Is Star Wars the (Old) New Frozen?
In the decade following the release of the original Star Wars movie in 1977 the licensing business overall grew more than 10 times, from $4.9 billion in retail sales that year to $54 billion in 1986, according to The Licensing Letter Databook.
Star Wars is credited as the catalyst for much of that growth — certainly in the entertainment sector, but across the rest of the licensing business as well. In recent years, worldwide retail sales of merchandise based on the Star Wars characters and imagery has hovered in the vicinity of $2 billion annually.
So as the rollout of new Star Wars merchandise begins this Friday, with a new movie coming in December, what are the prospects for Star Wars sales now?
A widely reported bullish analysis of Disney’s stock by Macquarie Securities analyst Tim Nollen puts the number at $5 billion in the first year following release of the movie (which is a funny time to start counting, since the merchandise is going on sale more than three months before the movie comes out). Good forecast or is Nollen building unrealistic expectations for investors?
“Star Wars is on a whole other level from anything we’ve ever done,” Dynomighty’s Sydney Pham told me at the NY NOW gift show in New York recently. Dynomighty makes Tyvek wallets, passport holders, and other accessories, and festooned its booth with Star Wars displays.
“We started pre-selling the classic images a month before the [mid-August] show; we’ll have new images from the movie for the spring. But even the classic images are outselling all of the best-sellers we’ve had for eight years,” Pham said.
That’s pretty strong language. Joyce Washnik, editor of Giftbeat, a newsletter for the gift industry, sees Star Wars crossing all retail channels, including specialty gift stores which, traditionally, might not touch a pop culture phenomenon such as Star Wars because so much merchandise is available at Walmart, Target, and everywhere else.
Still, Washnik says, gift stores had a great run with Frozen and she sees Star Wars following in those footsteps. Frozen did just shy of $1 billion in retail sales of consumer products in its first year following release, based on my analysis of various Disney statements over the past few months. And that was for a property no one had ever heard of and for which Disney probably could have done more had the studio, retailers, and manufacturers anticipated the immediate success of the movie. (Not being able to anticipate that is why movies and merchandising are art not science, thank you.) In the case of Frozen, the licensing program had to be revved up quickly in response to the movie’s wildfire takeoff; needless to say, Disney knew what to do.
For perspective, Mickey Mouse and Hello Kitty do a little less than $4 billion each in retail sales of licensed merchandise annually, worldwide. Disney Princess and Winnie the Pooh are just below $3 billion each, and Cars and Star Wars have done about $2 billion each. Note that all but one of those — Hello Kitty — are owned by Disney.
If the new Star Wars movie bombs, which seems unlikely, Disney will still have built momentum and had three months to sell the goods. That’s analogous to most fast food promotions which end before the movie opens…just in case.
Nollen writes that Star Wars “could generate $5 billion in consumer merchandise sales in its first year of release…[and] this would easily net Disney about $500 million in licensing and retail revenue.”
Using the loosest of calculations, $5 billion — which is greater than the value of the entire licensing business pre-Star Wars! — would be $2.5 billion at wholesale. Since royalties are mostly calculated on wholesale, and the rule-of-thumb for rough estimates across all categories is a 10% royalty rate, that’s $250 million net to Disney. Even if the royalty is higher (likely), it’s still not going to come to $500 million. But $250 million? Even Mickey wouldn’t sneeze at that.
Good forecast or unrealistic expectation? As Robert Browning wrote, “Ah, but a man’s reach should exceed his grasp, Or what’s a heaven for?” Written for Star Wars, no?
Behind The Turmoil At Iconix
It’s no surprise that Iconix has performance issues.
With a broad portfolio of mostly second tier fashion brands, the question has always been just how poorly were some of the brands doing, and whether the successes simply weren’t big enough to carry the losers. On its roster, Peanuts was the odd-brand-out, adding entertainment to the mix; that acquisition, in which Charles Shultz’s family has a 20% stake, was reportedly a rocky road until Leigh Anne Brodsky (ex- of Nickelodeon) came on board to manage the entertainment side of Iconix. And that’s now the cornerstone of Iconix’s good news.
For Wall Street, Iconix has pitched itself as a business model boasting a built-in, long-term, guaranteed revenue stream (the minimum guarantees manufacturers pay for rights to make and market goods under Iconix’s owned or partially owned brands) — with no manufacturing costs, no inventory, no responsibility for returns, and some hot brands.
Iconix wasn’t the first to own a brand and just license it out, but it may have been the first to institutionalize the practice across a roster of brands. And Iconix did so with a twist: Direct-to-retail (DTR) deals such as Joe Boxer at Sears/Kmart — one of its earliest successes.
The Iconix model, with its emphasis on ownership of most of its brands (and a major stake in those it doesn’t own outright) and DTR exclusives, has become the template for Authentic Brands Group, Sequential Brands Group (whose CEO, Yehuda Shmidman, rose quickly through the Iconix ranks before leaving to launch his own brand acquisition efforts at Sequential), Hilco, and a few others.
Iconix has also accelerated interest among some traditional licensing agencies to look at the possibility of taking an ownership stake in some of the brands they represent, as Iconix itself has done with Peanuts, Madonna’s Material Girl brand, and others.
So what’s going wrong at Iconix?
- Too many mediocre labels that never gained traction, especially among men’s urban brands, with which they’ve struggled all along.
- Founder/CEO Neil Cole has been a great proponent of DTR, which worked for some brands. The problem is the company can’t force DTR for all of its brands, which was reportedly Cole’s goal.
- DTR was especially difficult to realize in foreign territories — certainly at the speed Cole had expected. There was little recognition in the home office, according to sources I’ve spoken with over the years, that European, Latin American and Asian markets don’t behave just like the U.S., or that individual countries in those regions behaved differently from each other, even after local agency partners in some territories tried to convince them of that.
Some of the other companies in this space — notably Hilco — are very disciplined about buying brand names cheap (often in bankruptcy court) and flipping the brand in 18-36 months. That’s admittedly a different business model (Iconix is in it for the long haul with its brands, sometimes to its detriment), but Hilco has the added plus of running a closeout business that offsets some of the lesser investments. But perhaps most important, that closeout business gives the company direct insight into the opportunity for some of the brands it manages through that process. Sort of like an audition.
With a Peanuts movie due in November, that property is in high growth mode; what happens once the movie has peaked is another question. The company also acquired Strawberry Shortcake from American Greetings earlier this year as part of its entertainment/character efforts; that story remains to unfold.
In some respects, Iconix and the other companies in its space are no different than music or film or publishing companies, where one hit carries the load for all, so long as “all” isn’t too over-leveraged.
There’s been a great deal of management turmoil at Iconix, what with the CFO and COO leaving earlier this year and now Cole’s resignation and the ascendency of Peter Cuneo to Chairman and interim CEO (for which Cuneo received 60,000 shares of Iconix stock). There also remain accounting issues to be resolved with the SEC. But a bad quarter isn’t the end of the road for Iconix.
The link at the top of this post is a Zack’s analysis of the most recent Iconix quarterly report; here’s the formal spin-positive release from Iconix itself.)
Just don’t count Neil Cole out of the licensing business. He’ll be back. What he accomplished has been significant for the licensing world. And I wouldn’t bet against him when he returns.
Awesomeness Seeks to Bridge ‘Connectivity and Commerce’ For YouTube Stars
“They call themselves ‘creators,’ we call them ‘influencers,’” says Dreamworks/AwesomenessTV’s Jim Fielding. Dreamworks owns Awesomeness, which is a marketing engine for young (often very young) makers of YouTube videos. There is also an Awesomeness social media community for the tweens and teens that marketing engine targets.
Fielding, who spent more than a decade with Disney Stores, including four years as President, and then served as CEO of Claire’s, knows his audience — and old media types like me are decidedly not in his sights. Fielding’s mission: “Connectivity and commerce,” he says — to help those “creators” establish strong direct relationships with consumers as well as a strong retail presence.
From a viewer perspective, Awesomeness is an umbrella for YouTube channels that cater to these demographic groups. The nomenclature is awkward, though: Awesomeness refers to its social media offering as a network while it prompts those coming to its website to “Watch our channel.” But the “channel” is an aggregation of 91,000+ existing YouTube channels as well as those generated specifically by Awesomeness. And again, admittedly, I’m not the target, but I find the AwesomenessTV interface confusing for trying to find a specific creator’s work unless they happen to be featured. (Much easier to get there directly through YouTube.)
Semantics and my own navigation challenges aside, the channel signs creators with existing YouTube followings and uses its marketing expertise to propel them to higher levels of viewership. Licensing can become part of the package — that’s part of where Fielding figures in — though as in other entertainment realms, the creators often retain those rights for themselves, or their managers/agents/parents/lawyers or other handlers.
Still, the power of that umbrella is considerable. “Discovery might have 300,000 viewers for a very successful video,” Fielding told me at Licensing Expo in Las Vegas last month. “We put a video up yesterday that had 1.5 million views in three hours.” Awesomeness adds 24-32 “pieces of content per week, plus longform” videos. Awesomeness also creates videos for brands looking to engage its audience of tweens and teens.
While many see the shelf-life of these videos as extremely limited, Fielding points out that search can bring viewers back to old episodes. He cites as an example “Life So Rad,” a series created for retailer Kohl’s. When the third season went up, viewers sought out the first two seasons, which they found even though those older shows were no longer highlighted on the site.
That can be a blessing and a curse, since the fashions a Kohl’s might be featuring in a season one episode probably don’t exist by season two, let alone season three. Still, it signals that much sought after level of engagement.
Among the more successful of Awesomeness’s stars are:
- Amanda Steele, who started posting YouTube videos when she was 10 and is now 16. Her subjects: beauty and fashion.
- Ingrid Nilson, who has been making videos for seven years, was a judge on Project Runway, and has three million YouTube subscribers and at 26 is earning 6-7-figure endorsement and other marketing fees.
- Tyler Oakley, a humorist, author, and gay rights advocate who used his social media celebrity to raise $1 million on his birthday for The Trevor Project, an L.A. non-profit that provides a safe haven for LGBT and questioning youth in times of crisis. On the more “commercial” side, he stages pajama parties on college campuses, where $250 VIP tickets include meet ups.
The company will support a new “creator” by backing production of 6-12 episodes. “If there’s the right engagement we’ll do more,” Fielding said.
Fielding sees the biggest threat to these celebrities’ longevity in how long they will be willing to produce two to three videos a week. “Most of them started by making selfies,” he notes. The more visibility they get, he adds, the more sophisticated the production values get and the more time it takes to produce even 2-3 minute clips.
The bottom line, says Fielding: “The fans will tell us when [the Awesomeness creators/influencers] aren’t relevant.”
Contact: Jim Fielding, firstname.lastname@example.org.
What I Learned At Licensing Expo 2015, Part III: More Open to the New
There were quite a few new character properties exhibited at Licensing Expo in Las Vegas early in June. And while the drumbeat in recent years has been how difficult it is for anything new to penetrate the market — in particular to get on the shelf at retail — a number of attendees commented to me this year that there was a sense that “the market is more secure, and therefore more open to considering something new.”
Most attention, of course, focuses on “new” from Disney/Marvel/Star Wars, Nickelodeon, Warner, Turner, spinoffs, reboots, and so on. But here are some notes on two of the odder newbies, a new digital hit (Bethany Mota; more on digital properties in an upcoming post), collaborations, distribution strategies, and more.
Will the newbies be back next year? Stay tuned.
Opportunistic Anime. John Prine and the late singer/songwriter extraordinaire Steve Goodman set out to write the perfect country and western song by including every country song cliché they could, including mama, trains, trucks, prison, and being drunk. The result was “You Never Even Call Me By My Name,” which was a country hit for David Allen Coe in 1975. I don’t know if the folks at Genco, part of the Daisuki Anime Consortium Japan, have heard the song or would get the joke (most of the clichés are bunched up in one final verse), but they were at Licensing Expo concept-testing Sushi Ninja, who “fight with evil Monsters for justice every day.” While they fight largely over silly things, there are only three episodes so far. Not sure it’s really for kids, or whether the humor can hold up over a full season, but so far it’s pretty funny in a SpongeBob-by sort of way.
Flush Here. Jim and Dan Chianese are brother podiatrists in Blacksburg, VA, and Charleston, WV, respectively. They are also the inventors, if you will, of Toilet Babies, a line of five (so far) “characters” that reside in Kalimapoo. You probably get the idea already. If not, go to their website. Each character has his own backstory — and yes, they are all male.
The brothers sourced 2000 of each character in China, have interest from a distributor for Japan, thought the line would appeal to 3-8 year-olds but have found the range is more 18-40 (in part, no doubt, because the only way to purchase them is online via credit card or PayPal), and exhibited at Toy Fair West and Licensing Expo in search of unloading the concept (sorry) on licensees. “We’re doctors, and we figured we’d follow the motto we follow in our practices: ‘What you don’t know, ship out.’ That’s where licensing comes in.” Contact: email@example.com.
Learning to Fly on the Fly. When Aeropostale decided to launch an exclusive line around digital celebrity Bethany Mota, it was “two months from agreement to stores,” early in December 2013, in order to make the holidays, says the retailer’s Scott Birnbaum. Aeropostale is making 8-12 deliveries a year on the line, and when Mota makes live appearances (25 “meetups” so far, attracting 2500-3000 each, on average), she has to change outfits several times because the stores sell out instantly of whatever she wears.
Making Lemonade Out of… Animaccord VP of Licensing Vladimir Gorbulya, representing the popular Russian property Masha and the Bear, which launches dubbed in English in the U.S. on Netflix this August, says they “don’t want to crowd the market with episodes.” They have 51 short-form episodes of the core series (it would take three to fill a half-hour U.S. slot on broadcast or cable). There are two spinoffs: Masha’s Tales and Masha’s Scary Tales. The program already has a strong YouTube following in the U.S. European toy chain Hamleys features Masha in a store-in-store concept in Russia; next up will be Italy. (The property does not show up on Hamleys’ English-language website.) Animaccord issues 2-3 stylebooks annually to keep the property fresh.
Sound the Trumpets. Signage at the Fox booth at Licensing Expo heralds Ice Age having amassed $1.4 billion in merchandise sales (cumulatively, worldwide), with 2.5 million books in print. . . .Fox figuratively threw its trademark searchlight on exclusive retail and design collaborations including Simpsons x Joyrich, Simpsons x MAC, Home Alone x Rook, and others in signage adorning the outer walls of its booth. . . .Authentic Brands Group (ABG) hardly needed more than the giant TV over the entrance to its booth, what with a running loop of images featuring properties it owns and represents, including Muhammad Ali, Marilyn Monroe, Michael Jackson, and Elvis Presley.
Nice Touch. Kudos to Advanstar for adding a “character parade” the opening day of the show. Several dozen characters wound their way slowly through the aisles, making for plenty of smiles and some neat once-in-a-lifetime photo ops. On their own, The Minions were especially popular at Universal’s booth, while the Teletubbies made an appearance at the LIMA Awards festivities.
What I Learned At Licensing Expo 2015, Part II: Beyond ‘Device-Agnostic’
The younger the consumer the less he or she cares which device they watch or listen to. It’s been apparent for several years now that they don’t think in terms of computer, stereo, smartphone, TV, radio, etc. They want their content on whatever device is convenient at the moment.
But they also don’t think in terms of film or a game or a traditional TV show or a Netflix or YouTube or other video. It’s all entertainment to them, a fact that is underscored by the way PBS Kids emphasizes digital games for its preschool shows; movies deliver trailers a year out and prolong the life of a release through, again, games and other online extensions; or TV shows extend their season with mini-episodes online.
All of this is cause for a wholesale re-thinking of how all forms of entertainment are marketed — let alone how entertainment consumption is measured.
A complaint that came up repeatedly at Licensing Expo this year from toy companies, movie studios, TV and video networks, and other IP owners, and which I’ve heard from people in music and other entertainment sectors as well, is how difficult it is to measure the popularity of a given movie, TV show, music recording, game or other piece of “content” across even the major platforms.
Whether YouTube or Netflix or Amazon or Facebook or Twitter or Spotify or… the owner of a piece of intellectual property has to go into each platform’s analytics independently, with no shared interface to simplify the process.
For marketers that means learning a host of analytics systems when all they really want is “the numbers” and probably aren’t statisticians. For large companies with dedicated departments that’s not a big issue. For anyone else (and that includes most companies), it is a very big issue indeed.
Is there anything out there that aggregates this wide range of user data across platforms?
What I Learned at Licensing Expo 2015, Part I: It’s Time To Retrofit Retro
Call it what you will — retro, vintage, nostalgia, classic, evergreen — the “everything old is new again” refrain has been perennially popular in licensing. But just using old images, or original packaging, is NOT the name of the game:
- Look at how Nick updated the Teenage Mutant Ninja Turtles and Saban the Power Rangers — and the huge success they’ve enjoyed on air and in consumer products. (I estimate that the Turtles exceeded $1 billion at retail worldwide in 2014, while the Power Rangers continued their upward swing to in excess of $350 million worldwide.)
- Nintendo’s Mario Bros., Bandai/Namco’s Pac-Man, and other video game companies are stressing pixilated images in their style guides. These are true to their origins but have the added benefit of playing off the popularity of styles popularized via LEGO and Minecraft, as my colleague Karen Raugust points out.
- “Throwback jerseys” are made of contemporary fabrics. “The Mick’s” throwback comes “equipped with Majestic’s amazing Cool Base technology to keep you cool and dry whenever it heats up!”
- Archival art, whether Fuller Brush, the Smithsonian Library’s Seed Catalog Collection, or the Saturday Evening Post seek to wed “nostalgia with innovation,” as Fuller Brush says in its promotional literature. As do we all.
More from Licensing Expo in coming days.
Merchandise Wagging The Book At BookExpo
New or recently new exhibitors at BookExpo America, the book publishing tradeshow in New York City this week, are using plush, handbags, and other items to differentiate their books in the competitive children’s and YA aisles. Some is licensed, or (hopefully, from the view of the authors and designers) will be. And some prefer to maintain control. (See my previous post for a report on artists at Surtex and the National Stationery Show similarly wanting to maintain control.)
Much of what we saw this week is being manufactured for show display only, as a test, or in small quantities the authors sell on their own websites.
Louisiana-based author Lance Olsen and illustrator Thomas Perry were showcasing their “Sharky Marky” preschool book with a plush shark in a plush car, both of which they fabricated for the show. The website also features coloring book sheets that can be downloaded. They had a sign that they’re looking for a literary agent and/or publisher, and they’re amenable to licensing. Distribution is primarily via Barnes & Noble and amazon, plus a handful of stores in Louisiana.
Author/illustrator/designer Christopher Straub had similarly beautiful 9” plush for his books, “Albert the Confused Manatee” and “Rocky the Confused Platypus.” Indeed, the level of detail in the plush was striking, making the book characters seem a little plain by comparison.
Straub told me he had to have the fabric for the platypus made to his specifications because he couldn’t find something the right color that had as good a feel as the fabric for the manatee, and he is concerned about continuity in the look and feel of the characters.
Straub sells his books ($17.99 MSRP) and the plush ($22.00 MSRP) on his website, and estimates he’s shipped about 2500 books from his home office over the last six months.
Author/illustrator Karen Kilpatrick, based in Florida, is working with licensing business pro Joan Packard Luks to build on her series of learning books based on her Pumpkinheads characters. The books are self-published for the moment, with Baker & Taylor and other traditional distributors making them available as well. An app has just launched, and Luks says animation is in the works, as well as formally licensed merchandise.
BeautyLand Couture is an online retailer offering beauty items from hair appliances to HBA to candy sticks, as well as handbags and apparel for young teens.
The book tie-in? A YA series built around a character named Madison K., an 18-year-old fashionista with positive morals and work ethic created by author and BeautyLand Couture founder Nina Kaplan. A third book in the Madison K. series launched at the show, as did some new Kaplan-designed merchandise.
Of course there were plenty of licensing business standbys at the show:
Disney Publishing had a relatively modest booth.
Candlewick Press is using the inside of the dust jackets to create coloring posters for Peppa Pig and other titles, and is doing book + novelty packs for Peppa, including “Love Game” for the upcoming Valentine’s Day. (Candlewick shares U.S. book rights for Peppa Pig with Scholastic — different formats for each.)
Bendon and Parragon had their wide assortments of licensed titles.
Plenty of Star Wars and Star Trek, as well.
And there were a handful of very creative book-based companies that sell their own very unique merchandise. Two standouts:
- I continue to be impressed by Litographs, which designs shirts, prints, and other goods in designs composed of all the words in the book in teeny tiny type.
- New to the show this year (but in business for two years), is Obvious State, which creates art out of quotes, titles, and other book-based sources.
Both companies handle their own manufacturing, but their designs are certainly licensable for categories beyond those they make or source themselves.
Nina Kaplan, firstname.lastname@example.org; 267-644-6119
Karen Kilpatrick, Karen@pumpkinheads.com; 954-309-3640
Joan Packard Luks, email@example.com; 201-224-2190
Lance Olsen, firstname.lastname@example.org; 504-919-0082
Christopher Straub, email@example.com; 612-387-4488
Unintended Potential, Part I: Talking Barbie
There’s a lot of talk about STEM (science, technology, engineering, math) and STEAM (add “arts”), and plenty of laudable products to support entertaining educational play. Mattel supports Nickelodeon’s BLAZE, for example, and there are a wide array of licensed Discovery toys spanning an array of subjects.
But sometimes there seem to be hidden potential applications for other toys. Take Mattel’s new talking Barbie. A child can ask questions of the doll; questions and responses are stored in the cloud, content can be updated by Mattel, and the doll builds on past conversations.
We asked whether there had been any thought to a wider range of inquiries and whether the doll searches the Internet. “Barbie will never search the Internet; we’re COPPA [Children’s Online Privacy Protection Act] compliant,” came the reflexive response to an anticipated question that might have insinuated Barbie entertaining inappropriate subject matter with her charges.
But I was asking in a different context. Last fall there was a media frenzy when a mother wrote an article for The New York Times about how Apple’s Siri app engages her autistic son by being willing to pursue a subject endlessly. (See also NPR interview with the mom.)
The Mattel spokespeople were intrigued and introduced me to the outside developer who had created the Barbie application, Benjamin Morse, “Teddy Roboticist” for Toy Talk, a San Francisco company that has previously developed the apps The Winston Show (“a talk show where the characters talk back”) and SpeakaZoo (“where you talk with the animals”).
Feels like there’s something there for someone, whether it’s Barbie or otherwise.
Unintended Potential, Part II: Anki Racing Set
This seems like a slam dunk licensing opportunity that the company isn’t even thinking about. Anki has a physical car racing game that is controlled by an app. But this doesn’t use the touch screen so much (at least not for steering) as the motion of iPhone or iPad which is used like a steering wheel. Speed is controlled by moving your thumb on the touch screen.
The app was highlighted by Apple two years ago, just about the time other toy manufacturers were trying apps where you ran the toy vehicle over the actual screen (a scary scenario for most parents).
In a reverse out of the usual set up, where you download the free app and then have in-app purchases to enhance the playing experience, with Anki you buy the physical tracks (a lightweight flexible plastic), special toy cars, and then download the free app to run the whole thing.
So far I’m told there isn’t a plan to license – the company is focusing on distribution of its own Anki Drive sets (about $150), but it’s easy to envision the Thomas version, the NASCAR set, the Batman set.
Must Read: Karen Raugust On the ‘Maker Movement’
The “Maker Movement – a hybrid of engineering and invention on the one hand and arts and crafts on the other” has surfaced in the toy arena. See Karen’s blog post here.