The changing face of licensing

THE BACKDROP

 

To use the UK as an example, and to look specifically at the high streets, this has seen many large retail chains going out of

business, due to two main reasons – the ongoing recession, and the fact that many people are shopping online. This has, in turn, left retailers cautious about taking stock, in case it doesn’t sell, and because cash flow is steadily decreasing and tied up elsewhere. So where a retailer might have ‘bought in bulk’ – ordering a certain number of product units – now there has to be a guarantee that these will sell, which, of course, is a risky business as no one knows a magic formula to dictate sales.

 

While Woolworths, which accounted, according to sources, for around 20-30 per cent of licensed children’s products on

the UK high streets, went into administration and closed, online shops such as Amazon flourished – low overheads and no

need to stockpile products meaning that costs could be kept low.

 

The main crux being that in times of economic troubles, everyone, or those who are savvy and have enough foresight

to do so, will begin to look for solutions elsewhere. Many licensed products are available to buy now is sold in the

supermarkets, such as Tesco and Asda. There is a phrase floating around at the moment: ‘If you have got your product into

Tesco, you’ve made it.’ However, this does not come without its pitfalls. The huge superstores, such as Tesco and Sainsbury, as well as Boots and Marks and Spencer’s, are highly indicative of current trends in licensing. The popular boys’ and girls’ brands will more often than not have a presence in the supermarket retail space. This, of course, means those smaller chains and independent stores, or those who have bought in bulk and do not hold the power over the UK retail market, will flounder.

 

THE CHANGED FORMULA

 

Using this example, this is seen all over the world too, of course, and not just in terms of licensed product to retail. A certain

formula is arising in the world of licensing and it seems to be that companies are finding different routes to the traditional

ones.

 

Two brands that have been very successful in licensing – Moshi Monsters and Angry Birds, to use as examples – have

their origins not in television, film or publishing. These mediums are being utilised by these brands now, of course, but

Moshi Monsters is an online game and Angry Birds originates from an App. These two brands have become symbolic of

thriving licensing programmes that have bypassed the ‘conventional’ methods that other business have used. Ten years ago it would have been difficult for similar brands to make it in licensing because financers and retailers liked the reassurance of presence on the screen or in print. Between them, the two brands have hundreds of licensees all over the globe, and are quickly progressing into other territories such as Latin America and Asia.

 

THE PRODUCT CYCLE

 

This begs the question to arise of how quickly a product can be brought to retail. In a world that can be described as fickle,

or changeable, in its likes and dislikes of popular products, with certain brands riding a wave for a year then disappearing,

how does a business avoid the trap of bringing a product out too late to make money – which is, of course, what it is all

about.

 

Traditionally, after a brand emerged, or had been around for years, it can take a long time for licenses to be signed,

prototypes of product to be designed, manufacturers to make these product and finally for the end result to appear on

shelves.

 

From television brands, there had to be at least 52 episodes aired terrestrially before licensing programmes could

begin to have product at retail, as it was deemed as a risk otherwise. In terms of movies, the licensing programmes are

somewhat different. Toy Story, for example, did not have a huge merchandising programme around the first film, but it has

now become a franchise and merchandise demand was higher for the third in film than the first. So many movies, in fact,

have become franchises, such as the Batman series and Transformers – in this risk-averse world, the companies behind the movies know that they are essentially ‘on to a good thing.’

 

THE CITED REASONS

 

One of the reasons the world of licensing is changing is the amount of choice available to audiences. In terms of television,

whereas programmes such as Thomas the Tank Engine would air once a week, on one of the four channels in the UK, it

is now available on demand, every day, and the same goes for most television programmes – there are now hundreds of

television channels, meaning some ways the viewership and audience can be diluted, so presence must be felt elsewhere.

This is another reason why other, non-traditional routes are becoming increasingly an option.

 

But returning to the subject of product-on-demand – how is this possible, when for many brands, the merchandise does not appear on shelves until 18-24 months after its first appearance? We live in a world that is ever-growing in its consumerism, despite the financial woes – and choice is everything.

 

THE SHIFT

 

The China mass-manufacturing has taken over – whereas before, manufacturing on a smaller scale could be done and most people were happy with the outcome, so many companies have turned to enormous factories in China to bring product to retail in relative speed. However, if you listen to the global undertones, there is increasing talk that this manufacturing bubble in China cannot last forever. Businesses are turning to original equipment manufacturing (OEM) – essentially meaning they are doing it themselves, rather than outsourcing. Where costs have to be cut, companies have to look at streamlining and, importantly, are listening to consumer demand.

 

What this means for brands in the long run remains to be seen, and as mentioned before, the world of licensing is

somewhat risk-averse – which means that while the evergreen brands are seeing longevity, businesses behind new brands have to look at new ways to avoid certain traps to fall into.

 

What this means, in a very general way, is that the industry of licensing is shifting, and on a positive note, growing,

where so many other industries are slowing down. This is indicative of the fact that licensing is relatively young, was born

due to a demand, and thus is able to adjust to global changes.