As the global financial decline set in and affected consumer spending, brand owners collected $5.7 billion in licensing royalty revenue in 2008 — 5.6 per cent less than in the previous year, according to the annual Licensing Industry Survey from LIMA.
Consumer spending was particularly weak in the second half of the year, with the US Treasury Department reporting a 3.8 per cent decline in the third quarter and a 3.5 per cent drop in the fourth quarter.
In 2008, royalty revenue collected by brand owners declined in eight of the nine categories of licences tracked in the survey. The only exception was the collegiate market, where royalties collected by schools and affiliated organizations rose 3.5 per cent to $208 million in 2008.
LIMA’s statistics are derived from results of its annual survey of companies directly involved in the licensing business, examination of public financial documents, and interviews with licensing industry executives, with the goal of providing reliable data to help licensing professionals identify trends and growth opportunities.
Charles Riotto, president of LIMA commented: “Given the current economic climate, the revenue declines are not unexpected. However, a strategic, thoughtfully implemented licensing program remains a very effective way for businesses to build their brands, drive incremental revenue and position themselves to thrive in a rebounding economy.
“To succeed, it’s more important than ever for brand owners to identify brand extensions that will support and enhance their core businesses, while retaining flexibility to be there when consumers are ready to buy.”
The largest portion of royalty revenues are generated in the character segment, including characters from the entertainment business. They account for 46 per cent of the business. Other major segments include corporate trademarks/brands (17 per cent), fashion (14 per cent) and sports (13 per cent).
Survey responses also indicate that retail distribution patterns for licensed merchandise may be changing, with brand owners exploring retail opportunities beyond their normal distribution channels.
While large mass merchandisers remain important to brands, several firms report they are seeking relationships with smaller, independent retailers, whom they see as more able to respond quickly to market trends and are more willing to take on new, untested properties and products.
Additionally, responses indicate that supermarkets, drug store chains, specialty chains, online retailers, dollar stores and warehouse clubs are growing in importance to brand owners and their licensees.