“In general terms, the economic downturn, coupled with the folding of Woolworths and EUK, have heavily impacted the UK industry in recent months – fragmenting the supply chain and making it harder to reach retailers at the same time as consumer confidence hit rock bottom. This has had a greater impact in some categories than others, however the overall effect has been painful. As a UK-based global business, we’ve seen some swings and roundabouts – the weak pound has facilitated some revenue benefits but our UK-based licensees have struggled with higher costs.
"What is clear is that 2009/10 will be a tough year but we’re in a good place; the brands that will ride out the storm are those that resonate with their audience and we’re lucky enough to have a really strong portfolio. Brands such as In The Night Garden and Doctor Who that have enduring appeal for our audience and endless creative opportunities, have contributed to 2008/09 being our most successful year since the launch of Teletubbies over ten years ago – no mean feat in the current climate.
"But we can’t, and won’t rest on our laurels. We need to continue to build strong relationships with retailers so that we can understand their needs and what we as a licensor with a broad range of popular brands can do to help meet those needs. With further consolidation on the High Street possible, or even probable, the opportunities for launching new brands will be fewer and fewer, so the key is to retain focus on a select number of the best brands and deliver high quality products that our audience values. Additionally, for global players like ourselves, it’s important that we realise the opportunities in key markets such as the US; we need the scale of these international markets if we are to continue to invest in major new projects going forward.”
Neil Ross Russell, MD, BBC Worldwide Children’s & Licensing
“So far this year, I’ve been really excited by what’s coming through. I’m seeing more of a focus on key lines and the right product for the right licence. This year’s film releases have enormous potential with the likes of Star Trek, Transformers and Harry Potter to name a few. As a retailer, we are fortunate enough to see growth in our key licensed product areas despite the economic downturn.”
Fran Jones, Entertainment Product Buyer, HMV
“As with all businesses, I believe the licensing industry is suffering as a result of the recession. Manufacturing costs have increased as we get less for our pound and that all important shelf-space remains elusive for new brands, as retailers play it safe with a deeper buy-in of tried and tested ones. The key to turning things around is focusing on timeless brands, product innovation at affordable prices and delivering new media content – an area which is still very much on the up. Here are HarperCollins, we are starting to licence out rights to our picture book characters and Collins Geo/Language brands, offering customers a wider choice of consumer products which have evolved from our best selling and well-loved books.”
Melanie Beer, Head of Licensing & Content Development, HarperCollins
“Although the economic downturn is affecting the entire world economy, the UK and the US are perhaps suffering the most and the licensing industry is no different.
New trends are already developing within the licensing industry as a result of the downturn: shift in consumer shopping patterns, the entire retail landscape has changed and reorganised, with current mass market retailers benefiting from the Woolworth closure, plus licensees are still trying to fill the gap, as well as online retailers gaining popularity. You have to accept that the world is different. Forget about what you know or did before as it might not be relevant today anymore.
"Companies like 4Kids, which deal with multiple currencies, are affected by the exchange rate fluctuation and I believe that this will be the case until the sterling rises again. We have seen the impact of the devaluation of the sterling in our business as the pound has dropped so in heavily value against other major currencies such as the dollar and euro. As a result, we have seen more UK companies requesting European distribution of their goods as it makes their products more competitive in overseas markets.
"I think that this is vital for the licensing industry as a whole to realise that the economic landscape has completely changed and adapt accordingly. We have to go back to basics and keep our business approach simple - so that everybody understands what the consumer wants - I will still add everybody understands what buyers need, what we need to do and differently, what the consumer wants, and how we can best provide it.”
Sandra Vauthier-Cellier, MD, 4Kids Entertainment
“Overall we are observing various category dynamics. On the one hand traditionally big categories such as softlines are experiencing a slowdown at retail and the licensed part of that business is affected. On the other hand, however, in certain categories such as food and beverages there are new dynamics: DTR, new manufacturers adding licensing to their tactics to fight declining sales.
"We are also experiencing different types of reactions from companies: some of them much more receptive to the potential added value of a licensing programme, others postponing decisions regarding new initiatives.
At WBCP specifically looking at the trend of renewals and royalty declarations for EMEA region, we are not seeing major gaps or substantial decreases versus expectations which is rather positive and reassuring given circumstances. Even more we have had a few major new launches with leading companies in several markets: for instance Looney Tunes Active Collection at Tchibo in Germany, at Boyner in Turkey or the launch of the Looney Tunes Dairy range by Ulker in Turkey.
"Whilst it is more difficult than in previous years to get an accurate reading of the rest of the year, there is a general view that overall the industry will stabilise even though the dynamics may differ category to category and market by market. Certain categories which require substantial marketing investment above and below the line may be more affected by marketing budget cuts towards year-end.
"The focus on classics and big blockbusters is happening, but as an industry we are fortunate to have strong classic/evergreen properties plus a regular flow of new content and still some underdeveloped areas to look forward to.”
Bruno Schwobthaler, SVP Sales & Business Development EMEA, Warner Bros Consumer Products
“Without doubt there is caution in the wind, however, during economic crunch times brands need to differentiate more than ever and there is no better way to do this than through the medium of licensing. Retailers only want ‘guaranteed’ winners – but, then again they always have - and licensees are being most reserved when it comes to fiscal deal term parameters. However, this was a trend already in existence prior to the economic downturn as retailers consistently squeezed their supply chains and, indeed, all commercial touch points.
"Even those licensors with ‘hot’ properties in their portfolio are not immune from the current slump, as licensing is a true game of dominoes in marketing and brand extension terms – a shunt here leaves a dent there or, if you are an academic, for every action there is an equal and opposite reaction. Complacency is a dangerous trait to adopt – whether intentional or not – and certainly those at the forefront of licensing today are moving forward with both cautious optimism and market sensitivity. Everything is carefully reviewed and whilst entrepreneurial flare is still core to the business philosophy, it is also tempered with astute commercial acumen and heightened due diligence.
"Certain market parameters are also beyond management account control such as currency fluctuations and, for those who have not bought applicable foreign currency in advance, the volatility of international exchange rates can indeed be problematic – and most notably perhaps for those having to buy in US dollars, but trade in other currencies.
"Overall, I believe that the general licensing market is just about level pegging where it ought to be right now, however, there may be a slight dip lying ahead as a result of boundary layer generic retail decline. That said, licensing is predominantly a mass market phenomenon and one of the biggest genres is children’s entertainment. Even in tough times, the mass market sector and children’s brands seem to be more resilient than most and if a true star rises above the parapet, the uptake will still be fundamentally inspirational and soul warmingly successful. Consumer demand has not gone away, it’s just a little more selective than it perhaps once was and for those who truly innovate and pioneer, the crop is still there to be harvested.
"As one Ken Viselmann, the guy who brought Thomas the Tank Engine and Teletubbies to the US, once told me: “It’s all down to luck and luck can be defined as where strategy and opportunity meet!”
Stephen Gould, Senior Consultant, RDF Rights
"There are two problems with a definitive assessment of the effect of the recession on the licensing industry. Firstly, it may simply be too early. Secondly, many key indicators are by no means making things clearer. On the one hand April retail sales have been good, causing some to think we have hit the bottom of the recession and are now, at the very least, preparing to climb out.
"On the other, both the good weather and Easter falling in April have helped sales, so April may not be representative. And will falling inflation and cheaper mortgages be more influential on spending in the coming months than growing unemployment and wage freezes? Or will stay-at-home Brits cancelling overseas holidays spend their money on licensed goods rather than air travel? We still don’t know.
"So what do we know? Well, it’s clear that exchange rate fluctuations do little to help the situation. This is a global economy after all, and when you are sourcing materials or goods from overseas, a lack of stability doesn’t help long-term decision-making. UK suppliers could point to the low value of the pound against the euro as a short-term boost, but that is no way to run a business like ours.
"As for specific properties, I don’t think classic brands will necessarily be hit. Certainly for The Beatles, a brand I manage in the UK, the aim is longevity and a short or medium-term recession will not be allowed to get in the way of a strategy that could run into decades. I know of a number of children’s brands looking to launch at retail in the next ten months for which the same point applies; the aim is to build over years, not months or weeks. One-off launches tied to short-run films or TV series might arguably be in more danger. But that isn’t certain: the strength of the offering is still what matters.
"And not just the offering. As I have noted previously, licensors need to work more closely with licensees than before, supporting their retail pushes. And both must be more committed to understanding and meeting the needs of retail itself and help retail to respond quickly to changes in customer preferences – which, of course could differ from one license or age group to another.
"So it’s hard to tell at this stage just how seriously this recession will hit licensing but, at the very least, the boom is over, and we may have to be ready to work harder and better just to stand still, let alone go forward."
Caroline Mickler, MD, Caroline Mickler Associates
“I think everyone will have their own perspective on this depending on their company’s position and activity.
From Start Licensing’s point of view we are a relatively small company, so haven’t been so susceptible to economic swings and we have also focused on building a licensing portfolio that is centred around classic, proven or media supported properties.
"With this in mind we have benefited from the growing interest in ‘retro’ properties through our work on The Beano, The Dandy, Jackie and Commando for example. With a property like Bang on the Door we have focused on working with the owners on creating original and bespoke design solutions for licensees and retailers. The success of the Fabric Animals stationery line from Blueprint in WH Smith is a good example of this. This design was a refreshment of the classic Bang on the Door Animals and was developed in partnership with Blueprint to fulfil a market need.
"So my view is that the first half of 2009 has been reasonably good for us, but that is framed by the fact we are a low overhead business that has always been quite targeted and focused in our business activities.
There is no doubt that decision making has slowed down, less commitments are being made and the retail landscape is challenging, but I think this is where a strong focus on adding value to business transactions, a commitment to good communication and a willingness to promote your brands is important.
"I think we need to champion the fact that licensed properties can add value to businesses and in many ways be good marketing solutions that can save money. For many companies it is a short cut to brand equity they may not be able to afford at the moment.
We went to Prague to exhibit Bang on the Door at the Licensing Forum as we believe in a controlled way you have to invest and seek out new opportunities.
"I think in some respects we have become a little complacent and this is a wake up call to think about new markets and new distribution channels. Perhaps we have grown a little lazy in selling licensing to a broader market and this is a good opportunity to review things.
"We worked with Holland Publishing to launch a new range of Bang on the Door books at the London Book Fair recently. It was a real joint endeavour with focused PR, input from Bang on the Door and a licensee that was determined to make the most of the show. The end result was very encouraging. Also it was a great forum to hear retail feedback and adjust products accordingly – I think you have to listen and respond. This cuts all ways though. As an agent we would love to get more feedback from people.
"Another one of our clients Kindle for Big & Small has also shown a lot of faith in their property supporting it with trade and consumer PR, working closely with licensees and the broadcaster. I think this is a good example of a new entrant to the licensing market being prepared to support their property to a level they feel comfortable with a well thought out plan with the objective of growing a licensing business to dovetail with their TV business. Even though times are tough they have recognised sensible and targeted investment is appropriate. They see licensing as a growth area for them.
"We are in a tough period, but I think a bunker or blinker mentality is ill advised. I think we need to promote licensing as a marketing and product development tool that can provide a value for money solution to customers, adjust our business modelling to reflect market needs, investigate new business opportunities thoroughly and also make a commitment to communicate.
"I think July to December will be tough, but approach it with confidence in our portfolio, our approach to business and a real belief that well executed licensed products can provide a great return on investment.”
Ian Downes, MD, Start Licensing