Size does matter when it comes to getting product prominently featured in the aisles of retailers such as Target, Toys R Us and FAO Schwarz. At this week's Licensing '98 trade show, the increased cost of gaining prime shelf space in top stores was a hot topic of conversation. Licensors realize that no matter how much effort they put behind production and design, it doesn't amount to much if the merchandise never reaches consumers.
"We've definitely been putting more money against our product at retail. We see it as a good investment in marketing and selling," said Jim Klein, president of Universal Studios' Consumer Products Group, in an interview Tuesday, the show's opening day.
One of Universal's most recent investments can be seen at Schwarz stores in New York and Las Vegas. Universal invested heavily in "Jurassic Park"-themed boutiques in the high-end toy stores, decorating them with faux foliage and dinosaur bones. Why put so much effort into two stores? Location, location, location.
"They say the FAO Schwarz store is the third-most-popular tourist destination in New York. . . . This is as much a marketing exposure vehicle for us as it is a retailing vehicle," Klein said. Especially in the absence of yet another sequel, the "Jurassic" retail push becomes a critical component--along with theme-park attractions--of keeping the property going.
Marketing fees are an important source of revenue for top specialty stores such as FAO Schwarz, as well as the major chains, which control the majority of the toy market. Like other types of stores, such as supermarkets, chain stores charge fees that amount to "rent" on aisle displays and "advertising" rates to be featured in store ads. Studios such as Universal have deep pockets for such expenditures. But where does this pay-for-display policy leave the smaller players?
Richard Goldsmith, president of Los Angeles-based Hollywood Ventures--which distributes "The Big Comfy Couch," a preschool show aired on public TV--says customization is key. "We can offer exclusive products, or even a retail exclusive on an entire property to a retailer for months." Goldsmith recently cut an exclusive deal with Target Stores for "Comfy Couch" characters.
Retailers like an exclusive. "We're a specialty retailer," said Michael Tabakin, director of entertainment marketing for Toys R Us. "We have to give people a reason to come to us, instead of Wal-Mart or Kmart."
At the same time, licensors appear to be focusing more on building a few key properties. The trend is largely out of necessity--retailers have pulled back from buying merchandise related to over-hyped and under-performing films and TV shows. But the trend could benefit the industry if it results in higher-quality merchandise.
"I think we're all trying to be more selective," said Steve Ross, head of consumer products for News Corp.'s 20th Century Fox. In the absence of any big, merchandisable movies, Fox is focusing on the animated TV properties "The Simpsons" and "King of the Hill" and live-action hit "Buffy, the Vampire Slayer," along with limited merchandising tied to the upcoming "X-Files" movie. With the exception of the 10-year-old "Simpsons," all are expected to sell primarily to the gift and collector's markets.
Fox is also doing some high-end merchandising of the blockbuster "Titanic," which will launch on video in September. Specialty goods will include replicas of dresses worn by Kate Winslet's character, Rose, and reproductions of the Titanic's china shown in the film.
Though entertainment properties account for a big chunk of the licensed-goods pie--projected at $120 billion in 1998 worldwide retail sales--there are many successful non-entertainment licenses. One trend being pushed by more than half a dozen companies this year is the millennium. Expect to soon see licensed slogans such as "Class of 2000" and even "Have a Nice Millennium" (accompanied by a 2000 with three smiley faces for the 0s) splashed across everything from T-shirts to baby bottles.
Another broader trend is corporate licensing. Charles Riotto, executive director of licensing show producer LIMA (Licensing Industry Merchandisers Assn.), says the corporate side has been the fastest-growing part of the show in recent years. "Companies started realizing that they have untapped equity in their brands," said Riotto, who added that about 90% of Fortune 500 companies have some type of merchandising program.
These range from merchandise created exclusively for employees (American Airlines teddy bears, for instance) to a pile of products associated with top brands such as Coca-Cola and McDonald's. One new player is U-Haul International Corp. A perfect lifestyle brand for the do-it-yourselfer? Time will tell.
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What's Hot, What's Not
Companies spend billions to license images of popular sports figures, movie and TV characters, even corporate logos. Here's a look at some likely winners and losers of the licensing game.
Tot TV: Characters from PBS' "Teletubbies" and Nickelodeon's "Rugrats."
Ultrasmart: History Channel and PBS' "Nova" getting attention.
Blue-Collar Chic: Harley-Davidson, Lowrider magazine and Snap-On Tools make tracks.
Sports Stars: More opportunity for emerging sports personalities, like skaters Ekaterina Gordeeva and Tara Lipinksi.
Big Lizards: Universal's "Jurassic Park" toys are promising.
Tot TV: Saban Entertainment's "New Captain Kangaroo."
Ultraviolence: MGM's "RoboCop" not generating much heat.
Cannabis Chic: High Times magazine gets only a whiff of interest.
Sports Stars: Fees charged by superstars like Michael Jordan scare some marketers.
Big Lizards: Sony's "Godzilla" merchandise is only OK.
Researched by Marla Matzer