Licensing World

The (licensing times are a changing')

Publisher John Baulch explores the evolving licensing landscape and looks at what is driving the current increase in sales of licensed toys.

For the introduction to our previous Hot Properties feature, which appeared in the January issue of Toy World, I wrote about how the pandemic had impacted the licensed merchandise market in 2020. Five months on from writing that article, many of the same challenges and opportunities remain, while a picture is beginning to emerge as to what might lie ahead for the remainder of the year.

On the plus side, just as we experienced in 2020, toy sales have continued to be robust in the first quarter of 2021 – year to date, sales are up 7%, while licensed sales have increased by a healthy 16%, accounting for 29% of toy sales, the largest percentage we’ve seen for some time. So, while some licensors are grappling with challenging sales through certain retail channels (I can’t imagine the past year has been a vintage one for apparel sales), and while others have had to cope with the loss of revenue via the box office, at least the toy retail market remains strong, delivering healthy numbers for those licensors with properties in the kids’ space.

Drilling into the detail gives us a clearer picture of what is currently driving the increase. For example, according to NPD data, licensed toys accounted for £37m of sales in March, 27% of the total UK toy market. Pokémon was the top-performing property, which is no great surprise, based on recent conversations with retailers both here in the UK and across the globe. The launch of the new Shining Fates expansion has exceeded sky-high expectations, as Midco Toys’ Dave Middleton explains in this month’s article on the opening of his new store in Burton: “Pokémon has been phenomenal. I released a video on the Shining Fates expansion, to let consumers know that they could order it by phone on the Friday it launched. The phone did not stop ringing from the minute the shop opened until 7pm that evening. We limited sales to one of each SKU per customer, so they just bought one of everything which added up to around £240. Honestly, it was staggering.” We caught up with Pokémon EMEA licensing director Mathieu Galante to hear more about the company’s plans for 2021, the brand’s 25th anniversary.

Evergreen classics Star Wars and Barbie have also continued to perform exceptionally well during the first quarter of 2021. It’s also worth noting that four of the top 10 properties are either proprietary Lego brands (Friends, City, Star Wars) or brands largely driven by Lego ranges (Harry Potter), while the top 10 gaining properties – with the exception of Barbie and Pokémon – all revolve around the brickbuilding behemoth. As such, it could be reasonably construed that the increase in sales of licensed merchandise in the toy space so far in 2021 is being heavily driven by Lego. Great for Lego, great for retailers of Lego and great for those licensors who have licensed ranges being developed by Lego – but what is happening in the rest of the licensing space across the kids’ market?

We have yet to see many new movies being launched, and while the cinema release schedule remains fluid and a little lighter than it would be in a traditional year, there are still a number of new films which could make a decent impact as the year progresses. I am excited to see the reaction to Space Jam, Tom & Jerry, Spirit Untamed, Paw Patrol The Movie and several other new movies when they finally reach the big and/or small screen over the coming months.

However, as we saw in 2020, the reduction in major movie events has created an opportunity for other brands to grow their share or gain a strong foothold in the market. Licenced ranges based on classic toy lines such as Barbie, Peppa Pig, Paw Patrol, Nerf and My Little Pony have seen sales increase significantly over the past year, while the L.O.L. Surprise! phenomenon has translated perfectly into a broad and successful licensing programme. With each of these properties, licensed merchandise perfectly complements the core toy range, providing retailers with valuable incremental sales opportunities.

In addition, brand new toy hits such as CoComelon and Love, Diana have been swiftly followed by a broad selection of licensed merchandise, capitalising on the huge viewing numbers being delivered by YouTube and other streaming platforms. No longer is a major movie or linear TV the only way to generate buzz and excitement - as pocketwatch’s Danny Spronz points out in our excusive interview on page 124: “We believe that YouTube has absolutely become the best way to get content and messaging in front of kids. At best, the linear model was creating 26 half hour episodes a year, and kids had to tune in at a specific time to watch. The Kids Diana Show YouTube channel releases content three times a week, which kids can watch whenever they want. We looked at Nielsen data in the US during Q1 of 2020 and were amazed by the results. Ryan’s World drew more unique viewers in the US than any linear TV channel, and Diana’s channels were almost as big as Disney and Nickelodeon – and the US isn’t even her biggest market.”

Elsewhere, gaming licences are once again coming to the fore: Among Us has generated a huge buzz since it was announced earlier this year that Toikido, Darran Garnham’s new toy venture, had secured global master toy rights to the property, while Moose has just been unveiled as the master toy partner for Fall Guys: Ultimate Knockout. Both games appeal to a younger demographic than many other video games, and so align perfectly with the toy market – suffice to say that expectations for both ranges are high, and I’m looking forward to seeing the games brought to life in toy form.

And while the times really are “a changin’” in so many ways, naturally, some things never change. During unpredictable times, licensors, licensees and retailers often fall back on tried and tested properties. Enduring classics such as Batman, Harry Potter and Beano are safe havens for all concerned, with a multi-generational fanbase and instant recognition amongst consumers. Indeed, evergreen brands are well-represented over the following pages: this issue showcases exciting new launches based on Thunderbirds, Thomas and Friends, Fireman Sam, Sonic and many others.

The toy market has always been a pivotal one for the licensing community, and that isn’t changing either. Indeed, we continue to see toy companies which haven’t previously been active in the licensing sector deciding to get involved and launching new ranges - notably Melissa and Doug, which recently signed a deal with Viacom to launch ranges based on Paw Patrol and Blue’s Clues.

Toy retailers are also looking to suppliers outside the traditional toy market when they put together their licensed merchandise offering: this issue features leading suppliers of dress up costumes, greeting cards, stationery, fashion jewellery and homewares amongst others. These suppliers not only give toy retailers the ability to broaden their selection and offer their customers something a little different, but crucially they also often deliver higher margins, which allows retailers to achieve that all-important margin balance across their licensed product selection.

So, while challenges remain when dealing with elements of the licensing community (the notoriously labyrinthine approval process employed by certain licensing companies – ‘marketing prevention’ as we sometimes refer to it – has given us a few sleepless nights as we put this issue together), the fortunes of the licensing and toy communities will always be inextricably linked. It’s a truly symbiotic relationship, and long may it prosper.