appeal of entertainment characters, classic and modern. The category was the only one to top 10% growth, followed by 8.9% growth in both accessories (2.7% overall growth) and toys (7.0% overall). “Frozen” was the top toy property in 2014, generating $531 million in retail sales in the category, according to The NPD Group. Notably, NPD said “Frozen” did not capture the top spot in any of the 11 super-categories it tracks and was the top property in only four of 100 subclasses measured (paint kits, fashion styling and dress-up, children’s puzzles, electronic entertainment) even though it was represented in 39 different toy categories. “Frozen was the big news in the toy industry in 2014,” said Juli Lennett, president of the Toys division at NPD. “It wasn’t due to that one hot toy that was a category killer, but because of the varied breadth and sheer number of toys.” The No. 1 selling toy item in 2014 was “Teenage Mutant Ninja Turtles” action figures. One licensee responding to the survey says boys’ action figures saw the greatest increase of any licensed product last year. Other product categories that grew between 5% and 10% included domestics (6.2% in entertainment; 2.0% overall); and health and beauty (5.3% in entertainment; -2.0% overall). Consumer electronics (7.1% in entertainment; 3.0% overall) also grew in that range, with an assist from kids who continue to trade up from toys to electronics at younger ages than before. The lines continue to blur between electronics and toys as well, with two tablet computers on NPD’s list of top 10 toys for the year. “Kids are gaining in electronics,” says one licensee. “All of these technologies and categories that have been traditionally marketed to adults are going to kids.” For the second year in a row, product categories showing declines in 2014 included gifts/novelties, stationery/ paper, and videogames. In two of these areas—videogames (down 8.5% in entertainment/8.0% overall) and gifts/novelties (down 8.8% in entertainment/5.0% overall)—declines in entertainment/character-licensed products were even more severe than for the categories as a whole.
Retail distribution of entertainment licensed products mirrored that of licensed products overall, with sales accelerating in the e-commerce channel while most other retail channels continued in a traditionally steady vein. The e-commerce channel grew to represent 15.6% of all entertainment licensed product sales in the U.S. and Canada in 2014, a change of seven-tenths of a percentage point, the biggest change in entertainment retail channel share. The value/dollar/convenience channel also grew, by half of a percentage point, to 5.7% of sales. Some entertainment licensors have signed new licensees to open up the value/dollar channel. [pieChart title=”Retail Sales of Licensed Merchandise Based on Entertainment/Character Properties, by Distribution Channel”] |
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