Attorney Pam Schechter explores the ways cartoon characters are exploited and the type of money that's involved.
Garfield and Friends © Film Roman.
Animated characters tie the world together much like a common language. It is almost a given that children, no matter where they live, understand and enjoy Disney characters, whether seen in cartoons or on the myriad pieces of licensed merchandise that are widely available. For adults, Homer Simpson, Mickey Mouse and even Beavis and Butt-Head bring out similar smiles.
I remember during my first visit to Europe, seeing a Snoopy poster in a shop in Rome. It showed Snoopy as "Joe Falchetto," dancing with his paws raised high. I immediately felt a strong sense of familiarity as I gazed at Joe Cool's image, even though I did not speak Italian. In that instant, the world became a smaller place. I was reminded once again that animated characters have become a lingua franca. As such, we do not need words to enjoy a character on a T-shirt, poster or hat.
This year, almost $95 billion will be generated in worldwide revenues from the sale of licensed products. A hefty chunk of these dollars will come from the merchandising of animated characters.
Screen Savers and Pacifiers
When The Simpsons went on the air, the show only had 12 licensees. Now, there are more than 1,110 Simpsons items licensed worldwide. The products include sleepwear, PC screen savers, electric calendars, video games, bubble baths, boxer shorts, cake pans, cookie cutters, golf balls, pacifiers, welcome mats and trading cards. Some of the items can be worn, some displayed, some used and some consumed. By the one hundredth episode of the television show, over $3 billion worth of Simpsons merchandise had been sold worldwide.
Similarly, MTV is making millions on international sales of licensed products from Beavis and Butt-Head to the show's international audience of teenagers and twentysomethings.
Last year, in the theatrical film arena, merchandising and licensing fees added $5 to $6 billion to film revenues worldwide. Some of 1995's most successful tie-ins were from animated films as The Lion King, Aladdin and Pocahontas ; thus, not only did these films do well at the box office, but they also have created streams of licensing revenue as well.
Companies that produce animated films and TV shows realize the potential of licensing popular characters. Disney, Hanna Barbara, MTV, Nickelodeon, Film Roman, Klasky Csupo, and Saban are all actively involved in licensing the rights to their characters.
Some animation studios hire other companies to license the rights to their characters. Others manage and control the creative and financial aspects of the licensing and merchandising process themselves. The typical licensing agreement is usually between a production company, as the owner of the rights to the character, and a manufacturer or distributor, which has the responsibility to produce and distribute the products.
Risks and Rewards
In negotiating a deal, the competing interests of both the production company and the manufacturer have to be taken into account. A producer naturally wants to earn as much as possible and will usually receive a percentage of the sales of the licensed products, while seeking to maintain certain controls over the type and quality of product created, so as to preserve their character's identity.
On the other hand, the manufacturer wants to earn a fair profit for taking the risk in creating and distributing the licensed products. In order to do this, it needs a certain amount of freedom to exploit the products, with minimal control by the production company. A key consideration is the degree of risk the manufacturer incurs. After all, there is always the possibility that the market for the products will never materialize, perhaps as a result of the show's or film's lack of success. Ideally, a licensing agreement is a fair compromise between these competing objectives.
Most licensing and merchandising agreements are basically the same. The use of the character on a certain product is licensed for a specific amount of time for a specific territory. The license usually allows the manufacturer to manufacture, advertise, distribute and sell the products on an exclusive basis.
It is important that the agreement provide enough time for the manufacturer to effectively produce and distribute the products in question, which customarily ranges from 3-7 years. The production company commonly receives from 3-10% of the gross profits from the sales of the merchandise. However, in rare instances, it can be as high as 15%. Arrangements can also be made for the production company to get an up-front guarantee in addition to a share of the profits. These sort of guarantees for the animated star of a successful film or TV show can range from $500,000 up to $1,000,000.
A company that wants to license a character on the international market will want to make sure the manufacturer protects its copyrights and trademarks. This is done by putting the appropriate copyright and trademark notices on the products. To verify this, production companies approve artwork and samples of the finished product. This is also done to make sure the characters "goodwill" is not compromised.
When a merchandising licensing agreement expires, the rights to the character are usually returned to the producer, including all of the materials used to produce the merchandise.
Manufacturers are not the only businesses that realize the value of animated characters. Recently, McDonald's, the international fast-food giant, and Disney announced a landmark cross-promotional agreement. The 10 year pact confirms how animated characters are being used by multinational corporations. The agreement, which kicks off on January 1, 1997, is worth $1 billion! Disney originally started cross-promoting its animated product with McDonald's in 1987 with the rerelease of Snow White and the Seven Dwarfs. However, for the past 5 years, Disney turned to another fast-food chain, Burger King, for its major cross-promotional efforts, including tie-ins for such films as The Lion King, Pocahontas and The Hunchback of Notre Dame.
The global appeal of such characters as Mickey Mouse, Snoopy, Donald Duck, Fred Flintstone or Bart Simpson, tie the world together with a common language, that of laughter. Seeing familiar friends in unfamiliar places makes the world a neighborly place.
As an art form, animation crosses all boundaries of language and geography. There are few areas in the entertainment industry that are as well suited for international merchandising as that involving animated characters. So, remember, no matter what your native tongue, Garfield speaks your language.
Pam Schechter is an entertainment attorney in New York City. Her practice includes a special concentration in the animation industry. She represents several animators including Eric Fogel, the creator of the MTV animated series The Head and Beavis and Butth-Head animation director Yvette Kaplan.