If 2020 had been a normal year, with no pandemic, the world would be filled with people sporting T-shirts, hats, and other merchandise from the 2020 Tokyo Olympics, injecting billions in revenue into licensing companies, retailers and manufacturers worldwide.
But as millions of people became infected in early 2020 and borders were closed to international travel, the Tokyo Olympics were cancelled.
That cancellation is just one example of how the novel coronavirus has literally sickened a previously booming sector.
“We were seeing a lot of brands really excited for (the Tokyo Olympics) this year because the economy was doing well,” said Alex Onaindia, CEO of the Distinction Agency in Miami. “It seemed like the perfect time versus Rio four years ago.”
But all that, and much more, changed as COVID-19 cases sprouted like toxic mushrooms around the global map.
Professional sports leagues initially cancelled games for an extended period, and then hobbled through the rest of the season either in isolated ‘bubbles’, like the NBA and the NHL, or with greatly reduced attendance.
The trend continued down through the lucrative world of college sports, and internationally with football, which North Americans still call soccer.
Estimates of sports industry revenue worldwide plummeted from an expected $135.3 billion, to just $73.7 billion when adjusted for the impact of COVID-19. That’s also a significant drop from the $129 million earned in 2019.
And it’s not just sports. The other big loser in the licensing world was in the movie industry, which likewise couldn’t put many butts in seats as cinemas shut down across the globe. Even when theatres opened their doors and fired up their popcorn machines, major releases like the intended summer tentpole movie Tenet turned into major flops, and other big releases were delayed, such as Wonder Woman 1984 and the latest Bond release, with the tragically ironic title “No Time to Die.”
The impact on licensing is massive. The US firm Fanatics, which serves as the official retailer for all major US sports leagues and has its fingers in close to 1,000 retail outlets, has seen its brick and mortar sales plunge, and even their online sales have dropped 30 to 40 per cent below normal.
Fanatics also produces millions of sports jerseys a year for fans, but this year, with sales flatlining, the company turned New York Yankee pinstripe material into hospital gowns and masks, as have other major brands like Nike, Under Armour, New Balance and Bauer, to name a few.
At the retail level, the national sports merchandising chain Lids shut ALL of its 1,100 mall-based stores in North America, laying off 8,500 employees; a prime indicator of the malaise spreading in the $15 billion licensed sports industry. Similar layoffs were reported last spring at other large sports licensing product brands, including 47 Brand, Mitchell & Ness, New Era, Outerstuff and WinCraft.
“I’m pretty sure people will still go into malls and buy sunglasses from Sunglass Hut,” said Lawrence Berger, a partner at Ames Watson, which acquired Lids with exquisitely bad timing in February of 2019. “But are they going to come into Lids and buy a sports cap if the NBA or NHL seasons have been cancelled, and maybe MLB?”
Licensing firms are typically hit last in the multi-car pileup that is the Year of COVID. Direct-to-consumer licensees earn money in real time as consumers buy products, so their bottom line is the canary in the coal mine, and they feel the pain first.
Wholesale to retail licensees feel that pain later as orders from the retailers evaporate. Licensors typically earn their revenue quarterly, and they feel the pain last once the wholesalers and retailers cancel orders, and the licensing fees simply dry up and float away.
As in the sports industry, the film industry is being plagued by failed or delayed launches of a plethora of merchandise deals. Disney’s Mulan, for example, put together a massive licensing program designed to launch around the movie’s premiere, but Colourpop Cosmetics had already released a Mulan collection in March. Fortunately for Colourpop, Mulan was later released on Disney Plus, but there’s little doubt the delay and the lack of a theatrical release had a negative impact on Mulan licensing.
Other licensee partners face even greater problems. For example, Wonder Woman 1984 signed on several licensees in the lead up to its expected premiere in 2020, including Swarovski for jewelry, Reebok for clothing, and Mattel for toys, among many others.
The WW84 collection was put out for sale in August with an expected theatrical release date in October 2, 2020, which of course did not happen, and sales stepped off a cliff.
Fortunately, most of those products are non-perishable and can almost certainly be sold later, but the impact on licensing this year from delayed film releases and cancelled sporting events has been vast, and is growing by the month, with many estimates expecting a revenue drop of between one-quarter to one-third compared to 2019.