Blockbusters help licensed merchandise sales soar

The prominence of movie franchises such as James Bond and Star Wars are accelerating the growth of licensed merchandise, an industry worth £156.2bn, and although the US remains the biggest region for sales, the Chinese market is growing rapidly.

With the latest movie in the James Bond franchise hitting cinemas this week, a whole host of Spectre-themed merchandise is already flying off the shelves as retailers look to cash in on the appeal of 007.

Licensing is big business; global retail sales hit $241.5bn (£156.2bn) in 2014, generating $13.4bn (£8.7bn) in revenue for the trademark owners, according to the first worldwide study of the industry by the Licensing Industry Merchandisers’ Association (LIMA).

Considering the consumer interest in blockbusters such as Spectre, it is no surprise that the top licensing property type is ‘character and entertainment’, with a 44.4% share of the retail market. However, it is Disney’s properties that are the key driver in the category owing to the universal popularity of characters such as Elsa and Anna from Frozen, as well as its ownership of the Marvel and Lucasfilm assets.

Indeed, in anticipation of the much-hyped Star Wars: Episode VII – The Force Awakens landing in cinemas in December, retailers are stocking shelves with everything from bedding and t-shirts to toy figures and even a working robotic droid.

Corporate trademarks also feature prominently, accounting for 22.4% of the licensing market. “Many corporations are finding that licensing their name or trademark into complementary, but not competing, categories enables them to capitalise on the awareness and trust that people have in that brand,” explains LIMA’s president Charles Riotto.

Fashion (12.7%) and sports (9.7%) are the next largest property segments, according to the analysis of data from 490 companies worldwide. “We are definitely seeing growth in sports on an international basis,” adds Riotto. “It has always been big business in the US with American football, baseball and basketball but a lot of the international sporting associations are catching on to the value of licensing.”

In the UK, many football clubs have their own licensing programmes, for example, as does football governing body FIFA.

In terms of products, clothes (16.2%), toys (13.5%) and accessories (11.6%) generate the largest proportion of retail sales globally, according to the study. This could shift, however, as a number of categories are in position for growth.

At present, the food and beverage sector accounts for 6.1% of sales but it is set to take a larger share, says Riotto. “We see a lot of licensing in that area with celebrity chefs licensing their own lines of food and restaurants, fast food chains and coffee shops licensing products for supermarkets. There is a general increase in activity overall for the category.”

Health and beauty (4%) and home decor (7.2%) are also increasing in prominence, especially in Asian markets, as people accumulate more disposable income, he says.

The US is by far the largest market for licensed merchandise sales, generating 58% of the total $241.5bn, but other regions are gaining in size. Northern Europe accounts for 13.3% of sales and is the second most profitable region, but North Asia is growing rapidly. The region accounted for 7.9% of sales in 2014 but this is up 17.8% compared to the previous year, the second fastest rate of growth behind the Middle East and Africa.

“Up until recently, the only licensing market in that region was Japan but China has been increasing rapidly,” says Riotto. “In my observation, China has been the fastest growing licensing market in the world over the past few years based on the sheer size of the population and the growing number of people with disposable income.”

Access to global information on the internet, as a result of better broadband connections, has also been a contributing factor, he explains.

China and Hong Kong ranks as the sixth largest licensing market, with the US, Japan, the UK, Germany and Canada claiming positions one to five, respectively. Riotto predicts China will surpass Japan to become the second largest market within a few years.

Although the Middle East and Africa only had a 2.2% share of total sales in 2014, this region experienced the largest growth, having increased by 21.5% since 2013. “The industry is in its infancy in those markets,” adds Riotto. “It will continue to grow but it will be a while before it becomes a business with any significant value.” The slowest growth, meanwhile, was recorded in Europe.

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