Doing Business In “The New Normal”

Posted by Marty Brochstein on September 15, 2010

The following also appears as a column in the Fall/Autumn issue of Total Licensing magazine, viewable at http://viewer.zmags.com/publication/d5f6ae6e

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Years ago, I attended a business conference whose featured speaker was Alan Greenspan, best known recently as the former Chairman of the Federal Reserve Board, a key economic policy-setting part of the U.S. government. When he gave this particular speech, though, he was outside the government, making his living as a consultant and economic forecaster.

Before he got into the meat of his speech, he shared the joking thought that the key to economic forecasting is to “forecast often.” It was a great laugh line, playing on the wisdom of putting out projections and pronouncements so regularly that nobody could, in the end, hold you to any one of them in particular.

But that line also spotlights one of the biggest challenges in marketing these days – in fact, in virtually any business: to correctly assess and predict the direction of the global economy and its various local components. For those of us in the licensing sector, that is centered most often on projecting patterns of consumer behavior and consumption well into the future.

Those kinds of predictions depend on a huge collection of constantly moving parts, such as consumer confidence and attitudes, unemployment, saving rates, interest rates, among many others. Pick up a newspaper, or go to your favorite website, and you can find “expert” analysis to back up either an optimistic or pessimistic viewpoint. Take your pick.

Whatever your outlook, though, the overall challenge that everyone in the licensing business faces is to try to work within this “new normal” of an incredibly uncertain and selective retail and consumer landscape. How are companies adjusting their business practices? How should they be?

Those questions come to mind in light of a couple of recent discussions I’ve had with licensing executives – one a licensee, the other a property owner – about the subject of small deals. The licensee, an apparel manufacturer who has long experience on various sides of the licensing business, was complaining about the fact that she’d been trying to get the rights to a couple of decades-old entertainment properties for a line of high-quality retro t-shirts. The problem was the minimum. She and the licensor’s category manager agreed that the deal merited a $5,000 minimum. But the studio had set a strict policy of doing no deals for less than $10,000 so the business was going to go by the wayside. Frustrating on all sides.

A couple of months later, I heard of a similar mindset from an executive of an entertainment company, whose boss rejected a tentative agreement for an ongoing property with a novelties manufacturer. The reason: the numbers were well below what the property had drawn in the preceding deal in that category, which had been done five years ago. The fact that the retail and competitive landscape had changed radically in the intervening time frame seemed to carry little weight.

Of course, there are strong arguments for minimum deal size – the time and financial costs of administering a license can’t be ignored. And, of course, everybody in this business has budgets to meet, and numbers to achieve, and bosses will always push their managers to get as much for a property as they can. I mentioned the subject of this column to the head of one licensing agency, and she gave an impassioned defense of maintaining strict minimum deal levels, given how much it takes to manage a relationship with a licensee once the deal is signed. The point is well taken.

But I can’t help but feel that in the current economic climate, there’s something to be said for flexibility and acknowledging current market conditions. The definition of a “successful” program isn’t static; it’s a function of consumers’ confidence and willingness to spend, retail vibrancy, the media landscape, and a host of other factors. As the licensing business works its way out of the recent softness, I expect that the same creativity that is brought to bear on creating the properties and products that are the lifeblood of this business will be applied to figuring out a way to get the smaller deals done.

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A few months back, I mentioned that LIMA is working with a group of companies organized through consultancy Business for Social Responsibility (BSR) on an effort to streamline and coordinate licensors’ requirements of licensees (and the licensees’ subcontractors) vis a vis socially responsible manufacturing, and the overlapping and sometimes contradictory auditing maze that has arisen.

I’m happy to say that as the first outgrowth of this effort, LIMA will host a webinar on Wednesday, October 20, that is designed provide a high-level overview to compliance management approaches. The webinar will also highlight best practices in building collaboration with suppliers to support robust management of social and environmental issues in manufacturing. Specific topics covered will include:

» Approaches to managing factories and suppliers
» Tools to evaluate compliance
» Resources for supplier capability building
» Setting and using compliance performance indicators.

The webinar is free to all LIMA members, US$99 for all others. Go to the LIMA website – www.licensing.org – for more details or to register.