TV channels eye the Rs 3,500 crore licensing and merchandising industry

Posted by LIMA Staff on January 21, 2015

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This post originally appeared on exchange4media - re-posted with permission.

by Collin Furtado

Quite a few new developments in the merchandising and licensing business of TV channels have happened in the recent past. New deals have been stuck between the consumer products divisions of brands and international brands which include Viacom18 Consumer Products business announcing their deal with FC Barcelona and Winx Club and Disney India’s Consumer Products division signing a deal with fashion brand Satya Paul. Apart from that the year has also had a lot of developments where TV networks have leveraged their own IPs to promote brands and have extended into various consumer products.

Currently industry experts estimate the business to be roughly about Rs.3,000-3,500 crore of retail sales in India. This is growing at more than about 12% year on year currently. With issues such as the ad cap on advertising there is a limit to which channels can grow their revenue and this is being looked as an additional source of revenue for channels.

The growing popularity of the merchandising and licensing business

The consumer products licensing business works like any other brand licensing business where there is primarily the intellectual property (IP) rights owner who gives to those interested to use the brand in certain products for which the IP owner gets revenues in the form of royalty. While some channels that don’t own the IP rights for the brand do so by acquiring the rights for a particular tenure while paying royalty to the IP owner. There are other TV networks that have created their own brands and hence own the IP rights giving them the liberty to create consumer products and distribute it themselves.

Some of the TV networks that have decided to turn towards this model include Viacom18, Disney India and Turner International. The merchandising and licensing business has been more popular with the kid’s category products, although now it is also moving towards targeting teenagers and adults. However, till today the kid’s genre shows are most popular in terms of merchandising which is followed by sports and movie properties.

Viacom18’s Consumer Products division currently boasts a range of 800 products across various categories which include brand IPs that are network owned and non-network owned. They have had more success with their own IP brands from the Nickelodeon stable such as Motu-Patlu and Ninja Hattori. While Viacom18 Consumer Products had signed a deal with Prataap Snacks for the Motu Patlu toys to be included in their Yellow Diamond Rings products, Ninja Hattori on the other hand was in ad for Khata Keri Aam confectionary with Ajay Devgan animated.

Saugato Bhowmik, SVP – Consumer Products, Viacom18 had said, “Viacom18 Consumer Products was conceptualized to monetize the iconic brands and characters that we as a network have created and invested in.  Thus the investments going into building the characters Motu-Patlu and Nina Hattori are ongoing. At consumer products our job is to leverage and use that investment and work with the best partners who can manufacture great quality products for our customers. If one had to add up that investment that is more than the size of many brands put together.”

Disney India on the other hand has strong IPs which have been internationally build over the years by the parent company and these brands today have become larger than life brands. The Walt Disney Company had US$45 billion in character merchandising retail sales in 2013. With strong brand IPs such as Disney’s Mickey & Friends and Princesses, Marvel’s The Avengers, Spider-Man and Star Wars under the Disney India wing, it doesn’t need to look further.

According to Abhishek Maheshwari, VP and Head – Consumer Products, Disney India the success of Disney India’s Consumer Products business and Disney network of Channels are intertwined. He said, “Today, television plays a significant role in building our stories and characters by introducing and involving our viewers in the magical world of Disney. Disney Channel reaches out to 68.1 million viewers including 24.9 million kids and 31.3 million adults (Source: TAM Data, Period: Jan to Oct 2014; All Day 07:00-23:00 hours; average monthly cumulative reach in million). Disney Junior is a channel that younger kids watch with their mothers and Disney XD is home to all our Marvel content.” He further added, “In India, the business is aligned around four brands: Disney, Disney Pixar, Marvel and Lucasfilms and offers a product range that cuts across ages and gender through more than 3000 SKUs (Stock Keeping Unit). The properties that kids and families can relate with are the ones that translate best across mediums. Also the stories and characters that have the ability to travel across platforms and turn into 365 days property, have the potential to translate into compelling products.”

Another network that is also big in the licensing and merchandising business is Turner which like Viacom18 has leveraged the use of its own IPs as well as the one’s they have acquired. With a strong popularity of the Chhota Bheem series on Pogo, for which the IP is owned by the company, in October it collaborated with Kellogg’s Chocos for a brand integrated mini-series called ‘Coco Aur Chhota Bheem ka Dhamaal’.

Besides channels there are many other companies in the merchandising and licensing business in India that acquire the rights from the brands internationally in order to provide people the rights to manufacture the merchandise officially in the country. Dream Theatre is one such company that had recently acquired the rights (product licensing as well as content rights) for popular kid’s property Pokemon. While they have syndicated the content to Hungama channel, part of Disney India, the merchandising and licensing portfolio is done by them in India and South Asia. The channel has recently been at the top position on the ratings chart and the channel has been running on the success of the series. It also has the licensing and merchandising rights to the Discovery portfolio for India and South Asia and includes popular properties such as Miami Ink, LA Ink and American Chopper. They also had acquired the rights for FIFA World Cup 2014 for which has a huge following. Apart from this Dream Theatre also has merchandising and licensing across all categories for the property WWE.

How does it drive revenues for channels?

The entertainment industry is the strongest in terms of consumer product licensing. TV channels in India have found out that the popularity of certain properties extend beyond TV screens to products such as back-to-school products, accessories, toys, collectibles, clothing, footwear, bags and much more. Without divulging any details on the exact contribution of the consumer products business of Disney India to the overall business Maheshwari said, “Our Consumer Products business makes significant contribution towards building the Disney brand and allowing the consumers to experience the best of Disney”. On the other hand, Bhowmik said, “We are clearly headed towards double digit contributions to this business. We have taken baby steps but we wanted to get the best partners on-board first as we did not want to compromise on quality”. According to a source from Nickelodeon they estimated the consumer product licensing business to contribute around 10-15% of the overall business revenues for the channel.

Though kid’s properties take the lion’s share of success in the merchandising and licensing business, the growth has been spurred by the targeting of adults too. With properties such as FIFA World Cup 2014, WWE, Marvel series, Star Wars, Clubs such as FC Barcelona, Arsenal, Real Madrid, MTV, etc. popular with teens and adults alike the market for merchandising and licensing for TV channels has opened wider in India.

Another reason for the growth in the merchandising and licensing business of channels in recent times can be attributed to reach and popularity of ecommerce players in India. They enable not only greater reach but also through the form of attractive discounts on products have managed to grow the merchandising and licensing business. In a recently written article by Jiggy George, Founder and CEO, Dream Theatre said, “We have a vibrant entertainment economy and our consuming class is significant. However, organized retail growth is still limited and not servicing the fans. E-commerce, this year has been a significant catalyst to licensing growth and fuelled by private equity money: it is bound to grow further.”

Similarly, Bhowmik said, “At this moment ecommerce contributes to roughly half the business and this only grows from here. Because that is our game changer. Sitting here I can get last mile distribution in Northeast, Rajasthan, south India and everywhere overnight with ecommerce. Which does not mean the offline retail becomes less important. Offline retail is key for all the top 36 metros in the country and that’s why we have over 10,000 touch points in these markets but beyond that online retail is clearly where we want to go.”

In 2012, Cartoon Network Enterprises part of Turner International in India expanded their licensing business and were eyeing a turnover of Rs.1,650 crore in the next three years as against a Rs.850 crore turnover previously according to media reports.

In terms of growth in 2015 Viacom18 expect the consumer products division to grow from 500+ SKUs to 2,000+ SKUs, more than 1 million products in the market and a footprint of more than 10,000 in distribution and retail platforms.

However, the licensing and merchandising industry business for channels is still small. “India’s L&M industry is still in its infancy but the segment is poised to grow significantly in the coming years. Character and entertainment brand licensing is one of the largest segments and probably the part most recognized by the consumers. This category of licensing encompasses properties emerging from films, television, games and online entertainment,” said Maheshwari.

The licensing and merchandising business is still in its infancy stage as it still contributes just has touched double digit figures of the overall revenue contribution. Today the industry grown to a size of Rs.3,000-3,500 crore less than Rs.1,000 crore a year back definitely indicates the level of potential that this business has for bringing in revenue to TV channels. A 12% odd growth year on year definitely seconds this business’ growth potential.