COVID-19 - The Industry Fights Back

The licensing industry has watched, over recent years, as retail changed from thriving bricks and mortar malls and stores to online. Retailers of physical stores found ways to attract consumers with events and activations. And, in many cases, it was beginning to make a difference. Stores and chains that developed their experiential business, began to see an uplift in visitors and, consequently, sales. And then the virus hit. First in China and then spreading its tentacles around the world. And the world went into lockdown. Shopping, certainly initially, was limited to essentials and products that could ease the burden of being incarcerated for an unknown length of time. Regular stores were closed with only the essential food stores and pharmacies still open. Online shopping became the norm. Amazon’s customers spent over $11,000 each and every second as hundreds of million of people stuck in lockdown turned to the delivery giant to keep them fed, entertained and able to work under the new conditions. Fitness product sales went up 55%. Toilet paper sales went up 231% leading to a global shortage. Laptops and other computer sales rose 40%. Overall, according to Adobe, e-commerce in the U.S. rose by 25%. All thanks to COVID-19. Other winners were cloud services, news, gaming and e-commerce ad spend, as well as grocery delivery services. As people settled into the new normal, their purchasing decisions were largely based on three needs – to protect, to connect and to entertain. But, of course, the question is very much what will happen post-pandemic? Will consumers return to shopping in stores in reasonable numbers, whilst still navigating social distancing or will they feel more comfortable, and confident, continuing to shop online. Online grocery shopping, certainly, is likely to see a good percentage realising the convenience of online shopping. Other stores are going to have to go the extra mile to draw customers in and make them feel safe within their stores. Online streaming services such as Netflix and, more recently Disney +, saw huge spikes in demand. In fact, Disney who expected to take five years to reach between 60 and 90 million subscribers, were already up to 54.5 million by early May. Amazon and Netflix have seen over 60% growth in their subscriber base in India as a result of the lockdown.

Were we warned?

Nostradamus wrote in the year 1551:

“There will be a twin year (2020) from which will rise a Queen (Corona) and will spread a plague (virus) in the darkness of night, in a country with seven hills (Italy) and will transform the twilight of men into dust (death), to destroy and ruin the world.”

Jon Ollwerther, EVP, Global Brand & Business Development, Genius Brands International spoke to Total Licensing about the challenges, strengths and long-term effects that the crisis will have on the industry

Could you outline the measures you have put in place to ensure business keeps moving?

“One of the most important factors that determines whether a person or a company survives a crisis or emergency is how quickly they identify it as such. Months ago, our current reality was hard to even imagine. At Genius Brands we watched closely as the crisis unfolded in China, and we were very on guard so we were in a position to react quickly when it became clear it was heading towards a global crisis. Our first priority was the safety of our employees. At the same time, we focused on liquidity—this is not a secret formula, companies that have strong balance sheets fare best in recessions. We also made early and frequent check-ins with our key media and licensing partners on the consumer products and distribution sides of our business. Keeping a frequent and open dialogue with, specifically, our licensees and the retail community has helped us maintain a strong position and up-to-date awareness in an ever-evolving situation.”

What initial effects is the virus and the ‘global shutdown’ having on your business?

“The first and most apparent effect of COVID-19 and the ‘global shutdown’ is our corporate cultural and habit shift from a primarily office-based culture to an entirely work-from-home culture, but that is not unique to Genius Brands. We were able to adapt very quickly to this change and quickly shifted our focus back to our own IPs, our content partners, licensees, and tv network partners.”

How are you still managing to engage with fans?

“We’re a global children’s media company which produces animated content so we have ramped up the volume of content we offer on YouTube and through our own network of digital channels, which reaches over 100m US TV homes, as well as content across our social media channels. We’ve also increased the number of DIY activity guides and coloring activities we post online. Finally, and most importantly, we are very proud to have swiftly produced a series of animated PSAs teaching kids how to be safe during this pandemic, starring Jennifer Garner and Warren Buffett, both of whom donated their time to the project, as well as the team of producers. Genius Brands is offering the PSAs for free to any and all broadcasters, educators, and parents to use to improve child and family safety.”

Conversely, are there any areas of strength that have surprised you?

“Genius Brands has always fostered a very entrepreneurial spirit; for example, we don’t have a culture of assistants, and we outsource our IT. There is no culture of “pass the buck.” This mindset has served us well as we’ve transitioned quickly to a work-from-home organization. We made this transition with virtually no disruption to our workflow. This enabled us to be on email and phones right away, and setting video conferencing meetings to keep our clients and our partners updated.”

What do you see as both the immediate and long-term challenges of this?

“The long-term challenge is without question the macroeconomic shift that has occurred as a result of COVID-19. I have no doubt that the global community will pull together and take control of the medical challenges, though, sadly there will no doubt be much more suffering before that happens, both in the human too and economically. The economic challenges, however, will take much longer to course correct. As I write this, in the last two weeks in the United States alone, 10 million people have filed for unemployment. Those hard-working people fuel the economy. Many others still have suffered reduction in pay. These people watch TV, they eat out in restaurants, and they spend money on consumer products in stores. For the last ten years, we’ve been in a period of economic expansion, where consumers have felt extra money in their wallets for discretionary spending. There also seemed to be a “sugar high” mentality in the United States, where the average household savings is under $9000, yet the average car loan stretches for over 70 months. The scary thing is that we will inevitably see even greater unemployment figures in the weeks to come. Yes, these people will get back to work, but that will not happen overnight. Just this week, for example, Macy’s furloughed the vast majority of its 125,000 employees. It will take time to get these employees back to work and time still for them to recover from their financial loss and hardship before they can even consider discretionary spending. Further delaying recovery will be the fact that many jobs that existed just a few weeks ago may not exist again. There will be enduring shifts in our economy following COVID-19—will shopping among large crows bear as much appeal as it used to? Will going to a crowded concert feel as fun? I live in both New York and LA, where large, long, communal dining tables have been a growing trend for the last decade. This is great for restaurateurs who can make each square foot of their restaurant more productive, but will diners continue to embrace it?

Sales of board games, jigsaw puzzles and video games have also seen sharp rises, as have outdoor toys aimed at entertaining children in their own backyards during the lockdown. Of course, the entertainment industry – in particular movies – has been a major casualty of the virus. Movie

theaters were shut early on in the pandemic. And filming ground to a halt. The latest James Bond film was pushed back to later in the year, together with Tom Cruise’s return in Top Gun which is now expected in December. Other releases slated for July such as Disney’s Mulan have been postponed till later in the year. But the entertainment industry is nothing if not creative. Apple launched Fraggle Rock: Rock On, entirely shot on iPhone 11 phones from the homes of production teams and individual artists from all over the US. If nothing else, the current pandemic has proven how creative people can be with an internet account and a lot of free time. It already has already reshaped how we view musical and comedy performances, as a long parade of creatives have opened their homes to the internet. On the movie side, Universal decided to launch their Trolls World Tour online and it became available to rent in early April. Three weeks later, it had taken nearly $100 million in rentals – smaller than the $153.7 million that the first Trolls movie took but, in terms of revenue to Universal, higher with no theatre sales. Understandably, with no sign particularly of when movie theaters will reopen, Universal are planning further on demand releases. Other movies planned to go straight to VOD include Artemis Fowl from Disney and Scoob from Warner

THE EUROPEAN ANIMATOR

Iginio Straffi, founder of animation company Rainbow SpA in Italy, spoke to Total Licensing about how the crisis has affected business and how he sees innovations coming in various forms

What steps have you taken to ensure that the business continues?

First of all, we have taken all necessary precautions for the health of our employees. Our spacious and modern premises have allowed us to spread out the workstations and we have encouraged smart working by enhancing remote connections. We continued to work with the countries that had passed the critical phase of the pandemic or those that had not been affected yet. In order to do this, we reorganized our work, relying on the skills of our flexible and fast team.

Have you had any slowdowns in production?

Absolutely yes, we have accumulated from two weeks to a month’s delay compared to the productions we are following. We do everything we can to optimize remote work, but in fact our production cycle has been strongly affected.

As far as the distribution is concerned, did your sales increase? No, because the buyers are at home at the moment as well. It’s hard to provide future data from this point of view. Of course our shows are broadcast all the time since children are all at home, so they can distract themselves and have fun with our stories, but for now it’s difficult to state if the situation will have a big impact on the distribution, considering that all TV broadcasters are changing their programming and I don’t think they are able to predict the future of investments and new challenges. Luckily we live in the age of streaming, communication and advanced technologies.

How has this helped your business?

We had already started to develop this sector at Rainbow, we started very early and professionally. I am sure this storm will stimulate innovations in terms of content enjoyment. The challenge is now to understand how all this can result in a real monetization for the benefit of the business.

What do you think the short-term effects will be when the pandemic ends? Many things will change, but I am sure that humanity and children above all, will never give up on entertainment and imagination. When all this will be over, we will need even more good stories that can make us dream of safe worlds and great adventures.

And what about the long-term ones?

The impact on the economy, travel and leisure will be serious. It will take time, and certainly there will be an acceleration in the emergence of new forms of communication. Our relations will travel on virtual highways, that will be even wider and faster than the present ones. We will move less but our ideas and interpersonal exchanges will run even faster.

Media. Of course, nobody believes that people will only wish to watch a movie in their own homes and once the pandemic is over, viewers are expected to return to movie theaters. But, for the moment, during these strange times, VOD is proving to be a great alternative. Another area that has reacted well is eSports. Traditional sports around the world have ground to a halt. Interestingly, ticket sales and merchandise from eSports events only account for around 10% of the revenue. The bulk comes from sponsorships and media rights – both of which can remain strong as eSports goes entirely online. And so to the licensing industry, the shape of which has changed as a result

of the pandemic with less staff and, in some cases, more creative and innovative ways of carrying on business whilst, at the same time, helping the cause. MGA Entertainment is a great example. They quickly launched Operation PacMan which provides personal protective equipment (PPE) to healthcare works and hospitals that are facing a shortage of supplies as they work to fight the spread of Covid-19. They are using their distribvution connections to gain access to supplies, buying them at cost and donating them to medical workers, communicating directly with hospitals and medical practitioners so that the supplies go direct in the hands of those that need them. Manufacturers switched production of their normal ranges to produce PPE and masks to help the cause and, across the world, companies are harnessing their talents and abilities to supplement those of doctors and hos

MARCH WAS NOT A GOOD MONTH FOR RUSSIA...

By Marina Semenikhina, Licensing International representative in Russia.

Russia pulled the short straw in terms of the economic scenarios. Right before announcing quarantine restrictions in the country, the oil crisis struck at the beginning of March, and the rouble value dropped against the dollar by 20%. With many foreign licensors operating in the Russian licensing market having

minimum guarantees in US dollars and Euros, the licensee’s life became more complicated. The Q1 reports are expected to be OK: the crisis began in March, and most of the sales prior to that weren’t affected. Therefore, licensors and agents refused to postpone the royalty payments – the money has already been earned. The Q2 plans and rest of the year will be lower than expected (in some cases, down by at least half). Minimum guarantees and new contracts are a different case. Most licensors and agents stopped negotiations until at least the end of quarantine. Licensees are asking for a renegotiation of minimum performances in the contracts, especially those in a foreign currency. Licensors usually show a high level of understanding of the situation – it is essential to keep earning something rather than cancelling the contracts. They are also considering zero-MG contract extensions for another year. The payment schedule postponed for a month or two is also a standard case. However, this has led to rumours such as ‘Company A offers half a year payment deferment, please give us at least the same’ and other negotiation manipulations. On the other hand, brand owners and agents are freezing payments, including marketing, which slows the industry pace and lowers a licensee’s motivation to enter the agreement. Some companies have cut the working week during quarantine with salary decreases, and cutting-out sales staff. Every rouble

pitals. In the UK, leading vacuum manufacturer Dyson spent $25 million in creating ventilators, using their existing motor technology. Further afield, so too have GM, Ford and Tesla as demand for ventilators increased.

And, of course, as fashion always finds a way, face masks, once seen as an exotic accessory, has evolved at breakneck speed into something else. The speed has been essential as many countries are now insisiting people use facemasks when out in public places. Despite both the US President and Vice-President refusing to wear one on highly public occasions, as countries move forward towards reopening, masks are rapidly becoming a way of life. Disney is now selling non-medical masks featuring Marvel, Star Wars and Pixar characters. Three days after product launched on shopdisney.com they announced that they had reached their goal of raising $1 million in profits from the sale of their cloth masks which will be donated to MedShare to support the medical community’s efforts to provide lifesaving care.

counts. Every payment goes through precise control. Every cost has to be proven like never before. At the same time, the human factor has always dominated in the licensing industry. Relationships are vital. The choice is simple: one violates the agreement and never gets trusted again. Or fulfills their obligations and keeps working. We keep talking: managing anxiety, finding compromises, re-negotiating, and taking care of the network everyone has been working on for years. Before writing this article, I had a call with an industry peer whom I admire for optimism and an easy-going attitude. He said: ‘This is not the first and not the last crisis I am going through. We all remember 2014-15 when we thought life had come to an end (the rouble lost half of its value). Within a couple of months, I was so busy negotiating dozens of the contracts – everyone seemed to be back on track’. Yes, it’s a tough time. Some of us will make it through; some won’t. After quarantine ends, we will face a new normal. And hopefully, it will include meeting at industry events. While working remotely, I miss talking to people face to face. We still hope we can welcome all Russian industry players to the Moscow Licensing Summit in the first week of September.

At the same time, Bravado launched lines of cloth masks with logos including Billie Eilish and The Rolling Stones – with proceeds going to MusiCares in the US and Help Musicians in the UK. Trevco in the US has taken the face mask business to new levels. They recently launched maskclub.com with a collection of licenses from major entertainment and toy brands. They worked with property owners to use existing artwork that had already been approved for other products and were able to generate approvals generally within hours. For each cloth mask sold, Trevco are donating medical grade face protectors to first responders through the First Responders Children’s Foundation. Assuming that most countries will

HELP FROM THE TOY ASSOCIATION

By Steve Pasierb, President & CEO, The Toy Association

To all our members and the wider global toy & play community: The U.S. Toy Association team is here for you during these unprecedented times, acting both proactively and responsively to protect all and meet the needs of our friends and colleagues across the business of toys. I invite everyone – particularly those with business interests in the United States – to visit our COVID-19 resource page, which is continually updated with news impacting the toy and play community and crucial information to help businesses navigate uncertainty, including: • how U.S. companies can advocate for toys to remain accessible to the 1 billion children worldwide out of school and engaged in at-home learning; • links to business relief programs and assistance in the U.S.; • tips on operating a company remotely; • impacts on international trade; and • play resources for families balancing working and childcare at home. We have also announced a series of conference calls (for members only) to provide guidance on the United States’ $2 trillion coronavirus stimulus relief bill and discuss how it could assist toy and retail businesses. Finally, as reported in our weekly Toy News Tuesday newsletter, the ICTI Ethical Toy Program (IETP), of which The Toy Association is a founding member, is helping global factories and buyers manage the crisis by implementing a number of measures, which include extending factory certification periods and providing guidance on how to responsibly manage areas like increased working hours or managing a downturn in orders. The toy community is extraordinarily resilient, and business will recover over time as our normal rhythms and patterns of society re-emerge. In the meantime, I strongly believe our ability to work together, share, and help one another will absolutely hasten recovery for all. It is heartening to hear stories about how the toy community is lending a hand during the pandemic – from shifting production to make essential medical supplies, to creating free at-home educational and play resources for parents, to helping source and deliver critical safety equipment to hospitals and first responders. Let’s each continue to do whatever we can to get through these trying times. And, send messages of hope to families. The Toy Association wishes the very best to you, your families, your employees, and your colleagues.

require facecoverings to be worn by people until a vaccine is found and distributed, the potential for facemasks to become a new range of potential licensed products seems enormous. Trevco, better known for making licensed print-on-demand apparel, has switched its Michigan plant to producing non-medical cloth masks bearing IP from Warner Bros., Hasbro, Cloudco, King Features, Cartoon Network and Sanrio. Most recently MaskClub’s licensors include ViacomCBS, NBC Universal, The Maurice Sendak Foundation, Emoji Co and NASA. In the UK, Reemsborko Ltd, in partnership with Creative Licensing, has announced their collaboration with Wild Bangarang for Bill & Ted branded face masks. The ‘geek and gamer’ apparel specialist has designed 40 face masks for this collection, including Bill & Ted’s Wyld Stallyns band logo, as well as the duo’s iconic and timely catch phrase Be EXCELLENT to each other!. All styles in

the range will be handmade in the UK, with proceeds benefitting NHS. Rand Marlis, President of Creative Licensing commented,, “In this difficult time we hope Bill and Ted masks bring a smile and add a little humor to the world.” Reemsborko’s Max Arguile says “The next time I leave the house I be will be proudly sporting a mask that boldly says, Be EXCELLENT to each other.” Psychologists are concerned about how the wearing of facemasks will change people. According to reports, it depends on the motivation for wearing them. “If you are wearing a mask to protect yourself from others, you are forming a habit of fear. Every time you put a mask on, every time you see someone else wearing one, you will reinforce this fear. “But if you are wearing the mask to protect others, wearing it will create a feeling of connection to those in your community. “You’ll see others wearing masks as a sartorial sign that they are willing to

Parent and Licensing Industry The relationship with nature has been a edge in the space race, shows that “eduExec Trudi Bishop poses the prominent part of the Swedish culture cation can be used to solve a difficult question... so it is unsurprising that ecology and problem.” conservation has been part of the The problem we face now is the climate The balance of home-schooling and school curriculum since the 1970’s. crisis. Let’s use lessons learned, the working from home is set to continue Importantly, these have not been limited space to pause during the pandemic for a number of weeks, potentially not to a single subject (often science) but to rethink how we want our children’s ending until the new school year in are imbedded across all subjects and relationship with nature to continue so September. start in preschool through every level of we can help them help solve this everLuckily for many parents there have their education system. Including it in all present challenge. been many toy and entertainment comsubjects, encourages citizenship, engagepanies creating education resources for ment and perhaps most importantly parents to use with their kids to keep independent and critical thinking. No them engaged. The Good Play Guide has wonder then, that it was Sweden who an entire Learning Hub available giving gave us Greta Thunberg. a broad range of inspiring activities for New Zealand is also including environparents and kids. mental awareness in their education As parents settle into the role of system, albeit with a more holistic apteachers, the core educational focus is proach. Again, it is not a siloed approach shifting from the traditional classroom but is across the whole curriculum and to the garden and further afield where all levels of the education system. They possible. Bug houses are being built, wish children to understand the interdeseeds planted, bird feeders filled, giving pendence of all living things, creating an our little learners the opportunity to awareness, understanding and sense of reconnect with nature gaining a new responsibility leading to action to take awareness and appreciation of their care of our world. relationship with the natural world. Youth campaigner, Joe Brindle of This renewed relationship and hopefully “Teach the Future” campaign group is renewed respect for nature is a weldemanding a similar overhaul of the UK come positive outcome of the pandemic. education system citing he is concerned Not only is it positive for creating a for children’s mental health due to them rounder education for the young but it “not being told the truth about the also helps with their mental health too. climate crisis.” When the children finally return to the In an interview with the BBC in February classroom, can we then use this as an this year, he said, “…it’s the most eduopportunity to rethink how we educate cated people who are causing the most our young, bringing, as Sweden has damage to the planet.” Joe, using the done for many years, environmental example from the 1958 US National awareness and sustainable living into Defence Act which aimed to kickstart the curriculum. STEM education to give America the

HOME SCHOOLING AND WORKING FROM HOME

sacrifice some freedom and comfort for the common good.” In summary, you could say that the toughest times inspire the greatest solutions!