Report: Licensing Industry Up 2.5 Percent in 2012

FILM: "The Smurfs"
Courtesy of Sony

When sony said Aug. 9 that it will release a sequel to its hit "The Smurfs" on Aug. 2, 2013, the studio declined to reveal who will write or direct. But THR has learned that the studio already has a script.

The $110 billion business sees Sony sign on more than 100 promotional partners for "Smurfs 2."

The annual Licensing Expo kicks off in Las Vegas on Monday with the industry that licenses the likeness of cartoon characters, movies, TV shows, sports teams, company logos and more enjoying a rising tide of sales thanks to the ongoing recovery from the global recession and the growth of alliances with both brick-and-mortar and online retailers.

The market for licensed goods reached an estimated $110 billion worldwide in 2012, an increase of 2.5 percent over the prior year, with the largest single category, entertainment licensing, up 2.8 percent, and retail sales rising to $49.3 billion, according to the annual report from LIMA (the Licensing Industry Merchandisers’ Association).

“In the same way that the business slumped during the recession,” says Martin Brochstein, LIMA’s senior vp industry relations and information, “the recovery of the overall consumer economy is helping boost the licensing business. In addition to that, the large entertainment companies have gotten increasingly sophisticated about creating promotional alliances with major retailers to maximize the benefits for both.”

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As an example, Sony Pictures Consumer Marketing announced Sunday that it has signed more than 100 third-party promotional partners for Smurfs 2, who will spend hundreds of millions promoting the movie right alongside their own products. 

Thanks to the success of the first Smurfs movie in 2011, toy-store chain Toys R Us is launching an eight-week campaign that includes an in-store Smurfs feature show and custom Smurfs gift cards.

McDonalds will have Smurf 2 Happy Meals, Jakks Pacific will offer plush toys, play sets and more. Macys will host a “Great American Drive-In” event with outdoor screenings of Smurfs 2 all over the U.S.

Those go along with Smurf promotions with Walmart (an exhibit of Smurfs-inspired electric cars), Claire’s (a back-to-school promotion featuring Smurfette), Glam House (jewelry), Ubisoft (video games) and Beeline (mobile games). 

This comes on the heels of a huge Man of Steel licensing campaign that also included about 100 licensees and generated free ads for the movie valued at about $170 million.

DreamWorks Animation will attend the three-day show to pitch partnerships and sponsorships tied to Mr. Peabody, an animated film scheduled for release March 7, 2014. They already have lined up deals with Hallmark (stationary), Hybrid Jem (knit tops and t-shirts), Funko (vinyl figures), Comic Images (plush toys), PopFun (glassware) and more.

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The licensing business has also been boosted by digital properties such as last year’s big hit Angry Birds, based on a mobile game.

“One of the developing trends is the growth in the number of  noteworthy licensing programs emanating from the digital world,” says Brochstein. “Angry Birds has been quite the phenomenon, but was joined in 2012 by, among others, Activision’s Skylanders game which uniquely tethered together physical toys and digital play, and spawned a huge licensing program.”

This is the 30th year of the LIMA licensing group, but for most of that time licensed merchandise was all about selling to children, who wanted to wear, play with and even eat things associated with their favorite characters.

In the past decade that has helped drive fashion licensing, which also has moved the category into adults’ items. In the LIMA survey, fashion was up more than any other area, surging 3.4 percent in 2012 to $16.5 billion.

“Another noteworthy trend is the increasing amount of licensing emanating from the adult-oriented shows on cable networks, as opposed to the traditional broadcast networks” says Brochstein. “One of the breakout licensing hits of the year is A&E’s Duck Dynasty, but that’s only one example. There are a host of significant licensing programs based on cable shows.”

That is why last week Beanstalk, a global brand licensing agency, launched a new division called Tinderbox dedicated to working with “digital brands to realize their potential in the world of consumer products,” according to an announcement.

“The ability to engage with consumers in countless and increasingly more direct ways has resulted in a visible impact on the licensing industry,” says Dan Amos, Tinderbox’s head of new media. “A brand can be born in the digital space, gather significant momentum and form a bond with consumers as deep as franchises decades old. It’s a very exciting time for the licensing industry, with incredible product innovations forming connections between the virtual and the physical world.”

Tinderbox’s first clients include the entertainment apps The Beetnuks and My Singing Monsters, as well as the social network for tweens MovieStarPlanet, which already has licensed apparel, stationary, home decor and publishing, among others.

Michael Stone, CEO of Beanstalk, predicts “Tinderbox will be a catalyst for further industry growth.”

The report pegs North American licensing royalty income in 2012 at $5.5 billion. A 2.5 percent increase over the prior year. “The licensing community continues to find new ways to strategically leverage the equity of the brands, character, imagery and other intellectual property,” says the report.

In terms of retail sales of licensed products, music licensing was up 1.7 percent over 2011 to $2.7 billion. Sports licensing rose 2.2 percent to $12.5 billion. But publishing was down 2.8 percent to $732 million.

Much of this is now being driven by online activity, especially in areas like sports where fans may be spread out over a wide area, and have limited access to team-related items.

“Out-of-market fans have traditionally been a major factor in building the online subs, but that channel also gives opportunities to niche and specialty products that may have trouble finding brick-and-mortal retail shelf space," the report reads.

The Licensing Expo runs through Wednesday. On Monday, Gwyneth Paltrow, in her role as founder of digital media company, is to give the keynote address, titled "Brands on the Brink of Global Expansion,” after which she will be interviewed by Tracy Anderson, who is partner in fitness studios, DVDs and more. Those appearances are expected to be part of an announcement that Tracy Anderson is going global.

Avanstar Licensing puts on the expo for LIMA. They expect exhibitors and representatives from more than 5,000 brands to attend.