Hollywood’s New Toy Story

Jim Klein and Pat Wyatt have several things in common: They’ve recently taken key positions at movie studios. Their responsibilities cut across nearly all the sprawling companies’ divisions, from feature films and TV production to consumer products. And they both came from the same firm: Applause, a Woodland Hills-based maker of stuffed animals, figurines, mugs and other gifts bearing the likenesses of licensed characters, including Bugs Bunny and Mickey Mouse.

As licensing has become a huge business--about $70 billion at retail by one recent estimate--and entertainment-related merchandise has grown in importance, the movie studios are beefing up their licensing, merchandising and consumer products divisions and often hiring ex-toy company, retail or fast-food executives to run them. Movies themselves are a money-losing proposition for many studios, and the companies are seeking more money from the aisles of Kmart and Target.

“Merchandising used to be kind of the retirement position at a studio,” says Dell Furano, head of Sony Signatures, the studio’s licensing and merchandising arm, who joined Sony four years ago from Winterland Productions, a maker of licensed apparel sold at rock concerts and retail stores. “It was a position filled by somebody that had been at the studio for a long time, because the job cuts across all divisions. . . .That’s changed.”

Walt Disney Co. is the envied model in the industry. Last year, 21% of its revenue came from consumer products. Thanks largely to the direction of the late Frank Wells, the company repositioned itself in the mid-1980s as the preeminent name in family entertainment. Disney is one of the few entertainment corporations that can be considered a family brand name in its own right.

And that translates into a license to mint money. Disney opened its first Disney Store in 1987; it now has more than 530 worldwide. In a larger sense, the company has been in the retail business since 1955, when Disneyland--which could be considered the world’s first studio store--opened.

Now the other studios are playing catch-up, and Warner Bros. is looking to narrow Disney’s lead. (George Jones, president of worldwide licensing in the studio’s consumer products division, came from Target two years ago.)

Warner launched its own successful studio stores in 1991 (it now has more than 150 worldwide) and is preparing to relaunch its popular Looney Tunes characters with this week’s “Space Jam,” starring the ‘toons and Michael Jordan. It’s expecting “Jam” to be a box-office bonanza, producing upward of $1 billion in retail merchandise sales. The studio also recently announced the formation of the WB Kids record label under its consumer products division, which will produce the kind of read-along and sing-along product for “Jam” that Disney mastered for its animated releases.

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At MCA/Universal, Jim Klein is bringing his experience at Applause, Avon and mail-order firm Fingerhut to the process as the company looks to build lucrative franchises. Not surprisingly, Universal will open its first studio store at CityWalk next May, where they’re likely to sell everything from Universal Studios caps to licensed beauty and fragrance products. (Klein’s Avon background will come in handy here.)

“While I was at Applause, we saw the marketplace change,” says Klein. “We cut our line down by 50% in order to focus on the strongest brands. The biggest properties are getting bigger; the small properties are getting smaller.”

One of Universal’s biggest pushes now is for “Jurassic Park” and its sequel, “The Lost World,” due next summer. Following the big launch this summer of Universal Studios Hollywood’s Jurassic Park: The Ride, the studio is planning an onslaught of merchandising, promotion and in-store events for the sequel.

The country’s top retailers--companies such as Wal-Mart, Kmart and Target--are demanding prepackaged events tied to the biggest movies, such as “Lost World” and next summer’s “Batman and Robin” (from Warner). The retailers draw in customers with exclusive offers tied to these expected blockbusters, which the studios routinely spend upward of $20 million to advertise.

“The retailers are taking a much more proactive approach to licensing and merchandising,” says Sony’s Furano. “They must buy correctly, because their margins are so thin. Today, before they buy your property, every licensee asks you, ‘What are you doing at retail to promote this property?’ Retailers are the arbiters. So from the studio perspective, who’s better to talk to retailers than people with a retail background?”

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Fox’s Pat Wyatt, who joined the studio in January, agrees. “The game has changed pretty significantly from one where licensors [in this case, the studios] pumped out their properties and expected licensees to do the work and for retailers to gobble them up. Those days are gone.”

Before her two years at Applause, Wyatt worked at Mattel for seven. The toy company, which has had a long-standing relationship with Disney, now has a separate Mattel division working exclusively on Disney properties.

Coincidentally, Fox is producing a collector’s-edition Eliza Doolittle Barbie to coincide with this fall’s video re-release of “My Fair Lady.” “That was done before I got there, but I’d say the world is definitely getting smaller for all of us in retail, manufacturing and the studios. People are moving around and meeting up with the same people over and over,” Wyatt says.

Fast-food chains are another important link in the marketing mix and the chains have the upper hand against the studios because they’re in a buyer’s market. McDonald’s is tied up in a 10-year marriage with Disney, and Warner and Fox are getting into animated features, which are staples of fast-food promotions. The studios get consumer awareness and millions in ad spending from the food sellers; the chains are willing to break even on a promotion to drive traffic and build customer loyalty.

Hollywood has taken executive talent from the fast-food business too. Susan Frank, formerly a marketing executive with McDonald’s, left to work for Turner’s Hanna-Barbera. Last month, she become head of marketing for the new Fox Kids Network worldwide TV operation. And Disney recently hired former Burger King and Kentucky Fried Chicken marketer John Cywinski as president of Buena Vista Pictures Marketing--not a consumer products post per se, but one closely linked to Disney’s licensing and merchandising department.

“The process in the past was somewhat linear,” says Klein. “The production side brought the licensing and merchandising department a project after they’d already started developing it. It’s much more integrated now. We’re involved from the earliest stages and are interacting with all the other divisions.”

Sums up Fox’s Wyatt: “The marketing skills required for fashion, cosmetics and toys are very similar. It’s emotion-based marketing. We don’t sell things people need; we deliver on a promise or a dream.”