A look at the art licensing sector

Posted by Marty Brochstein on November 28, 2011

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The art licensing business is in the midst of a significant transformation, as some merchandise categories that formerly were mainstays of the business wane, while some newer sectors show significant growth potential.

According to LIMA’s Annual Licensing Business Survey, retail sales of art licensed products in North America reached $3.75 billion in 2010. While lower than the sales level of the year before, those numbers appear to represent the beginning of a turnaround from the depths of the recession that put the brakes on consumer spending overall. “In general, 2008 and 2009 were the worst years I’ve seen in the business,” said one prominent art licensing agent. “We started to come out of it in 20010, and 2011 has been okay so far.”

The LIMA numbers back that up. Sales were off 12% in 2008 and another 11.7% in 2009 before the rate of decline moderated to 5.9% in 2010, according to the Annual Licensing Business Survey.

Many are hoping that the inexorable integration of digital technologies into our everyday lives will open some new markets and opportunities. Some point to categories such as skins and wallpapers for computers and smartphones as rising revenue generators. Others point to the advent of on-demand publishing of wall art as a growing way of exposing licensed images to a broader audience. Costco, for example, has a digital Art & Image Gallery – accessible either in-store or online, that allows the shopper (including a small business intending to re-sell) to order any of more than 20,000 pieces of “fine art, photography and illustrations” in customized sizes, formats and frames.

One art licensing agent who deals mostly in fine art even talks of discussions with an electronics manufacturer that’s preparing a line of large electronic picture frames that could be programmed to display either single or rotating collections of artwork, according to the owner’s desire.

One significant question is whether the growing number of digital licensing opportunities will make up for the revenue that’s been waning in some categories that have been longtime mainstays in art licensing. Several of those we’ve spoken to note the waning of the traditional greeting card business, as younger generations communicate their feeling and commemorate occasions via email or on social networking platforms such as Facebook. Others point to the declining market for licensed checks, as increasing numbers of people of all ages pay more and more of their bills online.

One theme running through discussions we’ve had with several art licensing agents is that everyone in the art market is having to work harder and do more deals just to maintain prior sales levels. “The good news is that there’s still a tremendous appetite from manufacturers for licensed art,” says one Midwest-based agent. But that appetite is being filled in a different way. She describes a retail business characterized by buyers each looking for a “new and different” look in each selling season – no matter the merchandise category – but then ordering very conservative quantities. They’re relatively unconcerned about ending up with empty shelves at the tail end of the season, preferring that to carrying over and marking down merchandise perceived as tired and old.

Another agent, based in California, cites one of his licensees as saying that five years ago, he could put together an annual or half-year program for retailers in his particular merchandise category, but that “now, the programs last three months. So that means that for the same amount of paperwork and management time, you’re doing a quarter or half the business you used to do.” The good news is that the more recent sales pattern has manufacturers consuming more artwork more quickly.

Art licensing is only one of nine property classifications broken out in the LIMA Annual Business Survey, which is available free to members, and can be purchased for $295 by non members. Click here for more information and to download the report.