Licensing And Merchandising Trends And Their Impact On The Sale Of Animated Programming

When asked to write this article on the trends in licensing and how they are affecting the sales and viability of animated programming, it allowed me the opportunity to step back for a moment and take stock of why we are in this business.

Clearly, there are many companies that are attracted to this business for that potential home run property. That is still a possibility in these competitive and financially challenging times, however, there has to be more than that. There has to be passion.

As most players in the animation business know, there has been much turmoil over the last few years that have brought significant changes to the demand and viability of animated programming. Gone are the days when you could fully finance a show on the U.S. sale alone, or sell it to one or two territories and then rely on the licensing and merchandising revenues.

Licensees And Retailers Are Becoming Even More Risk Averse

What has become clear over the past couple of years, and what was apparent at the International Licensing Show in New York back in June, is that the market for entertainment licensing is not as buoyant as it once was. As of late, licensees and retailers are increasingly becoming risk averse; with fewer wanting to invest in entertainment driven properties.

In addition, in the U.S. market, specialist retailers such as Noodle Kidoodle/Zainy Brainy and Store of Knowledge are finding themselves in financial difficulty. This makes it harder for smaller properties (usually pre-school) to build smaller scale successes that can grow into bigger ones. There is tremendous pressure from licensees and retailers for immediate success at the mass level. This is, of course, very difficult considering that shelf-space is shrinking and there are simply so many properties competing for the space. Even retailers are competing for their own shelf space, as companies like Toys R Us develop their own private labels and try to get exclusivity on various products so that they can differentiate themselves from their competitors.

Movie Driven Properties Have Become Risky Business

The big animated theatrical releases are not bearing the same kind of fruit as in previous years, as these properties often have a very short shelf life. Animated films take 2 3 years to produce and the toy and licensed merchandise often mirrors that development time. The risk of trying to pick a movie that will be a box office smash, as well as a merchandising success, has forced licensees to become very selective. Licensees are looking for the longer-term plan so that they may limit their risk and amortize their costs over a longer period. They want to see the support that the studio will be providing such as movie sequels, television series, direct to video releases, book publishing plans and interactive plans, both online and off. Licensees and retailers are looking at the whole picture and the picture has to look pretty convincing.

Kids Have Other Alternatives

While the licensing business for entertainment properties is levelling off, licensees and retailers are moving toward other categories of properties, including consumer brands, sports, fashion, music and video games. Kids are simply busier and more fickle than ever. While statistics show that they are still watching a lot of television, they are not only watching kids television. Shows such as Friends and Who Wants To Be A Millionaire are actually some of the higher rated shows for kids 2-14. Even when you have a hit show, this still doesn't necessarily translate into licensing success. All of the planets have to be aligned.

State Of The Broadcast Market In The U.S. And Abroad

For an independent producer/distributor, the U.S. market is presently a very difficult puzzle to figure out. The market is in a state of transition, experiencing further consolidation while at the same time erosion in ratings. Disney has acquired Fox Family, one of the few players who dealt with the independent community fairly regularly. It remains to be seen what the Disney empire of ABC, ABC Family, Disney Channel, Toon Disney and soon Playhouse Disney will mean to the independent producer. Long term support from 20th Century Fox for the Fox Kids Network, one of the true platforms for building a boys action property, is in question at the moment. The Cartoon Network has reduced its time slot for the "Toonami block," the one part of their schedule that allows for acquired programming from independent producers. Kids WB! and Nickelodeon are clearly great platforms, however, they too do not acquire that much programming from independents. PBS is quite full at the moment with pre-school programming, and most of the other players are not really licensing platforms.

Internationally, the effect of all of the new kids channels that have launched over the last few years is taking effect. The market is fragmenting further, driving broadcast license fees down and ultimately making it more difficult to build awareness for your properties.

So What Do You Do?

The trends and challenges that are facing us are a reality, however, I do take a more positive spin from it all. At the end of the day, what still remains true is that great content, great stories, great characters and consistently delivering on your promise, will always lead to good things. Most of the breakout successes over the last 25 years have been from independent companies who focus on quality and unique ideas. Children have an innate love of animated properties that touch them on an emotional level. They love new things, a sense of fun, adventure and they are curious. There will always be room for a hit property.

While broadcast license fees have dropped, and there are more properties than ever, I do believe that the best do make financial sense. You know when you have a great property -- it is what I call a slam-dunk!

A great example of a recent success is Bob the Builder, a stop-motion animation series, from Hit Entertainment, that has strong entertainment value, a unique style and a great play pattern. The producers decided to build the property in the U.K. first and concentrate on developing the brand through the release of quality products such as music, toys, games, etc. Once a proven success, it made the trek across the pond to the U.S., a much easier task with a track record, and which allowed Hit to retain the merchandising rights while landing on a great broadcast platform in Nick Jr. Now it is their job to build and maintain this brand into an evergreen property. Watching my two-year-old play with Scoop and Muck, characters from the show, I think they are well on their way.

As for AAC Kids, although we are a relative newcomer to the kids entertainment area, we are quite proud of our properties to date. We have focused on establishing a solid foundation of global, creative and financial partnerships in order to build a stable of high-quality, innovative properties that we can build into global brands. At MIPCOM, we launched several animated properties that span the age spectrum. Included were Connie the Cow, a pre-school cel animated series, Henry's World, a stop-motion animated series for the 4-8 year old set, and Old Tom, a humorous series for 6-11 year olds about a filthy, flea ridden and smelly alley cat (what's not to love!).

Moving ahead, we have decided to focus our property development into three categories. First, we are definitely interested in developing and partnering on pre-school properties that have great story and characters and a strong emotional connection. Second, we are focusing on finding a great action oriented property that is non-violent, but that has a strong play pattern and third, we are focusing on the tween market with primarily strong live-action drama.

With a focused approach, and an unflinching passion for great properties, one can find success in this business!

As vice president, television distribution, AAC KIDS, Ken Faier, oversees all distribution of the AAC KIDS products both in the U.S. and international markets, including all properties under the agreement between TV-Loonland and Alliance Atlantis. Over his 11-year career at Brunico Communications Inc., Faier's responsibilities spanned publishing, events, Internet development, marketing and general management. A founding publisher of KidScreen, Faier helped to build Brunico's foray into international markets and the conference and events business. Specifically, he was the co-founder of the Golden Marble Awards, the only award show that celebrates excellence in children's advertising and promotions.