Expectations for ‘Star Wars’ Stuff Fall to Earth
Companies that are paying dearly for exclusive licenses to use “Star Wars: Episode I The Phantom Menace” might be wondering if “Great Expectations” would make a better title for the box-office smash.
It’s too early to sort out winners and losers among the massive wave of “Star Wars”-licensed merchandise washing through restaurants, convenience stores and airport gift shops. But early reports indicate that The Force won’t be powerful enough to keep all of the software, action figures, T-shirts, posters and memorabilia from tumbling into the markdown bin.
Such key “Star Wars” partners as Toys R Us and Hasbro Inc. maintain a bullish outlook, particularly for action figures, as they look beyond Hollywood’s summer and toward the toy world’s all-important holiday shopping season. PepsiCo Inc., which has flooded the market with 8 billion “Star Wars” cans, says it is pleased with customer reaction one month into its summer-long promotion.
Some mass merchants, though, are reporting mixed results on sales of more costly apparel and accessories. Tricon Global Restaurants Inc. isn’t talking about its “Star Wars” tie-in, but a restaurant industry analyst at Merrill Lynch & Co. described early results at the Taco Bell, KFC and Pizza Hut locations as “mediocre.”
Industry experts caution that reality rarely matches early, inflated expectations in the high-powered world of licensing deals.
“The ‘Star Wars’ merchandising program has to be viewed through the prism of expectations, and this has been one heck of a prism,” said Marty Brochstein, editor of the Licensing Letter, a New York-based trade publication that quotes industry insiders setting the licensing value of Episode I at between $2 billion and $3 billion.
Expectations were driven even higher by the lack of on-screen competition from Hollywood studio heads who stood on the sidelines rather than risk being trampled--or, worse, ignored--by the “Star Wars” box-office stampede. Marketers also felt more comfortable with the latest “Star Wars” movie because the property has a 20-year history.
“Given all that, this movie has been viewed as the closest thing to a sure thing that the business has ever seen,” Brochstein said. “Well, that said, in the licensing business, there’s no such thing as a sure thing.”
As Hollywood’s summer season moves into high gear, life could get tougher for Darth Maul, Jar Jar Binks and the rest of the crew. Macy’s already is selling “Star Wars” beach towels at 50% off and has marked down caps, ties, backpacks and action figures based on the film.
Last weekend, McDonald’s Corp. began promoting a tie-in with Walt Disney Co.’s animated film “Tarzan.” The world’s largest restaurant chain is using its marketing might to push Happy Meal toys and soda straws that replicate Tarzan’s famous yell when kids slurp soda.
Burger King’s promotional tie-in with Warner Bros.’ “Wild, Wild West” action movie starring Will Smith begins on Monday, two days before the film will be released. The promotion features sunglasses like those worn in the flick and six action figures.
“Star Wars” remains the heavy favorite, though, both at the box office and for its licensing partners, because the series has shown over two decades that it knows how to touch consumers’ hearts and pocketbooks.
When PepsiCo signed a three-picture licensing deal in 1996 for its worldwide soft drink, snack and restaurant operations, the company estimated the promotional, marketing and advertising value at a heady $2 billion.
Corporate partners have paid steep entry fees to align themselves with the newest installment. According to Securities and Exchange Commission documents, Hasbro agreed to pay as much as $590 million during the next five years for rights to use likenesses from the three planned films.
Observers say that the big fees have only added to the expectations among the film’s licensing and marketing partners. Hasbro executives won’t discuss specific numbers, but last week the company said “Star Wars” toy sales were meeting or beating the company’s forecasts, particularly in the action figure and fashion doll lines.
Wal-Mart Stores Inc. spokesman John Bisio said, “Action figures have been a real hot item.” But he acknowledged that interest in upscale items aimed at adults cooled somewhat after an initial rush. “We’d love to say those particular items were as popular as some of the toy items,” Bisio said. “But, then again, we’ve set very lofty goals for this film, and sometimes when you have lofty goals you don’t always meet them.”
In a report issued last week, Merrill Lynch analyst Peter Oakes suggested that Tricon’s three-chain licensing deal “has moved the needle maybe an incremental one or two percent, hence the upside is disappointing.”
Tricon spokeswoman Amy Sherwood declined to comment specifically on the promotion but said the company is “very comfortable with our second-quarter earnings estimate . . . and the feedback from consumers is that they’re enjoying the experience in our restaurants.”
One possible problem, marketing industry observers say, is that “Star Wars” merchandise seems to be everywhere. It’s being pitched to consumers at restaurants, in movie theaters, in airport gift shops and on the Internet. At Wal-Mart, for example, “Star Wars” stuff--ranging from bedspreads to a bath wash--lines the aisles in 16 of the chain’s 36 departments.
Pepsi spokesman Jon Harris said the world’s No. 2 soft drink company is “very pleased with what we’re seeing. . . . On EBay, we’ve seen our Gold Jedi collectible can on sale for $200, and our 24-can set went on EBay a month ago at $800 to $900. That tells us we’re connecting with consumers in a meaningful way.”
“From what we’ve seen, the promotion has been doing pretty good, and it’s given Pepsi a lot of publicity,” said Greg Prince, executive editor of New York-based Beverage World magazine. “But, then again, summer’s always a good time to sell sodas, and it’s hard to say if putting pictures of cats and dogs on cans wouldn’t do just as well.”
