Disney's license to print money
$30 bil in retail sales projected for yearBranded entertainment merchandise has become an expanding business for those sector players who are showcasing their latest dolls, video games and other consumer product wares this week in the Big Apple.
Driven by such franchises as "Hannah Montana," "High School Musical," "Cars" and Disney Princess, retail sales of merchandise licensed by Disney are on track to rise 12% to a record $30 billion-plus globally this fiscal year, which ends Sept. 30. Disney Consumer Products chairman Andy Mooney made the projection Tuesday at the International Licensing Expo.
Disney and other licensors usually receive a licensing fee of 5%-15% of total retail sales of product associated with their brands, according to experts. So, while the $30 billion translates into much less direct revenue for Disney, it is nonetheless fast becoming a key contributor for the company.
Disney is widely acknowledged as the entertainment company with the highest consumer products revenue. "Disney is unlike any other media major in its efforts, and ability, to build character franchises that can be evergreen in nature," said Miller Tabak analyst David Joyce.
Others also have used the power of their brands to boost business.
Time Warner's Warner Bros. Consumer Products unit expects to see about $6 billion in retail sales this year, a spokesman said. At the Licensing Expo, Warners is showcasing such franchises as Batman, Harry Potter, Looney Tunes, Wonder Woman and Scooby-Doo.
Viacom's Nickelodeon, generally seen as the No. 3 entertainment and the top TV-driven licensor, had retail sales of about $5 billion last year, according to a spokeswoman. Its key franchises include SpongeBob SquarePants. The figures don't include Viacom's other MTV Networks brands, BET or Paramount, which all have their own consumer products businesses.
Companies have struck deals with toy firms, apparel makers and the like who want to tap into the power of film and TV characters, the only growth segment across all categories last year, according to the International Licensing Industry Merchandisers' Assn.
For 2007, entertainment character-based licensing revenue reached $2.71 billion, up 1.1% from the previous year, LIMA estimates. That was 45% of the licensing total of $5.99 billion.
While consumer product licensing has grown for many entertainment giants, most companies don't disclose detailed financials. Disney's recent re-entry into the Disney Stores with a different business model "is part of the reason, I imagine, (why) they are starting to emphasize publicly their merchandising efforts and metrics," Joyce said.
For Disney, the $30 billion target for this year — with about 40% coming from North America — compares to $13 billion just five years ago. Mooney said if trends continue, sales of Disney merchandise by the firm itself and its licensees would surpass $40 billion in about three years. He's already aiming for $50 billion over the next five to seven years.
Disney's tween franchises are key growth drivers, with the company predicting that "High School Musical" and "Hannah Montana" combined will reach $2.7 billion in sales for fiscal 2008. That's nearly seven times the $400 million recorded in the year-ago period.
Mooney suggested Tuesday that the Jonas Brothers, who star in the "Camp Rock" movie that premieres June 20 on the Disney Channel, could well become a third major tween franchise worth about the same as the first two.
And Mooney notes that popular entertainment consumer products are recession-proof. "People on the fringes really suffer through a recession" while consumers continue to pay for strong established brands, he said. (partialdiff)