All that changed with a raft of late 1980s-early 1990s back-to-back licensing megahits based on films and TV programs: Barney the Dinosaur, "Jurassic Park," "Mighty Morphin Power Rangers" and "The Lion King."
Suddenly, licensing became a business worthy of serious attention in corporate boardrooms from Sunset Boulevard to Madison Avenue, and every week brings announcements of new, high-profile licensing alliances.
The field also has largely man-aged to shed its reputation for slapping "here-today, gone-tomorrow" characters on lunch boxes, coffee mugs and T-shirts.
In short, the business has become more sophisticated:
Film studios, TV networks, fast-food giants, retailers and manufacturers are adding licensing into their corporate hierarchies, creating in-house licensing units.
Licensing arrangements are taking place earlier and earlier in the planning process; more than a year in advance Warner Bros. locked in Playmates Toys as the toys and action figure licensee for its highly anticipated "Space Jam" film starring Michael Jordan and a cast of Looney Tunes characters. The film is due this fall.
Licensing agencies, in turn, are starting to view themselves akin to ad agencies, packaging licensed properties as brands for licensees. They're growing adept at presenting marketers as agents of movie studios and TV networks, ready to create customized products integrated into broad programs.
"There's no doubt licensing is finally being taken more seriously by the business world," says Murray Altchuler, executive director of the 11-year-old Licensing Industry Merchandisers Association.
One sign of the industry's business savvy is its effort to bring licensors and licensees together in cyberspace. LIMA last June announced plans for a Web site to be up and running this year where members can share information about properties available for licensing and other resources.
Despite its strides, however, licensing remains a gamble as unpredictable as the weather. Kids' quirky, fleeting passions give birth to "hit" concepts that fly off the shelves, creating fortunes overnight. But enormous sums are also lost each season betting on "dud" ideas.
"The stakes are higher than ever, and the risks are incredible," Mr. Altchuler says.
Beyond trying to tap into megahits, one reason corporations seem more eager than usual to read licensing's tradewinds is because sales of licensed merchandise as a whole is faring better than general retail sales.
Total retail sales dropped 6%-10% last year, but The Licensing Letter tracked sales of licensed merchandise overall as flat at $70 billion.
The results are not surprising to LIMA. There were no new runaway hits in the licensing world last year, although several properties performed very well. .
Kids' influence about $150 billion in annual sales, according to Children's Market Research's Kidtrends Report. A substantial percentage of that comes from licensing of kids' products.
About 70% of the $16 billion in 1995 retail sales for entertainment and character-related properties came from kids, according to The Licensing Letter, and children accounted for about 25% of sales of the $13.4 billion in licensed sports lines.
But sales of character-related properties actually fell 6% in 1995 and licensed sports merchandise sales dropped 3% last year. Corporate trademark and brand licensing, however, grew 8%, the newsletter found.
"Licensing relationships are starting to resemble connections between advertisers and ad agencies as people recognize that licensing can be viewed as a branding function," says C. Woody Browne, president of licensing consultancy Building Q. The ideal model for this approach belongs to Walt Disney Co., the pioneer of sophisticated licensing efforts allowing maximum opportunities for diverse marketer participation and concept longevity..
Licensing arrangements with Disney are hotly pursued. And when Disney is happy with a licensee's performance, there's a better than 50% chance it will renew the arrangement for the next film.
The same goes for licensed tie-ins for retail and fast-food promotions surrounding films. Burger King Corp. and J.C. Penney Co. have scored tie-in status with Disney on multiple films. Disney says it has no permanent relationships with any licensees.
Disney Consumer Products is also the pacesetter at selling its licensed merchandise through its 10-year-old Disney Store chain, with 450 outlets in 10 countries, where it continually nurtures and recycles licensed brand franchises.
Warner Bros. does the same with its own chain of 137 stores in six countries, utilizing its Looney Tunes and Batman characters, among others.
When it comes to outside licensors, companies like Warner Bros. also plot strategy early with them to heighten sales.
"We meet with the licensees as early as possible to make sure the products truly reflect the movie, which maximizes our opportunities," says Dan Romanelli, president of Warner Bros. Worldwide Consumer Products.
Such efforts have turned licensing from an afterthought into an important marketing tool, harnessed to reinforce brand image while driving ancillary sales of items beyond the core business.
An example is United Media Licensing. Best-known for its licensing of Charles Schultz' "Peanuts" comic strip, United Media's licensing program last year turned its wry "Dilbert" daily comic strip into a $500,000 phenomenon "that's a perfect template for how licensing can be used to create and drive a marketing program," said Diane Shaib, United Media's senior VP-U.S. licensing.
In the early 1990s the company began by publishing a line of books reprising comic strips featuring the high-tech corporation employee's humorous approach to office life. That led to a line of technology-themed licensed products featuring the Dilbert character on computer screen savers, coffee mugs and apparel.
In April, United Media launched a "Dilbert" site on the Internet's World Wide Web [http://www.unitedmedia.com/comics/dilbert], which United Media says attracts 70,000-80,000 visitors per day. In October, the Web site became a "cyberstore" dispensing the full line of Dilbert merchandise. Sales are expected to top $1 million this year.
Such integrated efforts are doing much to build licensing's value.
"Licensing flew so high in the last few years that some companies got burned," says Mr. Browne. "People are putting more marketing brains" into it.