Move Over!

May 2006

By Bill Dunlap

As the children’s
market becomes increasingly crowded, brand owners are battling it out to secure
shelf space in retail stores.

Not all that many years
ago, a company in the kids’ TV business that pitched its shows and brands
directly to big retail chains like Wal-Mart and Target to support its licensed
merchandise might have been considered an aggressive, cutting-edge marketer.

Not anymore. Today, it’s standard operating procedure. The heavy
emphasis on retailer relations is a direct outgrowth of the heavy emphasis on
merchandising in the splintered kids’ TV market. If you’re counting on
licensing to carry the brand, you had better do everything you can to support
it. If you want to see toys, apparel, electronics, books and DVDs with your
brand name get a fair share of tight retail shelf space, you had better be in
the game.

“You cannot compete in today’s marketplace unless you are directly
communicating with the retailer,” says John Gildea, the senior VP of consumer
products for Cookie Jar Entertainment. “You cannot just have a successful
program. Retailers are just inundated with opportunities and if they hear about
your brand from the licensee, if you’re not out there in front of them, they’re
left scratching their heads, saying ‘I don’t know about this.’ ”

“It’s a very crowded marketplace,” says Maura Regan, the VP and
general manager of global licensing at Sesame Workshop, whose longest-running and
most successful property is Sesame Street. “There are movies and all kinds of properties
that are taking space away from us, but we have to work with our licensees to
aggressively secure that space at retail on an on-going basis. We have to tell
them what is new and exciting and engaging about Sesame Street, and why we are relevant today as
much as we were when we launched 37 years ago. We are constantly arming our
licensees with that information.”

SHARE AND SUPPORT

Licensees expect
the licensor of a brand to provide retailers with an overview of its brands,
says Annette Banham, the head of children’s marketing for BBC Worldwide. “It’s
seen as a really essential part of our role and relationship with licensees,”
she says. “The licensees are very good at selling our brands, but it’s really
helpful that the retailer sees the full weight and opportunities that are
behind every new launch. Also, it’s important for retailers to see that we are
in it for the long haul. We’re not just about launching new brands. We are all
about supporting a brand portfolio and providing perspective within that
portfolio. So they know that whatever BBC Worldwide brands they have at retail
level, that there is enough to support the sell-through.”

Sesame Workshop’s Regan has found that sharing its success stories
with licensees gives them powerful ammunition with retailers. “The good [track
record] we have with Children’s Apparel Network, we share with Fisher-Price and
vice versa. And with Sunkist, we were originally only going to be in 4,000
stores nationwide, but we ended up in 8,000 stores. Those are the kinds of
things that make a retailer very comfortable.”

Other children’s companies agree, “You’re setting yourself up for
failure if you don’t include retail early on in your program,” says Cynthia
Modders, the senior VP of worldwide consumer products at DIC Entertainment.

KNOW YOUR GATEKEEPER

Joy Tashjian, an
independent licensing agent who represents companies such as Breakthrough
Entertainment and BKN International in the kids’ area, says retailer relations
is probably the most important aspect of a merchandising program. “You have to
deal with retail because retail is where it all ends up,” she says. “They’re
the gatekeepers. If the retailer is uninformed about your property, then you
are depending on your licensees to communicate the strength of your property,
and most licensees have so many properties they can’t fully articulate the
depth of your program.” She goes on to note that licensees expect brand owners
to introduce their properties to retail.

Licensees like toy giant Hasbro agree. “Any property is that much
stronger when you are coming at the retailer from all angles—from the
product merchandising angle and from a property merchandising angle,” says
Leigh Anne Cappello, Hasbro’s VP of marketing for licensed preschool. “That’s
the benefit that a licensor can bring into the mix. When they come in and tell
the retailer, ‘Here’s our vision of our property and here are some ideas for
you in terms of how you can make this insightful and strategically aligned
within your store,’ and when the licensee has the opportunity to work with the
licensor to do that, it just strengthens the proposition for all of us. We all
win.”

The nuts and bolts of how the copyright holder of a kids’ TV property
approaches retailers varies, and many executives are somewhat reluctant to lay
out all their cards publicly. But they are clear that a successful program
requires a lot of face-to-face meetings with both retailers and licensees,
sometimes together.

Smaller production companies and international producers may choose an
agent like Tashjian, the president of JTMG, to take their story to retail,
while larger companies have staffers dedicated to retail and, in some cases, to
specific major retail chains. And Disney Consumer Products goes so far as to
have offices near the headquarters of Wal-Mart and Target.

The meetings with retailers vary from one-on-ones to auditorium-sized
conferences of marketing executives, category buyers and licensees. More often
than not, the dance starts with a presentation by the brand rights holder to a
marketing executive at the retail chain months before the show goes on the air.

Juanita Palomino, the VP of domestic licensing for DIC, says that in
the first step for a new show launch, she or Modders accompanies a DIC retail
specialist to a meeting with the retail chain’s marketing executive. “It’s
important in that very first pitch that you talk about your property, the
breadth of the program you’re looking to design, how you plan on rolling out
the program, the marketing support behind it and, if you’ve already got your
licensees on board, you want to talk about them,” Palomino explains. “If you
can, you bring in some creative to give them a taste or a feel. Then you might
come up with some general ideas about a promotion that could be conducted with
a particular retailer. On Trollz we met with all the major retailers where we thought the
product would live. If you get past that gate, you start meeting with the next
level of executives. That can be either a marketing manager of a department, or
buyers in various key categories like consumer electronics.”

Modders expands on that: “When we’re first launching, we need to get
out there and get placeholders and say, ‘Here’s what’s going on. Here are some
of the very exciting properties,’ and we start with the gatekeepers of the
retailers and those are the marketing divisions. Then, as we build our partners
and our licensees, we can reach out to those individual buyers with those licensees
and hold collaborative meetings together to talk about greater concepts. It
depends on the property and where you’re going with it.”

Tashjian is currently meeting with retailers to introduce BKN’s Legend
of the Dragon,
which will air on the Jetix block in the U.S. this fall. “We are coordinating our
retail presentation with our key licensees—our toy company, Grand Toys,
and our interactive company, The Game Factory,” she says. “We will meet with
the marketing department and the buying departments that would be supportive to
their licenses. We want toy, interactive, apparel and publishing. You want a
core representation and you want to have all the elements they are supposed to
be evaluating. We would be looking at the TV commercial, the actual broadcast
concept, what kinds of promotions the broadcaster will be doing. You create the
entire world for the retailer so that when they go to make the buying decision,
your hope is that they will consider it in multiple categories, but at least
interactive, toy and publishing.”

KEEP THE BALL ROLLING

Julie Kekwick, the
U.K. retail marketing manager at BBC Worldwide, sometimes brings licensees into
early meetings with retailers, but she notes that the meetings without
licensees are more wide ranging. The key toy retailers for BBC Worldwide are
Argos, which operates catalog stores across the U.K., Woolworths and Toys “R”
Us.

“When I meet with the retailers separately, that’s quite useful
because then we can talk about the portfolio of brands we represent,” she says.
“The retailers generally want to learn about the longevity of the brand and the
marketing support and unique selling points of the brand. It’s important for us
to get a view of how our brands fit with the rest of the retailers’ portfolios
and other competitive products they might have. Also key selling seasons and
when it might be appropriate to introduce new brands.”

After the initial presentations, the executives say it’s important not
to drop the ball. “It’s that continual building of communications,” Tashjian
says, “and advising them about the ratings, about publicity, any kind of
marketing activities you’re doing so they either increase the buy they’ve
already made or at least keep the property on their radar screen.”

Lisa Tanzer, the VP of U.S. marketing for Cookie Jar, says the goal is
constant communications with retailers. “We want to be up in front of them,
talking with them about our brand strategy overall, introducing them to the
different licensees and what our merchandising strategy looks like at a high
level and, most important, to roll up and integrate all the marketing plans for
our licensees.”

An example Tanzer gives is the launch of DVDs and CDs for The
Doodlebops brand.
“Lionsgate is launching the DVDs and Disney Records is launching the CDs,” she
notes. “We’ll work with them to get a combined launch date and share
advertising dollars in a joint media campaign. Our goal is to go to the
retailers and say, ‘Look at the whole program together, see the power of the
brand, what the whole program looks like.’ Individual licensees don’t have all
the information that we have to make that powerful statement. We want to show
how these product lines can cross-promote and market and merchandise together.”

And as licensees are signed and they roll out branded products, the
meetings can get big. Modders points out that Wal-Mart has an actual auditorium
at its Bentonville, Arkansas, headquarters to accommodate major meetings. “When
you get to the magnitude of having 50 licensees on board and a major property,
you can often be invited to that auditorium and have buyers from every class
and category,” she says. “It can be 100 people. You give them a presentation on
what the property is, who all your partners are and the marketing and
promotional support.”

Cookie Jar’s Gildea says Target and some other retailers do a
“licensing expo” every year. “With Target, you have to put an application in
and they select a group of licensors to have a mini-licensing show in
Minneapolis,” he says. “You set up your booth there and the Target buyers come
through.”

TIMING IS EVERYTHING

Licensors also have
to be concerned with proper timing of merchandise rollouts. For the most part,
they want their show on the air for six months to a year before toys and other
products hit the shelves. One exception to the rule is a show like BKN’s Zorro—Generation
Z, which has yet
to debut. “In the case of Zorro, we work concurrently with the broadcast and product as
it is an established property that has had licensed goods out based on a
feature film and past animated series,” Tashjian says.

Banham says BBC Worldwide is always looking carefully at how to manage
the brand life cycle of its shows. “We would definitely make sure that the
brand had a chance to build, that there was enough consumer interest to support
any product development,” she says. “Then we would launch appropriate
categories at appropriate stages after that.”

Gildea is currently prepping a new Cookie Jar series, Spider Riders, for a fall launch but he doesn’t
anticipate any licensed merchandise hitting shelves before next year. “You can
look at how we’re using The Doodlebops as an example,” he says. “Our program will have
been on the air for a year and five months before the first product hits the
shelf. You cannot launch a television property simultaneously. Movies are a
different situation.”

One has to keep in mind, Tashjian points out, that retailers are
looking for one very specific thing: a product that will sell through quickly.
“They know how fast things sell and they can read it daily if they want to,”
she says. “If it’s not moving, it’s out, and you don’t have a second chance. If
you ship your product prematurely, while the show is still trying to get imbedded
in children’s minds, you probably will wind up with a property that gets moved
out of retail before it has a chance to find its audience.”

THE WAITING GAME

On the other hand,
if the show doesn’t attract an audience, the product may never get seen. “A lot
of us,” Tashjian continues, “depending on the property, are waiting—let
the show go on the air, let it happen, create the demand from the consumer
rather than try to push the retailer into a project. The only challenge is, if
your show gets off to a slow start, you may never see the product in the
stores.”

While licensors and licensees have the same goal of getting their
merchandise shelf space, when it actually comes down to the hard
negotiations—pricing, the number of products in a store and the space
devoted to them—it’s usually just the retailer and the licensee in the
room.

“We tend to let the licensee handle shelf space and pricing,” Tashjian
says. “The licensor does not really get involved in telling them how much an
item should cost. If we think it is inappropriately priced, we have the right
to say that. The licensor has complete approval rights.”

What the licensors are able to negotiate, though, are in-store
promotions and special handling of multiple product categories associated with
a particular brand. The ideal is to have a store area dedicated to the various
licensees in several product categories for a single brand. Also on the table
are various kinds of exclusives for a particular retailer. And often the two
are linked.

A comprehensive dedicated shopping area for a brand is a tough sell,
says DIC’s Palomino. “It’s almost impossible to bring all the products into one
area.”

Her colleague Modders notes that such issues are up for negotiation.
“If they are going to give up this kind of floor space, especially for a large
retailer with a lot of foot traffic, they’re going to want something in
return,” she says. “Generally this is where you negotiate the exclusive
offerings. They want to be the only destination for this product. This is where
a property owner really has to weigh the pros and cons of something like this.
If the retailer makes a volume commitment and the retailer is committed to
really promoting the property, it’s a minimal risk for the property owner. But
if you lock yourself into a retailer and they don’t support and promote it,
you’re out of luck.”

MAINTAIN EXCLUSIVITY

When DIC rolled out
the new Strawberry Shortcake in 2003, it gave Target an exclusive window for some
categories, including apparel and some stationery items. “No other retailer
could carry those,” Modders says. “They supported it with signage and after a
six-month period, we opened it up to all channels of distribution.”

Other considerations fall short of exclusivity. “A number of retailers
wanted to carry Trollz as an exclusive in the toy category,” Palomino explains, “but through
much discussion with our toy partner Hasbro we felt it was not in our best
interest with this property to roll out with one retailer. We talked about how
we could support each of the retailers in an individual way. With Wal-Mart we
did a value-added item that was exclusive just to them at launch. Hasbro
designed an exclusive two-pack. Toys “R” Us was given a different item. That’s
how we gave them a point of difference.”

Tashjian suggests that a dedicated shopping area for a project like
BKN’s Legend of the Dragon would be a very difficult sell. “I have no track record
to prove the success of the property,” she says. “One argument might be that we
could incorporate them somehow into the programming from a promotional
opportunity. Maybe they would have an exclusive window on product or maybe the
TV show could be somehow tagged or we could do something with our website. With
a new property, their normal reaction would be, ‘Let me sit and wait,’ unless
they fall so much in love with the property that they want to take that risk.
If you come in and say, ‘I have a quick service restaurant, I have a movie
promotion,’ anything you can show them that is layering beyond just broadcast
becomes very interesting to them.”

Modders says that sometimes a licensor and licensee might have
differences on how to roll out a product, but that the license agreement always
gives the property owner the upper hand on those matters. “We’re charged with
doing the right thing strategically for our brand,” she says. “Licensees also
have that same feeling, but they’re in a business where they sometimes need to
maximize revenue in a given year. We might want to take a little bit of a
slower pace. Sometimes we will limit a licensee from going to mass [market
retail] to increase longevity. With some properties, they need to live and
almost set a tone in specialty [retailers], whereas the licensee might want to
get out to mass. Very rarely are you at such odds that you can’t come to a
happy conclusion.”

BBC Worldwide’s Kekwick reports successes in getting Toys “R” Us in
the U.K. to devote retail wall displays to multiple BBC brands. “We negotiated
space for four brands that involved a number of different product categories,”
she says. “Things like that can be quite impactful. With Charlie and Lola we’ve worked with smaller niche
retailers on point-of-sale promotions to actually gain a presence for that
brand.”

REMEMBER THE KIDS

BBC Worldwide also
did a successful promotion with Woolworths in the U.K. two years ago when the
home-video market was shifting from VHS to DVD. “As the leader in preschool
video,” Banham says, “we worked with Woolworths to develop a DVD sampler, which
explained the benefits of DVD for a preschool market as well as providing
entrées of our preschool programs and the sort of concepts that would appear.
That was offered free in Woolworths stores. Woolworths were extremely happy
with the impact that made and the positive steps we had taken to support the DVD
market.”

The best strategies for securing shelf space are those in which
property owners, licensees and retailers keep in mind the end users—the
children.

“It’s all about figuring out what the needs of children are and
building content that really addresses them,” says Sesame Workshop’s Regan. “We
look at the day in the life of a child and ask how we can add value and meaning
to this child’s life. We really want to come at it from that perspective.”

Pinky Dinky Doo is a new property from Sesame Workshop based on books by Jim Jinkins
about a spunky little girl who loves to tell stories. The TV series recently
made its TV debut in the U.S. on Noggin. “The books and television show really
hit a chord with young children. The whole idea of storytelling is so engaging.
Gund is our master toy licensee and a phenomenal partner,” continues Regan, who
expects to have products on the market by spring of 2007. “Launching children
into a lifetime of learning is the foundation all sorts of bigger and better
things.”