"Brands will be less able to reinvent themselves becuase there will be fewer movies in 2009. To overcome this, the industry should nurture and focus on great classic brands."
David Binnie, General Manager, WBCP UK
"With manufacturing costs up by almost 30 per cent inc transportation, we are being extremely cautious as to which licences we buy into. The book market itself is holding up very well, but it is the major best sellers that are performing. In launching new licences everything now has to be in place for book chains and supermarkets to support. It is rare that they will support a publishing programme without the brand awareness in place. Only very high profile brands will be the exception to this to achieve mass distribution. One area that is performing above expectation is the film tie-in from original publishing, for example Boy In The Striped Pyjamas."
Mary Vacher, Licensing Dev Manager, Random House Children's Publishing
"Squeeze. This is the best word I can think of to describe the predicament every licensing industry player is facing today. From consumer to retailer, licensee to licensor, we are all feeling the squeeze as the whole industry relies on consumers and the purchases they make at retail.
We are all consumers and we know first hand that, nowadays, there is less money to spend on discretionary purchases. As retailers show diminished appetite for taking in newer, lesser established brands and more appetite for the ‘safe bets’, i.e. brands consumers know and trust, there is a risk that some licensees will fall far short of their revenue budgets – and that has implications, of course, for licensee cash flows and any minimum guarantee payment obligations they may have. In these circumstances, and in a better case scenario, licensees may seek to delay their royalty payments, and, at worst, may be face bankruptcy.
Licensors and licensing agencies will need to more flexible than usual in the way they approach both existing and new licensing agreements both now and in the coming months. In particular, more accommodation will need to be made to assist licenses where their cash flows have been hit and where business plans are having to be rapidly re-written in this stark economic new world order.
In essence, we need to move quickly and act now to have any effect over our 2009 busineses. The reality may be that it is too late to avert the consequences of the credit crunch next year, bearing in mind the time it takes the licensing business model to react to a change in market conditions. However, even if it may be difficult to address the issues we face for 2009, any and all steps we take now in understanding and addressing current trading challenges will stand our businesses in good stead for 2010 and beyond. That means right-sizing cost bases and keeping close to our licensee and retailer partners. We need to be lean and mean organisations to weather this global squeeze."
Ciarán Coyle, Managing Director, The Beanstalk Group
"From my perspective a key challenge in 2009 is trying to keep the intrinsic value of licensed properties at the top of the agenda. The recent Brand Licensing Europe show was a great showcase for our industry with a fabulous range of licences available. In the majority of cases most of the licenses have been well crafted, subject to support and investment helping to establish them as brands that have an in-built value and attraction to consumers.
They are desirable commodities. I accept there is an over supply and some licences will wither on the vine. However, what I think has started to happen is the intrinsic value of a licence has been lost and licences are being reduced in status as they are used in short-term price driven activities. I think it is important that the basic value and attraction of a licence is maintained. If we allow licensed properties to be commoditised in the quest for short-term revene gains we will lose the value that has been established in consumer's eyes. In tough times licences can add value to the retail and supply chain.
The temporary use of an Intellectual Property under licence can allow them to benefit from the well established good will that a successful licence brings - why surrender this value in the short-term? Using someone's brand equity to help sell product in a slow economy is a good move. Licensing has a lot of potential to help businesses.
We shouldn't sell licensing short and we should remember that many of the licensed properties shown at Olympia have been the subject of significant investment, careful management and ongoing support.
I also hope that communication becomes better - as an agent we are often criticised for not being good communicators and keeping licensees informed of developments and decisions. Quite right we shouldn't be complacent but I would urge all members of the licensing community to reflect on their account handling skills. I think it would be great in 2009 if we were able to develop more dialogue in the industry and actually hear back positive or negative about our properties from licensees or retailers. Feedback is welcomed even if it is bad news!"
Ian Downes, MD, Start Licensing
"This isn’t an easy time for licensees, licensors or retail. Although the immediate effect of the credit crunch will be, in part, cushioned by a sales boost around the Christmas period, we then have the whole of 2009 to get through at a time of probably decreasing High Street spending, less bank lending to the businesses we rely on and less willingness from licensees to take chances on new or untested brands.
Of course, there is an upside to this. A weak pound will boost exports and falling oil prices will (eventually) have an effect on energy costs and prices of petroleum by-products like plastic. However, it will do us no good to simply hope that things balance themselves out over time. We need to be proactive. To start with, the relationship between licensors and licensees will need to be reinforced.
For example, we are all happy to give licensees support when they present to retailers: statistics, powerpoints and marketing information should be made available at a moment’s notice. But licensor availability at a presentation, to co-host it or simply to support licensees during a Q & A, could make the difference for a retailer at a time when shelf space is being more jealously guarded.
We also need to look at our relationship with retailers and work more closely with them. It may even be useful at times to offer a retailer an exclusive of a product or design. Handled sensitively, the positives of retail commitment and guaranteed shelf space will outweigh the limitations of committing a licensed product to one retailer.
Arguably, of course, these approaches would be useful even at a time of relative economic stability - and that’s another lesson: we can always do better. Certainly if, by some stroke of good luck, 2009 turns out to be an easier ride than we expected, we shouldn’t use that as an excuse to avoid innovating or improving."
Caroline Mickler, Brand and Licensing Consultant
"As I'm sure everyone is saying it has to be retail spend. Are consumers going to keep buying anything other than the staples they need? My guess is yes, they will. From a kids' perspective they will need clothing, footwear, school stationery as well as other life essentials such as computer games, of course!
From a sport perspective it may be that fans still attend matches at club or international level, but don't buy as much merchandise as they previoulsly would. I think things need to be a whole lot worse than they currently are for die-hard fans to stop watching their favourite rugby, football or cricket teams altogether.
My hunch is that sport will fare reasonably well for a number of reasons: it's ingrained in a lot of people's minds and psychies. Just like giving up cigarettes, perhaps, it takes things to reach rock bottom before such a powerful addiction will be foresaken. Sport is also escapism. It takes a lot of hard working, everyday people out of their normal lives and into another world. It's also about hope, without wishing to get too philosophical. The hope that exists in every fan's mind that this is the season or this is the game. Maybe 2009 won't be as bad as many people fear..."
Chris Protheroe, MD, Copyrights Promotions Sport
"I think the licensing industry will face challenges launching the volume of new properties to retailers as has been done in previous years. As a retailer we are naturally being cautious by only backing the winners, as a direct result of customers demanding less as they have their disposable income tightened. In this climate brands and retailers will need to be true to their core proposition. Customers will buy into the brands they know and trust, and buy the products that will satisfy for longer. This may have a negative effect for movie properties, where their lifespan is generally shorter. Price will also be of increasing importance to a customer when it comes to licensed merchandise, especially for those products that are non-exclusive. I think the way to get through this period is to focus on being true to the core values of the brand and being conscious of retail price."
Sonya Little, Senior Licensing and Events Manager, Woolworths
“The main challenges facing us in this climate are to be able to grow our business at the same pace as the last few years. Fortunately, we are poised to weather the storm with evergreen brands such as Thomas & Friends and Bob the Builder. We also have a full production slate in place for the next five years with over 360 new episodes and more than 50 hours of specials in the pipeline, including fresh, new CGI formats for Thomas, Bob the Builder, Fireman Sam and Angelina Ballerina. We have invested in our core business and this is a long-term plan and strategy and in a tough climate retailers will back winners. And I think we have more long-term winners in our portfolio than most. But we never rest on our laurels as we continue to grow our properties through innovative campaigns such as ‘Discover Thomas’ to support the DVD release of Thomas & Friends: The Great Discovery.”
Peter Byrne, EVP Consumer Products Worldwide, HIT Entertainment
"Many of the challenges facing the industry in 2009 remain constant, however, as the majority of licensing revenue comes from the mass market sector, this period of belt tightening may actually be good for licensing in general.
So then – my old favourite first – retail. Retailers now fully comprehend that their shelf space is the Holy Grail to licensed brands and that without them, the latter neither evolve nor sustain inherent value. But, is today’s retail infrastructure akin to astute business acumen or a smoke screen for mediocrity coupled with indirect commercial naivity of tempered immoral and unethical proportions? If retailers really do hold the mantle to make or break a licence, do they not also have an inextricably linked obligation to mete out equitable fair play in the winner’s enclosure selection process?
In licensing, things are not as black and white as the economic doctrine of 'elasticity of supply and demand'. Many retailers still do not harness the value that licensing can influence on product sell-through. More often than not, it is an information prejudice scenario self-imposed by the retail buyer. Rooted in what Lewis and Bridger call the 'Soul of the New Consumer', retail buyers – like the rest of us - juggle with three new scarcities: Time, Attention and Trust. This untouchable attitude makes it increasingly difficult for any brand to reach what Malcolm Gladwell calls the 'Tipping Point', that magic moment when ideas, trends and social behaviours cross a threshold, tip and spread like wildfire. Buyers meeting with licensors to exchange experiential trading dilemmas with brand evolving solutions are very much part of the social dynamic realm that cause rapid change. Retailers need to embrace licensing from a brand perspective and not from an uncoordinated category buying viewpoint. The Pareto Rule undoubtedly applies where 20 per cent of lines will bring 80 per cent of sales, but, the slower lines must still be carried in order to offer a comprehensive range which will attract shoppers.
Just as we have seen a plethora of estate agents opening up across the country over the last few years of the boom in property, so too have we seen a charge of new players entering the world of intellectual property rights at a time when retail shelf space is shrinking and routes to market have also proliferated to the point where few of the former now retain the strength to deliver any meaningful brand impact. Whether a cynic or an optimist, the future is one where there is no place for the mediocratic and one where all the component parts of any successful licensing programme must encapsulate the risk versus reward model in tandem with equity parameters from both a gratuitous and punitive perspective. In short, there will be consolidation and there will be casualties.
Purest licensing agents will struggle to compete as their already limited commission retention is further eroded by third party partnership demands and those without an equity stake in the brand will have little choice but to watch from the sidelines instead of scrumming down on the pitch. Specialist delineation will become further blurred as licensees become licensors, retailers become licensees, broadcasters become licensing agents and licensors become retailers, and so on. In short, the market is about to become very ambidextrous to say the least. The close networking hub that is the UK licensing fraternity will remain, however, it too will become much more transparent in it’s levity as entrepreneurial acumen falls foul of retail distribution cynicism. There needs to be a re-balance of the power base and a taking of stock by all in the playground and as part of this continuing evolution, and mainland Europe is about to come ashore – big time. Some retailers are already here and more are on their way, however, the greatest impetus will be from licensees who are both strongly established in Europe and who are now proactively engaged in conquering the previously protected domain of the domestic home base licensee.
Moving forward, licensors are having to invest considerably moré and upfront in both brand development and creation and at the same time, broadcasters, licensees, retailers and tertiary commercial partners are pulling in the purse strings under a veil of dominoes liability culture. The fact remains that if a party has invested heavily in a brand and others wish to benefit from that investment, then there must be a willing reciprocal investment for such an equity spin off. In this genre, there too needs to be a re-balance of contribution and commitment if the creative well is not to run dry.
Despite these hardships and frustrations, lateral thought and innovative pragmatism are our beacon of optimism. Indeed, if one cannot solve a problem, it may be because you are playing by the rules. Change is rife and pioneering attitude is what is required. In playing for safety you will lose the magic. Magic creates dreams and dreams build emotional connectivity. To have a successful property is probably as much down to luck as it is to judgement. Luck, however, can be defined as where strategy and opportunity meet.
I believe the licensing industry is changing and is in the realm of turbulent transition. The bigger players have over-egged their financial expectations and the small guy lacks the resources to exploit this state of flux. This is the both the opportunity and the challenge for those who fall somewhere in between who may care to take inspiration from the now classic words of A.A.Milne: “There is wisdom in simplicity, pleasure in positivity and more to knowing than being correct.”
Stephen Gould, Senior Consultant, Director of Consumer Products, RDF Rights