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As consumer fatigue continues to rise, licensors rely on experiential partnerships to stay relevant.
Mattel just announced its plans for the 50th anniversary of its Hot Wheels license. But unlike the collectible special-edition product or play system you might expect to see rolled into stores, the toy company is planning a slew of events, pop-ups and partnerships for the coming year. Fans can enjoy everything from a traveling car show and the “Hot Wheels: Race to Win” exhibit at The Children’s Museum of Indianapolis to the multi-year marketing program “Hot Wheels Challengers,” where kids compete in the Hot Wheels Indycar Junior Grand Prix. The Hot Wheels’ anniversary campaign is a microcosm of how leaders in licensing are shifting gears to meet changing consumer shopping habits. As shoppers buy less stuff, the question is: Are you experiential?
Sesame Workshop, creators of Sesame Street, is also looking into more event-based licensing programs over the next few years as well, according to Gabriela Arenas, vice president of licensing in North America. “We’ll be growing our partnerships with the Sea Worlds and the Beaches of the world,” she says, adding these types of experiences work extremely well with franchises that aren’t always relevant in products. “That type of license makes it easier to create a connection with your audience. For instance, robust properties like the $25 billion Harry Potter franchise saw a boom in revenue with the opening of The Wizarding World of Harry Potter theme parks.”
Other brands are getting in on the experiential aspect, too. PJ Masks inked a deal in May with Italian theme park Leolandia to break ground on a PJ Masks-themed attraction to open in 2019. Toei Animation has signed two new licensees to develop experiential events based on the anime programs Dragon Ball, Saint Seiya and Captain Harlock, including a partnership with Overlook events to produce the “Dragon Ball Symphonic Adventure” concert, with 70 musicians interpreting songs and music from the series. The Emoji company and Chessington World of Adventures in the U.K. will also launch a six-week campaign featuring giveaways and a special train at the park in July. In fact, a recent International Licensing Industry Merchandisers’ Association (LIMA) report found that theme parks have become an increasingly important component of many brand licensing strategies as licensors search for innovative ways to leverage their property, enhance brand awareness and connect with fans. It’s about getting kids to take a break from looking at their computers and smartphones—a virtual reality breather—for some real-life fun. Rather than playing with a toy or having a collectible gather dust in a room, brands want the experience to be a memorable one.
Making matters even more challenging for license brands, especially smaller properties, is the dwindling shelf space in stores coupled by a younger generation who cycle through trends and character properties faster than ever. “We have a retail market that is shrinking in some areas,” says Penne Cairoli, president of Laura Ashley USA. “We’re competing with every brand out there, and there are a lot of choices so getting that floor space secured is the most important.” For those IDs that don’t have an obvious entry into the market, like a movie or TV release, creating experiential licensing opportunities along with moving into the market at a quicker pace is a way to get a foothold.
Timing is another challenge, which is only being made more difficult by the increasing pace and volume of entertainment launches thanks to streaming platforms like Netflix, Hulu and Amazon Video. Even YouTube has become a popular platform with unboxing videos and short form content like Masha and the Bear, a Russian animated TV series that posts its shorts to YouTube and
garners hundreds of thousands of views each. With content available 24/7, brands and retailers are left guessing when a product will be a hit and how long it should stay in stock. The traditional timing schedule to launch new properties is long gone. “If I’m a retailer planning to sell product from Stranger Things, I know a good chunk of the audience won’t watch the show until it’s been out for three months,” says Marty Brochstein, senior vice president of industry relations and information at LIMA. “How long do I keep it in stock?” In response, brands are speeding up the launch dates of their licensed products, sometimes without waiting to see the success of the property. Peppa Pig, which launched in 2004, waited three years to launch licensing products. PJ Masks, which launched in 2015, only waited one. The Netflix original series Beat Bugs, which debuted in August 2016, launched licensed products nine months later. Another Netflix original, Spirit Riding Free, waited just one month after its May 2017 drop to launch a line of horse dolls and accessories.
Of course, the best time to launch a licensed partnership is right before a property goes viral—like Frozen did in 2013. Alas, no one has a crystal ball. Michael Langfitt, COO of Trimfoot Co. says the timing should be right for both the licensee and licensor. “We have gotten into licenses way too soon, and we’ve gotten into licenses at peak to post peak and neither of those are as fruitful as striking a deal on the uptake,” he says, adding that it’s always a gamble to get it right. “You can risk going in a little soon, so you have dominance when it peaks, but hanging on a little too long could quickly eradicate all the good you did.” For brands left scratching their heads, Brochstein says the problem isn’t as bad as it may seem because the viewing patterns of children are different than adults. “Kids latch onto entertainment the same way they have in the past, even if they’re seeing it on an iPad on-demand now,” he says. “They tend to stay with characters about the same amount of time as they have in the past.” That’s why evergreen properties, like Sesame Street and Disney characters, are always a safe bet.
The licensing market as a whole remains a safe bet, despite the current challenges. While consumers may be buying less stuff, the licensing market is still on the uptick. In 2017, the global market grew 3.3 percent to $271.6 billion in retail sales, according to Brochstein. Of those sales, the largest segment (44.7 percent or $121.5 billion) is based on entertainment and character properties. And when accounting for licensing in the U.S. and Canada, the percentage jumps to 58 percent. But anyone who has walked into a movie theatre recently shouldn’t be surprised. The slew of comic book blockbusters like Black Panther and The Avengers this year alone have generated millions in licensing revenue. In the children’s market specifically, the biggest players in the licensing game remain “The Three P’s”: Paw Patrol, Peppa Pig and PJ Masks. And with one quarter of kids’ products featuring a license, according to The NPD Group, there is enormous opportunity.
In addition to hot properties, the key is finding the right companies to partner with. Is the brand’s message clear? Is it something the target demographic will love? Is it worth it to jump into a new category? And, most importantly, will it sell? “A licensor is looking to generate revenue, build a relationship with the licensee and have a comfortable working relationship,” Brochstein says. On the flip side, licensees need to decide their hierarchy of goals for taking on a license, whether that’s breaking into the market in a big way, opening a new distribution channel or adding a new age vertical. “The licensee has to figure out if the partnership is right for what they’re trying to accomplish, and that’s something that people don’t pay enough attention to,” he says.
The biggest consideration, according to Arenas, is to find like-minded partners. With Sesame Street’s strong mission of education and acceptance, some companies just don’t mesh even if they might turn a big profit or offer greater exposure to a product. “We say no to a lot of things because they don’t align with us,” she says. “It has to stand for something we believe in.” For instance, Sesame Street is very selective about partnerships in the food category because they have to be nutritional with wholesome ingredients. The only exceptions are limited-edition, short-term releases marketed toward adults like the upcoming 2018 license with cupcake maven Baked by Melissa.
Another key component is finding companies that are the best at what they do. When a partner is already a leader in their industry with tried-and-true methods and a strong consumer following, collaborations are easier to design. “We expect that our licensees are experts within their category and industry, so it’s just a matter of marrying a product with the look of the brand and making sure it works together,” says Cairoli. Most brands have a style guide for their identities, and the best collaborations offer a give and take of established design and refreshing ingenuity. Arenas will choose partnerships with smaller designers simply because their take on the Sesame Street logo and characters is new and relevant. “I love when they stretch their creativity and that creativity resonates with the multi-generational approach we have,” she says. “We can play a lot with our characters, and we have characters not as in the forefront with our younger demographic, like Bert and Ernie and Snuffy, we can play with for the Millennial demographic.”
As with any business relationship, it boils down to communication. When licensors hand over their style guide, they must let licensees know how much creative leeway they have. For example, when Trimfoot started working with Sequential Brands Group on its licensing partnership with Jessica Simpson, the family—even Jessica’s mom—was extremely involved. “We give line presentations to them, and if they see something we hit on, they’re highly complementary,” Langfitt says. “But if they see something we’re lacking, they have no qualms bringing it to our attention. Communication is essential.”