Licenses - a great potential market

Release date:2017-12-15

Whether it's the Paw-Patrol Advent Calendar, the Millennium Falcon from Lego Star Wars, or the Frozen Castle, the licensed toys business is a million-dollar hit. This year, licensed products were worth 20% of the total German toy market. In 2007, it was 16%. According to market research institute the npd group, Batman, Cars, Ghostbusters, Fireman Sam, and Trolls are currently very successful licensing themes.

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For the corporations, licensed toys are important profit drivers. In 2016, Hasbro's sales in the “girls” category soared by 50% to 1.19 billion dollars thanks to products based around Disney Princess, Disney Frozen, and Dreamworks Trolls. The Walt Disney Company is the leading licensor worldwide. According to License Global, the group received $56.6 billion in 2016 in licensed merchandise across all product categories. That's a plus of 4.1 billion euros, which was also due to strong themes such as Star Wars, Finding Dorie, Captain America, and the Jungle Book.

Companies keep quiet about licensing costs. With MasterToy licenses, a company can sell a brand across all product groups. Depending on the theme, this permission can cost hundreds of millions of dollars. A sub-license authorises the marketing of certain product groups, such as toy cars, T-shirts, or puzzles. It's a profitable business. Euromonitor International estimates the worldwide turnover in licensed toys to be around $21 billion, and forecasts growth of 14% by 2020.

The German licensing market has some special features: According to Euromonitor, customers are more reluctant when it comes to licensed toys. It often takes longer here until a license prevails. In addition, German parents often buy classic conservative toys. That's why companies usually have to make greater efforts and drive marketing campaigns to raise awareness of a theme. In the last quarter of 2016, 15% of all TV advertising expenses (26 million euros) were used to promote licensed toys. Compared to other countries, there are not that many top sellers in Germany. But if a topic is successful, then the German fans remain loyal to it for a long time, and the license holders can generate sales over many years. An example is Bibi Blocksberg. The little witch has been thrilling her fanbase for decades. This year, Bibi & Tina was named License Theme of the Year by the LIMA – Licensing Industry Merchandisers' Association.

So, there is still room for improvement in the German license market. While licensed toys make up one-fifth of total industry sales in this country, their share in other European countries is around one-third. The Kids License Monitor also points out that, according to research conducted in August this year, the full potential of many licensed themes is not being exploited. For example, 85% of the surveyed children like Ice Age, but only 58% own an Ice Age product. Concerning a large proportion of the licensed themes on the market, the experts conclude: “Although the topics are extremely popular with children, this is not sufficiently reflected in the number of licensed products that the children own.”

The manufacturers want to change this situation, and to benefit more strongly from the popularity of the licensed characters. More and more companies are expanding or rebooting their license business. Lego has long focused on licenses with kits around Star Wars, Cars, Disney Princess, and so on. Shortly before the theatrical release of Star Wars: The Last Jedi, the company released seven new Star Wars kits. With its long-running Lego Ninjago, the group also profits in other segments. Blue Ocean is the master publisher of the Danish Lego Group and publishes the Lego Ninjago magazine, which was the number-one children's magazine in the second quarter of 2017 with over 220,000 copies sold.


Source: Luna Journal

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