Editorial: International Licensing - License Magazine - Date: December 2004

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International Licensing - State of Affairs

Branding was once thought to be an interesting growth strategy for developing new products and establishing a foothold in the marketplace. Today it is considered absolutely critical— not only for top brands, but also for retailers, manufacturers and licensees.

According to licensing industry reports, after a down year in 2001, the licensing industry rebounded strongly in 2002, posting a $225 million increase in U.S. revenues. Manufacturers paid more than $5.8 billion in royalties for licensed products. In 2003 licensed products generated retail sales of $71.4 billion in the U.S. and Canada. The largest and fastest-growing segment of the industry is corporate brands and trademarks, which produced 25% of that $71.4 billion.

Brand licensing supports new products in a wide array of categories such as food and beverage products, apparel, accessories, house wares and publishing among others. And while the aforementioned figure serves as testament to US dominance,  the evolution of markets in China and South America suggest this  bias could be addressed in forthcoming years.

As acknowledged by a myriad of properties in market places throughout the globe, there are numerous global commonalities and conflicts. Some brands use licensing to develop as many consumer products as possible; others use it to develop the most unique consumer products as possible.

Brand licensing has become a strategy for retailers to gain even more power and control in the sales of consumer products. Examples of retailer licensed brands can be found in a growing number of categories: Wal-Mart's GE-branded housewares; Target's Phillips small appliances; and Home Depot's Scott's outdoor power equipment. K-Mart also had tremendous success last year selling over $1 billion of Martha Stewart home products.

Among US based consumer product brands there is every conceivable approach to licensing - from "merchandise-based"  or "equity-based" approaches to licensing. These two key approaches are adopted widely on a local scale, serving as an important first step in developing a successful licensing program.

The licensing programs of Coke and M&M's exemplify the local climate of merchandise-based approaches. Coke offers licensees different "looks" to use each season, looks that relate only indirectly to its own products and advertising. Similarly, M&M's will allow its candy characters to appear in almost any position and attitude to fit the distribution or usage of a licensed product.

Exploring the concept of global brand licensing, recent research by specialist AC Nielsen observed over 200 consumer packaged goods (CPG) brands from more than 50 global manufacturers.  The research initiated a new category, deemed the global mega brand franchise.

The key finding of the ACNeilsen report in the context of licensing  was that by licensing a brand name to manufacturers outside of the corporate expertise, manufacturers are able to use the expertise of others to extend their brand name into alternative product categories (e.g., Sunkist).

According to ACNeilsen boundaries, In order to be a mega brand franchise, a brand had to have products that were marketed under the same brand name in at least three different categories (based on ACNielsen’s category definitions). The brand also had to meet the brand franchise criteria in at least three of the five geographical regions. In addition, the brand had to be sold in at least 15 of the 50 countries studied.

One key finding of the study is that there are more global mega brand franchises in Personal Care than in Food, Beverages & Confectionery. Over 50 percent of the 62 global mega brand franchises were found within the Personal Care & Cosmetics categories…32 brands from 12 manufacturers.


Food, Beverages & Confectionery manufacturers ranked second, with 23 of the 62 brand franchises. Seventeen manufacturers marketed these 23 brands. Interestingly, 15 of the 23 brand franchises on the list were based on some derivative of the manufacturer’s current corporate name.

Meanwhile, within north American spheres, the recent Licensing 2004 International trade show, hosted in NYC showed a surprising lack of video game licenses, yet Japanese influences were everywhere. Among all the various trends, toys and t-shirts, four major themes dominated among the hottest new licenses:

Active preschoolers; the attention given to the childhood obesity epidemic in the US has paved the way for a slew of preschool properties dedicated to getting the little ones off the couch. Properties include Nick Jr.’s Lazy Town, Discovery’s Hi-5, and PBS’s Boobah (Boobah TC).

Retro revival: Gen X and Gen Y classics, such as Strawberry Shortcake, Transformers, Cabbage Patch Kids, Weebles, and My Little Pony had major presences. Mattel debuted a Barbie-branded clothing line for women. And thanks to an appearance on The O.C., Care Bears are hot once again.

Movie merchandise:licensed film merchandise dominated the show this year. Expected biggies include Peter Jackson’s King Kong remake, The Pink Panther, Fantastic Four, Curious George, Lemony Snicket’s A Series of Unfortunate Events, and Batman Begins.

Tween scene:We’ve already seen the success of lines from Mary Kate and Ashley Olsen and Hilary Duff, and the "tween lifestyle brand" category is expanding even more. Nickelodeon’s everGirl (everGirl TC) debuted here, as did Trollz, a new lifestyle and entertainment brand based on the popular fuzzy-haired creatures.

According to Kirk Martensen, President of Goldmarks Company, a Chicago-based consultancy that specializes in brand extension, licensing represents a favorable option for companies seeking to acquire strong brands  as it is the lower risk option and an alternative to high purchase prices.

"Consider two recent brand acquisitions: Salton, Inc.'s $137 million purchase of the George Foreman name and Disney Co.'s $350 million outlay for rights to Winnie the Pooh characters. Companies that can't afford to invest or risk that kind of capital often use licensing to secure the exclusive rights to a brand," says Martensen.

Martensen believes major retailers are using brand licensing to invigorate mature products. "As retailers secure the rights to powerful brands and extend them into new products, it is a major shift in leverage and serious threat to the existing brands in those categories," he says.

The key to success for brand licensors says Martensen is to be cautious and extend the brand only into product categories where the brand has relevance and appeal to consumers. "Retailers need to work closely with licensors and licensees to ensure that new brand extension products are consistent in product quality-value, packaging-communications, and wherever possible, features-benefits. Licensors must also weigh the pros and cons of entering into retail licenses, and carefully analyze the dynamics and trends of new product categories since these decisions can have a major impact on their core business."

"Not surprisingly, brands are playing an increasingly important role in the trademark licensing business. Going forward, brand licensing should become even more prevalent as a strategy used by manufacturers and retailers. The market leverage and power will continue to reside in brand owners; the question is, will it be manufacturers or retailers that own the brands of the future?" Martensen said.

Asked by License Magazine about the current retail climate Jordan Sollitto Executive Vice President, Worldwide Marketing for Warner Bros underscored the competitive nature of the marketplace. "It is astoundingly competitive, both internationally and nationally. Nowadays we are far more mindful of the significance of our retailers and their baring on the marketplace.

Asked about the differences between entertainment brands and specific properties, Sollittosays Entertainment properties such as Warners derive their essence from the TV shows or movies that are produced under their banner, whereas brands create their own reason for being, taking cues from the media and society at large.

"They create their own stance and their own point of view. Entertainment properties can on the other hand cross over this barrier and become their own self sustaining brands," Sollitto adds.

Adding her differentiation, Ashley A. Lee  Coordinator, Marketing and Business Development  for The Beanstalk Group says Entertainment licensing is directly inspired by the characters and themes of the property, while brand licensing is inspired by a brand's equities and the unique positioning it enjoys in the minds of consumers."

"A brand can stand for a lifestyle or function as a seal of approval.  Successful brand licensing must tap into the brand's unique point of difference and translate it into high quality products in strategic categories that are close to the core of the brand. For a brand to be licensable, it must be well-known and widely used by the public," Lee said. 

The main differences are the target demographic audiences and "Hot" vs "Classic" properties says   Rita Rubin Senior Vice President, International Licensing, United Media Licensing. " Most movie properties are a quick hit and run, while the tv and character brands have a longer life."    Additionally, Rubin adds,  "the international markets are behind the US when it comes to brands, although they are selling much better now than a few years ago.  The markets around the world all need to have exposure, whether tv, publishing or other media, in order to make a successful licensing program."

Hal Worsham Senior Vice President of Global Licensing Everlast Worldwide Inc. cites the differences between entertainment brands and specific properties.  "A character is only a character, ever.  A new name on the market cannot be a brand until it becomes famous, and a brand is only present when two factors exist: 1.  The consumer recognizes the name based on its fame. 2.   The consumer has a quality connotation of the name.  Without a quality connotation, the property merely remains and can never be a brand.

"It is tiring that our industry so values brands that they are prepared to license and market every type of property as a brand.  It is most erroneous. This is probably because character licensing has more perceived risks than brand licensing, so it is an attempt to remove licensing sales barriers," Worsham adds.   "So many licensors wake up in the morning and decide they are going to launch a new "brand".  They give this a name, apply for trademark registration, and then go around licensing this new "brand".   Another example: any new character that is introduced seems to have a licensing program built around that same characters "brand".  In neither of these cases is a brand present," Worsham said.

Asked about the current retail climate Ashley A. Lee Coordinator, Marketing and Business Development, The Beanstalk Groupsays itis highly competitive with a shrinking number of retailers and limited shelf space. "Increasingly, retailers are using licensed brands to differentiate themselves and attract consumers. Brick and mortar retailers face the challenge of competing with online retailers, and will need to create a more entertaining, experiential environment to lure consumers out of their homes."

"The current retail climate internationally continues to be challenging," says Maura Regan Vice President, International Licensing and New Business Development, International Television Distribution division of Sesame Workshop. 

"Retail sales are soft and there is much competition for limited shelf space.  We do, however, see growth opportunities for Sesame Street as we develop programs that are retail specific and provide turn-key marketing and promotional opportunities," Regan adds.

"As many industry leaders would admit, children's programming time slots continue to decrease.  In addition, the market place is quite saturated.  Another challenge is securing financing for a global market with locally relevant content.  It's a delicate balance, but the good news is that broadcasters still recognize there is a great need for highly engaging educational programs and will dedicate the timeslots, albeit limited, for them,". Regan said.

Hal Worsham Senior Vice President of Global Licensing Everlast Worldwide Inc offered his definition of the climate, "this has been said a million times, but the consolidation of retailers continues to provide challenges.  There are less retailer groups to sell, so the competition is even fiercer at those that remain.  If you have a good, unique product to offer any market, there are fine growth opportunities."

On strategy, Hal Worsham Senior Vice President of Global Licensing for Everlast Worldwide Inc added, "these days it is very popular to license a brand directly to a retailer.  If the brand is strong this strategy should not be followed, as it will limit the distribution of products and it will tie the brand image to that of the retailer. The shop-in-shop concept is catching-on in more countries around the world, so we see good opportunities for brands to present their stories in a growing number of markets."

Recounting some successful retail strategies she has observed, Ashley A. Lee  Coordinator, Marketing and Business Development  The Beanstalk Group  cited a strategy devised between Beanstalk and client Dualstar Entertainment,  seeing development of the mary-kate and ashley program with one exclusive retailer who could support the program with dedicated space, signage, promotions, etc. 

"Wal-Mart was selected and launched the program in the U.S. in early 2000 with nine core categories targeted at tween girls.  Based on the success of the Wal-Mart U.S. program, Beanstalk has coordinated international expansion," Lee said.

The brand now features over 2,500 SKUs in over 50 categories including fashion apparel, accessories, footwear, home décor, cosmetics, fragrances, liquid hair products, fashion dolls and accessories, television programs, videos/DVDs, books, and music. Through a strategy of controlled distribution country by country, the brand is available at 2,800 Wal-Mart U.S. stores as well as at Wal-Mart and Shoppers Drug Mart in Canada, ASDA, Littlewoods catalog and Boots in the U.K., Target in Australia, Suburbia in Mexico, The Warehouse in New Zealand, Auchan in France, Wal-Mart and Otto Versand catalog in Germany, and Seiyu in Japan.

Also, working with Toys "R" Us and licensee Mattel, Beanstalk created the Harley-Davidson Barbie as a limited edition collectible for Toys "R" Us.  The product sold out and the velocity of the Harley Barbie sales demonstrated the power of the brand in collectibles and in products for women.  As a result, TRU then agreed to carry the Harley-Davidson toy line, which has achieved tremendous success.

Also on the topic of successful strategies, Jordan SollittoExecutive Vice President, Worldwide Marketing for Warner Bros  believes successful retail strategies are those that partner with retailers in order to build their licensing and marketing dynamic. "This is propagated via successful communication with marketers and effective research between these parties, ultimately leading to better understanding overall."   Rita Rubin Senior Vice President, International Licensing United Media Licensing recalls her company’s successful DTR strategy, active in Europe. "This has allowed us to develop many product lines across varying categories without cannibalizing our other programs.  The same strategy holds true in Japan, where our Snoopy Town Shops continue to grow in numbers without negatively affecting our program throughout that country."

The common verdict regards the topic of growth territories amongst interviewees hinged on  Latin America, India and new free markets such as China and eastern Europe. Smaller but meaningful territories like Turkey, Israel, and Korea rate a mention, while  North America is still regarded  as the strongest market. Beanstalk  - China and India, as well as some

Maura Regan Vice President, International Licensing and New Business Development, International Television Distribution division of Sesame Workshop reveals, "  We are actually finalizing negotiations in both India and China and are confident these markets will provide long-term growth opportunities for Sesame Street.  We are also actively engaged in business in Russia and believe that Russia and Poland will provide significant opportunities for us over the next 5 years.

Rita Rubin Senior Vice President, International Licensing United Media Licensing adds, " We have been building a program in China for the past 6 years and have had exponential growth. As stated, it is still a relatively new licensing territory and offers great growth opportunities as the second tier cities develop their infrastructures."   While we have our Peanuts comic strip syndicated in India for many years, we have not pursued a fuller licensing program because of the difficult retail environment and the lack of national infrastructure. We are intending to start researching the potential of licensing in India in early '05," Rubin said.

Hal Worsham Senior Vice President of Global Licensing Everlast Worldwide Inc says, "I consider almost every market an area of growth, given that one signs the right licensees that offer unique products to the market place.  Right now, we are putting a very heavy emphasis on developing our Asian business, with the highest concentration in China.  We believe that China is perfectly situated to adopt Western brands, while the consumers are very brand conscious." 

"Add this to an affluent group of consumers that can afford to buy products, which number 300 million, and you have the keys to great success. We are also considering licensing in Argentina, as we believe that the market is recovering to the point at which consumers will be buying more branded products," Worsham says.

Quizzed about what sets international apart from national in terms of product,licensing, merchandising and other retail strategies, Rita Rubin Senior Vice President, International Licensing United Media Licensing said, "International licensing is based upon local cultural tastes, traditions and customs.  What works in one country, whether it be colors, packaging, advertising campaigns, does not necessarily work in another."

"It takes more resources to put together programs internationally due to increased legal requirements for registrations and defense of copyright and trademarks.  There are cross country opportunities in some regions, but most of the time each of the collateral materials has to be localized for language and other cultural distinctions."   According to Maura Regan Vice President, International Licensing and New Business Development Products and International Television Distribution,"Sesame Workshop products that might work in one country will not in another due to pricing, design, or general style of product.  "The retail landscape may not be as diverse as the US or distribution may not be as established," she says   "With regards to Sesame Street specifically, the challenge is that while we are a global brand, we are also very local and have local adaptations with their own logos and in many cases, different Muppet characters.  This presents challenges in working with one retailer or licensee that has pan-European, for example, distribution," Regan said.

"Successful international licensing programs need to be mindful of, and plan for, local consumer tastes and local retail environments," says Ashley A. Lee; Coordinator, Marketing and Business Development  The Beanstalk Group.

"To meet the needs of Beanstalk’s European clients, The Beanstalk Group UK was founded. The London office serves as the hub of European operations, executing territory-specific programs on a country-by-country, regional or pan-European basis."

"International licensing is very different from US licensing. For us at Everlast," adds  Hal Worsham Senior Vice President of Global Licensing Everlast Worldwide Inc. "We have a brand position as "upper moderate" in the US. However, outside the US we have a brand image of "high end". We like to keep this same imagery in all non-US countries to have a great consistency around the world. So, you will find us at such tony stores as Collette and Galleries Lafayette in France, and at similar stores globally." This requires that we make our product approvals and quality control at high levels. We work very hard with our licensees to make sure that they have merchantable product, but at the same time keep the image at a consistently high level." We really listen to what licensees say, as they are experts in their own markets. They have knowledge that we cannot have. That is why we take such great care in selecting the "best of the best" licensees. This is our method of working "locally" to meet local demand."

Written by Craig Stephens

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