Ahead of Licensing Expo, TV Kids investigates L&M trends and strategies in today’s competitive marketplace.
Toy sales in the U.S. bumped up 5 percent last year, to $20.4 billion, according to The NPD Group. Among the growth drivers for the industry were collectibles—which was a top contributor—followed by outdoor and sports toys and the games/puzzles category. A number of brands helped strengthen the segment, with Pokémon being the number one growth property of 2016 in toys, coinciding with the release of the explosively popular Pokémon GO augmented-reality game that saw players wandering the streets trying to “catch ’em all.”
The fact that Pokémon, which has been around for two decades, was the year’s leading growth property in toys is representative of the ongoing trend that retailers oftentimes still prefer to stock their shelves with established brands.
“It’s very hard, sometimes, to launch new brands and original ideas, because [retailers] are looking for sustainable business with many well-known key brands,” says Hans Ulrich Stoef, who heads up m4e and Studio 100 Media. “But luckily enough, after Studio 100 bought the majority of m4e, we also have classic [properties] in our portfolio, like Maya the Bee or Vic the Viking, for example, which makes it a little easier because the products already have shelf space.” Newer key properties for licensing and merchandising (L&M) in the combined m4e/Studio 100 portfolio include Mia and me and Wissper, as well as the in-development The Beatrix Girls, which will be more of a focus next year.
According to Alexandra Algard-Mikanowski, the international licensing and marketing director at Cyber Group Studios, retailers “want to take the least risk possible and to secure a level of turnover, so it’s very difficult to reach their expectations. And you need to have very good TV programming with good channels and come with a whole category of product in order to be successful.” The company’s L&M highlights include such established brands as Zou and Zorro the Chronicles, as well as the upcoming Gigantosaurus, an animated show slated for broadcast on France Télévisions, Germany’s Super RTL and Disney Junior channels around the globe.
“Retailers are looking for brands and products that resonate with consumers both through brand recognition and also—more than ever, especially as it relates to kids—the message the brand delivers to its audience,” says Frederic Soulié, the executive VP of global distribution and consumer products at Saban Brands. “Power Rangers’ core messages of teamwork, diversity and fun are a great example of this, which has helped the brand stand the test of time and continue to be a staple among retailers for nearly 25 years.”
Mondo TV is taking advantage of retailers’ desire for known brands with its first live-action series, Heidi, Bienvenida a Casa, which was inspired by Johanna Spyri’s classic children’s novel from the late 1800s. “It’s going to be a long-term project based on a total of 180×45-minute episodes,” says Valentina La Macchia, the company’s director of consumer products. “This is very important because we are able to secure a long-lasting program based on the merchandising.” Mondo TV’s L&M slate also includes the animated properties YooHoo & Friends, Invention Story and Robot Trains, the latter of which is a collaboration with CJ E&M.
4K Media, a subsidiary of Konami Digital Entertainment, has been enjoying success with the long-running Japanese property Yu-Gi-Oh!, for which it manages the licensing and marketing outside of Asia. According to Jennifer Coleman, the company’s VP of licensing and marketing, Yu-Gi-Oh! has been a hit in the L&M arena due to “the timeless appeal of anime and boys’ action/hero adventure.” 4K Media also represents the girl-skewing brand Rebecca Bonbon.
Another company with anime is Toei Animation, whose L&M catalog includes Sailor Moon, the Digimon franchise, One Piece and Dragon Ball. “These properties are well known by many anime fans and most of our properties were first broadcast in the late ’90s and early 2000s in the U.S.,” says Jennifer Yang, Toei’s senior licensing manager. “Kids who grew up watching this anime are now young adults, and they are the main target for Japanese anime in L&M nowadays.”
The Dragon Ball franchise celebrated its 30th anniversary last year in Japan. “Our Dragon Ball Z merchandising efforts are still very strong among teens and young adults after so many years, but we are hoping to gain more interest in children’s categories for Dragon Ball Super,” notes Lisa Yamatoya, Toei’s senior manager of film and merchandising.
There is also anime and manga specialist VIZ Media, which is owned by Shueisha and Shogakukan. At this year’s Licensing Expo, the company’s central focus is the older-skewing Death Note, with additional highlights including One-Punch Man, Naruto, JoJo’s Bizarre Adventure and Bleach. “Our audience is what I like to consider the next generation of fanboys,” says Brad Woods, the chief marketing officer at VIZ Media. “You’ve got guys like myself, who grew up with the world of DC and Marvel and what have you—still very valid and amazing properties—but then you’ve got this whole new generation and this groundswell of kids that started out between 8 and 12 a few years back, who have grown up into the teen and young-adult space and are all about anime. And so anime has kind of taken over that next generation of fandom.”
There is really no definitive answer as to when is the best time for companies to begin thinking about licensing and merchandising. Some like to start right away, while others wait until a brand has reached a certain level of maturity in the marketplace.
“It depends on the property,” says Cyber Group’s Algard-Mikanowski. “When you have a good broadcasting [reach] with huge TV channels, it’s better to start directly—that’s the case with Gigantosaurus. And for some other properties, it would be best to wait a little bit because if you have [a smaller] channel, it is better to have some ratings on television before launching a licensing program.”
“Whenever we produce a new show, of course the content comes first,” says m4e and Studio 100’s Stoef. “The entertainment values of a concept come first. So we are not really in the arena of just producing a commercial for the toy only.”
Soulié notes that Saban Brands approaches every property “with a 360-degree lens and a vision of both what the show and L&M possibilities can be.” The company is executing this strategy with the new animated Netflix series Cirque du Soleil Junior—Luna Petunia.
“We usually start thinking about licensing and merchandising right away because we are a production studio, so we are always involved in the co-production of the TV show,” adds Mondo TV’s La Macchia. “We don’t wait until the property has reached a certain level in the market because then it will be too late for us to develop a long-term licensing program. We always start at least a year and a half before the time to market, especially when we have to place the master toy deal. We know that the licensee needs the right time to develop the products.”
As in any business, the ability to keep up with competitors in the L&M industry is crucial in order for a brand to stay alive. Survival of the fittest is a phrase that applies to more than just the natural world.
Regarding challenges that are currently facing the segment, 4K Media’s Coleman says, “Well, one of them starts with a D and ends with a Y. So there’s that factor. And then there’s still that retail consolidation.”
“I think the most important [challenge] is the number of properties already on the market and launched by big companies, like Disney for example,” says Cyber Group’s Algard-Mikanowski. “It’s always very difficult to compete with this kind of a big company. You need to spend a lot of money on marketing and [put in] a lot of effort with retailers.”
m4e and Studio 100’s Stoef agrees that it is very hard for independents to compete with the majors these days, although it does help raise the bar on quality. “Creativity does come from the one who is having to pick his pocket; that encourages us to come up with new content and deliver more creativity. The biggest challenge is, how can you produce a sustainable business when you have to invest millions and millions of euros into a new production? And how can you make sure that you reach enough kids, and what can you do to convince retailers to put your product on shelves? It requires really big funds to do so. And not all companies are able to deliver that.”
Saban’s Soulié adds: “Innovation is key in an extremely competitive market, and retailers are evolving to speak to the current consumer, which means brands need to continue to innovate and evolve as well.”
Much like piracy is a major headache for the television, film and music industries, bootlegging is among the issues that L&M players continue to contend with. “We are facing a lot of bootleg items and/or ridiculously cheap parallel items imported unofficially to our territories,” says Toei’s Yang. “These affect a lot of our official products. I’m sure this is a problem for everybody in this industry.”
4K Media is trying to reduce the amount of unlicensed Yu-Gi-Oh! consumer goods on the market by launching an online shop that sells official branded merchandise. “We’re hopeful that with that happening, with our ability to provide this product for our customers, they won’t necessarily be making their own T-shirts and putting them up on [an online marketplace like] Redbubble,” says Coleman. “Obviously that’s going to benefit us because we’ll be getting the royalty payment, but it’s also going to hopefully strengthen [our licensees’] resolve in the brand and help show them that it still has legs and is still a money-maker.”
A challenge for VIZ Media is “weighing the appropriate size of the opportunity, and making sure that we’re working with our retailers to create clean programs,” says Woods. “Often you find our licensing and retail partners trying to create too big of a program, or create a bigger statement than it really merits or than the market will support. That, to me, is how you kill a trend. It’s one of these things where our content’s certainly on fire, but it’s still very niche in its appeal. And so I want to make sure that we’re meeting the customer demand, but also leaving those retailers with a clean shelf at the end of the day so that they come back and do it again.”
One way that 4K Media stays relevant in today’s extremely competitive L&M environment is with experiential offerings. “We’re trying to take more advantage of some experiential marketing to really touch and feel our consumers and help engage them in the brand,” says Coleman. “And we’re looking to expand that even more with some of the live events that we do.”
KEYS TO SUCCESS
Over at Cyber Group, Algard-Mikanowski says the strategy is to use “a global approach” for some products, while it is better “to deal territory by territory,” with others. “As we are a licensor, it’s possible to mix between global and local.”
La Macchia notes that Mondo TV always aims to work on a long-term basis. “Long-term is a must nowadays to compete in the market. It’s very important to grant to the licensees at least 52×26-minutes of a TV show because a license agreement is usually based on a two-year-term period, so we cannot work with very short TV series. We have to be able to assure from the beginning that we will help our licensees to grow their business and together increase the awareness of the property in the market.”
For Saban, maintaining the “core brand DNA” in both series content and L&M is key. “For example with Power Rangers, knowing its wide, global audience spanning kids to adults, we look to provide experiences that directly speak to them,” says Soulié.
As the world becomes more and more computerized, digital opportunities are increasingly important in the L&M arena.
“We are investing a lot to grow our digital business,” says Mondo TV’s La Macchia. “We are now working to develop a new application based on our characters. So we have big plans to grow the digital business here. And we do believe it’s really the main segment emerging so far.”
m4e and Studio 100’s Stoef notes that digital is a good way to test out new properties with small budgets on viral platforms. “You can pre-approve certain concepts via the internet, social media and AVOD platforms, and then spend money later on in a deeper way.”
“I think the opportunities lie in how you can disperse the brand appeal and the information in a more concise, bite-sized way,” says VIZ Media’s Woods. “Brands are coming out of the woodwork having been built on nothing but that. You look at the AwesomenessTVs of the world and a lot of the web-space influencers—these are people who built their entire awareness on 10-minute, 5-minute shorts. So for us, if we don’t stay abreast of that and shift our marketing in that direction, [we could] get lost and left behind pretty easily.”
Adapting to change has always been an essential business mantra, and as the way children consume content continues to evolve, it is one that companies should keep top of mind to stay ahead in the L&M game.