Sector watch: Character licensing

Posted by Marty Brochstein on February 16, 2012

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Character licensing – encompassing television and movie properties, as well as other entertainment entities – is one of the highest profile areas of licensing. Indeed, it is also the largest single sector, according to LIMA’s Annual Licensing Business Survey.
In 2010, this sector accounted for $2.37 billion in royalties payments to licensors, and approximately $45.9 billion in retail sales in the U.S.. That represents 47% of total estimated royalty revenue and 44.2% of all retail sales of Character-licensed products during the year. (The LIMA survey reports total royalty revenue in all sectors of $5.1 billion, translating into $104 billion in retail sales.)

While Character licensing is the largest area of the licensing business in the U.S., it’s also one of the most competitive. Properties emanate from everyone from the largest entertainment behemoths such as Disney, Warner Bros., Nickelodeon, Sony Entertainment, Fox, NBC and CBS to independent entrepreneurs who develop and nurture characters and concepts and try to bring them to market.

The vast majority of licensing programs in this sector emanate from major films, television shows and classic characters. However, as the digital world becomes more a central part of consumers’ everyday lives – and a vital part of popular culture – there is a notable rise in the number of licensing programs being built on the intellectual property contained in aps, online worlds, videogames and social games. In some cases, the licensing centers on the central characters of those games, in other cases they are branding campaigns. Notable examples of properties traveling from the digital world to physical product include Angry Birds, Moshi Monsters, Stardoll, and Talking Friends, among many others.

The nature of the products onto which character properties are licensed is also changing, as consumers’ own habits undergo a transformation. The importance of such traditional categories as greeting cards and bank checks – which in the past have generated significant return for licensors – has diminished, since consumers are using fewer of each of those every year. The market for packaged videogames is being challenged by the world of online gaming and social games, forcing licensors to reevaluate their plans and shift their development dollars and budgets.

Another product sector that’s been undergoing a transformation is foods and beverages, particularly as they relate to children’s properties. With the ongoing attention paid to childhood and adult health issues, most licensors have worked with existing licensees to develop healthier licensed food offerings, or moved their licensing programs into new food categories to encourage responsible consumption.

Character 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.