Licensing Revenue Royalties Rose 3.3 Percent In 2013 to $5.6 Billion
The annual survey by LIMA shows North American licensing and retail sales up for the third consecutive year, led by Hollywood character-related merchandise.
For the third consecutive year, the business of licensing goods and services was up in North America in 2013, a rise of 3.3 percent over 2012, for total royalty revenue generated of $5.6 billion.
That translates into retail sales of licensed merchandise and services of $115.8 billion, up 3.2 percent, marking a return to levels not seen since the beginning of the 2008 recession.
“Everything is continuing to loosen up in terms of retailers and consumers ability to look at new things,” says Marty Brochstein, senior vp, industry relations and information, for the International Licensing Industry Merchandisers’ Association.
The group, known as LIMA released its survey of the licensing business Monday, the day before the start of the Licensing Expo at the Mandalay Bay Convention Center in Las Vegas.
Among the licensing categories that continue to show strong growth is what the study calls character-related merchandise. That includes all of the licensing of entertainment movie and television characters, shows, celebrities and other copyrighted properties.
In 2013, character-related licensing, the largest single classification, generated $2.7 billion in royalty revenues which translates to an estimated $51.4 billion at retail, which is up 4.3 percent over the prior year.
“The larger entertainment firms continue to pursue a strategy of concentrating on partnerships with larger retailers, who are focusing on fewer properties,” says the report. “The smaller firms reported a greater willingness by specialty retailers to take risks than in the past.”
The digital revolution is continuing to have a huge impact. With specialty retailers like book, music and even toy retailers in retreat, a lot of the sales have moved online. However, the type of sales is shifting. Instead of old fashioned toys, children are turning to digital representations, games and apps instead.
“There’s been an on-going phenomenon over the last several years that in industry shorthand is called ‘kids getting older younger,’” says Brochstein. “The time and money spent on apps and iPads and digital services and such comes from somewhere, and those kind of things are affecting younger and younger kids. A five-year-old who might have been playing with an action figure two years ago now may be doing something involving that same character but doing it via an app.”
In the entertainment/character properties category, the single largest generator of licensing revenue in 2013 was toys/games which generated $638.4 million, followed by apparel at $292.6 million, software/videogames at $266 million, food/beverage at $212.8 million and gifts/novelties at $186.2 million.
Licensing revenues for music actually dropped year to year, to $121 million, which is about one percent lower than in 2012. That happened even as the music industry, facing declines in recorded music sales, have looked to merchandise to boost revenue, often from sales at concerts or events. “The major driver of these revenues n recent years,” says the report, “appears to be a shifting business model of the industry that emphasizes tours organized by entertainment companies as well as tie-ups.”
The revenue generated by licensing has become ever more important to the big companies that dominate the production and distribution of entertainment content and properties. “We believe the crucial role of infrastructure in consumer products licensing is not fully understood,” wrote analysts Vasily Karasyov and Kutgun Maral of Sterne Agee in a June 5 report. “A global organization is necessary to maintain relationships with licensees and retailers as well as maximize product lines and categories.”
In other categories, the survey says corporate and brand name licensing was an estimated $965 million, which translates into $22.5 billion at retail, up 4 percent; sports (both leagues and individuals) had revenues of $698 million, translating into retail sales of $12.8 billion, up; 1.9 percent; fashion (the big fashion names) had revenues of $7780 million, which was $16.9 billion at retail, up; 2 percent; and publishing remained unchanged at $35 million in royalties.
Brochstein is very optimistic about the outlook for the entertainment/character category in coming years. He notes that there are big movies ahead in 2015 and 2016 that lend themselves to licensing including another Avengers, a new Jurassic Park, Justice League and the granddaddy of licensing hero’s, the return of Star Wars.
“There’s always big movies but some have more resonance than others,” says Brochstein, “and Star Wars is one of those franchise that has always produced big business. There are still places for it to grow. These will be the first movies under Disney parentage and they are very good at what they do; not that Lucas wasn’t. But Disney has shown it is good at leveraging the franchises and creating things that are attractive to consumers.”
Wall St. analysts Karasyov and Maral also see a strong outlook, what they call “tailwinds” that are likely to be helpful: “in addition to new properties we continue to see the mining of character libraries, made possible by CGI…Current films offer more opportunities for consumer products than before – think Frozen vs. Pretty Woman or The Avengers vs. Die Hard.”
This was the sixth year LIMA has done its survey which is different from other studies in that they compile royalty income received from the licensing of properties as opposed to the more common practice of tallying up retail sales of licensed products.
The report was compiled by a team of professors at the Yale School of Management, who maintained complete confidentiality as to the sources of the data.