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PROPERTY TYPES

Licensed Sales Reach $109 Billion in U.S./Canada in 2017

Licensed retail sales grew just 2.3% in 2017 to reach $109 billion in the U.S./Canada—the slowest rate of growth observed since 2014, according to TLL’s Annual Licensing Business Survey. Licensed sales only marginally outperformed GPD; the U.S. economy expanded by 2.2% and the Canadian by 3% in 2017. This last year marks the seventh year of positive growth for the region—the business grew 3.2% in 2016 and 3.4% in 2015.

Overall American retail sales grew 4.2% in 2017, following annual increases of 3.2% in 2016, and 2.6% in 2015, according to the U.S. Commerce Department. Up north, total Canadian location-based retail sales were up 6.7%, according to Statistics Canada figures. Despite this rise in activity, licensed goods are not seeing strong returns.

It was one of the more difficult years in recent memory, in which licensed brands had to compete with private label as well as manufacturer-branded goods. Faced with a tighter retail environment, many retailers chose to invest in their owned brands and limit shelf space for competing licensed products—and customers responded to lower prices and better quality. (It is true that instances of newly signed DTR deals were up in 2017. But overall, the market for these types of deals is declining as stores close.)

The biggest distribution trends cited by Survey respondents for 2017 were the rise of ecommerce and the expanding importance of “lower” retail channels where low-price, impulse purchases dominate. Some licensors dragged their feet on approving their brand(s) for sale online, while others flooded the mass market with cheap product, and others still signed tens of licensees for the same product category in the same market.

In short, licensed goods lost a bit of their patina as indicators of exclusive, premium value. Expectations were set too high, buys and minimum guarantees were set too big, and there was backlash.

Almost 60% of Survey respondents expect their business to grow in 2018—down from 67% last year. Of those predicting growth, nearly half are looking at growth of 20% or higher. Most respondents cited compressed margins, market saturation, and increased costs when outlining their biggest hurdles to overcome going forward. Because of these concerns, over 40% of respondents expect to see flat or slightly declining growth in their business over the next year.

As in previous years, entertainment/character-based properties drove licensed retail sales in the U.S./Canada. Unlike previous years, however, the property type saw much less dramatic growth of 3.4%, compared to 7.6% in 2016 and 8.0% in 2015. It was only one of five categories to outperform the average growth rate with sports and video games/interactive/online a close second (both up 3.2%), followed by music (2.7%) and corporate trademarks/brands (2.5%).


Entertainment/character-based licensing grew by $435 million in 2017 to reach $13.2 billion in retail sales or just over 12% of the U.S./Canada total. But the category’s 3.4% growth rate was far from uniform—the brand landscape was extremely volatile, with a handful of brands single-handedly lifting the category from what would have otherwise been double-digit declines.

Many were disappointed by underperforming “sure hits” like Cars 3 and Despicable Me 3—and even Star Wars stumbled, although it continued to perform relatively well (think low-double-digit growth versus the triple-digit gains seen with the first Star Wars reboot). Notably, the “character” part of the category saw stiff declines. Such brand volatility and consumer fatigue emerged before Toys ‘R’ Us announced bankruptcy—and, to put it mildly, that wasn’t too helpful for the toys/games industry.

Surprisingly, musicians (2.7%), celebrities (2.2%), and even estates (1.6%) picked up some of the slack as consumer demand for pop-culture and novelty brands grew in product categories where entertainment/character has struggled to secure a foothold like fashion apparel and health & beauty aids (i.e., increasingly upscale, mostly-adult oriented categories). Coming off of years of declines (-1.5% in 2016 and -1.7% in 2015), the roughly $2.48 billion in retail sales music-based generated in 2017 falls short of the recent 2013 high of $2.56 billion.

Artists (1.8%) and fashion designers (1.5%) saw a welcome boost in licensed sales even as the market for domestics and home accessories, design, and improvement grew increasingly crowded.

This was the same trend powering some corporate trademarks/brands—which continue to be the largest property type by share of retail sales in the U.S./Canada. In 2017, the category grew $710 million (2.5%) to reach just under $29.2 billion in licensed retail sales. Hardware, appliance, and tool was the fastest-growing subcategory at 3.6% growth and $3 billion in licensed sales, following a 4.0% jump in 2016. Last year, the category grew thanks to an increase in licensors moving manufacturing out-of-house for core products; in 2017, they began ramping up production of adjacent merchandise. It was followed by food/beverage and electronics/technology with 2.8% growth each.

Sports brands continue to grow market share, jumping 3.2% to reach $15.9 billion in licensed retail sales in the U.S./Canada. Although growth flattish compared to 2016 (4.3%) and 2015 (4.8%), the top five professional sports leagues powered through expansions to their licensing programs at every price point and in every product category. Plus, there was a boost from other leagues that launched new programs.

Publishing-based brands (1.4% to reach $4.6 billion) were largely driven by lifestyle magazine brands (2%) in the apparel and home fashion spaces, but periodicals focused on music and sports also did well. Continuing a years-long trend, licensees are not looking to book or comic-based brands directly, but instead to their film or TV adaptations.

The traditional toys/games brands category was flat at 0.5%, growing just $7 million to reach $1.4 billion in licensed retail sales following years of regular growth (3% in 2016 and 2.5% in 2015). Licenses were dwarfed by manufacturer brands like LOL Surprise!, Hatchimals, and Fingerlings, but did not fall into the red because of activity from the very same types of brands.

The video games/interactive/online category grew $19 million, or 3.2%, to reach $626 million in licensed retail sales. While activity was certainly up, most were centered around impulse and other low-price point goods. Mobile game apps were largely a non-story as they have somewhat retreated from the merchandising space.


Retail Sales of Licensed Merchandise, by Property Type, U.S./Canada, 2016–2017
Note: Numbers may not add up exactly due to rounding.
(Figures in Millions)
Property TypeRetail Sales, 2017Retail Sales, 2016Change, 2016–2017Share of Market, 2017
Art$5,858$5,7531.8%5.4%
Art and Artists$4,362$4,2891.7%4.0%
Museums$1,496$1,4642.2%1.4%
Celebrities$5,915$5,7892.2%5.4%
Entertainers/Models$2,655$2,6191.4%2.4%
Chefs/Home-Related$2,194$2,1472.2%2.0%
Digital/Other$1,065$1,0234.1%1.0%
Collegiate$3,578$3,5082.0%3.3%
Entertainment/Character$13,215$12,7813.4%12.1%
Estates$2,330$2,2941.6%2.1%
Fashion$21,776$21,4491.5%20.0%
Apparel$18,423$18,2041.2%16.9%
Footwear$2,621$2,5572.5%2.4%
Home$732$6886.4%0.7%
Music$2,478$2,4132.7%2.3%
Non-profit$1,239$1,245-0.5%1.1%
Publishing$4,637$4,5741.4%4.3%
Books$485$4850.0%0.4%
Newspapers/Magazines$2,875$2,8182.0%2.6%
Comic Books/Strips$1,278$1,2710.5%1.2%
Sports$15,915$15,4223.2%14.6%
Trademarks/Brands$29,155$28,4452.5%26.7%
Automotive/Motor Vehicle$4,336$4,2302.5%4.0%
Food/Beverage$8,143$7,9222.8%7.5%
Restaurants$4,732$4,6851.0%4.3%
Sporting Goods$1,335$1,3310.3%1.2%
Hardware, Appliance and Tool$3,038$2,9333.6%2.8%
Home-related$405$3952.5%0.4%
Electronics/Technology$3,458$3,3632.8%3.2%
Electronic Media$230$2252.0%0.2%
Other$3,478$3,3603.5%3.2%
Traditional Toys/Games$1,433$1,4260.5%1.3%
Video games/Interactive/Online$626$6073.2%0.6%
Other$855$8332.6%0.8%
TOTAL$109,010$106,5382.3%100.0%

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