LAS VEGAS (AdAge.com) -- It's day one of the Licensing International Expo, and there are three things everyone seems to be talking about:
Wow, we're really in Vegas! That's because for the first time in 29 years, the show is not in New York City. This year's show is taking place at the Mandalay Bay Convention Center. Since the change was announced last year, there has been much speculation regarding whether the new venue would have a positive or negative impact on the types and numbers of exhibitors and attendees willing to make the journey. An estimated 500 exhibitors were slated to be at the show, about 5% lower than last year. A walk on the floor indicates a greater focus on entertainment than in years past. Toy brands and youth-oriented entertainment properties noticeably abound, while corporate brands seem out of place.
Are you on Twitter? Yes, social media and its usefulness in the licensing industry are being widely discussed and debated. For the first time, you can follow the show on Twitter @licensingexpo and post your own observations using the hashtag #LX9. In fact, that's how I found out that Wilmer Valderrama was making a personal appearance. I wouldn't want to miss that.
How is the economy treating you? Of course everyone is preoccupied with the economy. Licensing revenue and deal flow are often viewed as divining rods for licensing pros looking to predict the future. Unfortunately things are still looking grim. According to the annual Licensing Industry Survey released today by the International Licensing Industry Merchandisers' Association, brand owners collected 5.6% less in licensing revenue in 2008 than they did in 2007. Royalty revenue was down in eight of the nine categories of licenses tracked by LIMA. The only bright spot seems to be the collegiate market, where royalties rose 3.5% to $208 million in 2008.
But some licensors are not taking the depressed economy sitting down. I am struck by a (sort of) new crop of brands taking licensing to the next level. These brands are not using licensing and brand extensions to create additional revenue streams, reach new audiences or solidify consumer loyalty. Rather, they are using licensing as their primary business model. For these brands, licensing has really become their lifeline.
Sharper Image, Circuit City, Linens 'n Things, Bombay and Polaroid all went bankrupt within the last year and are in the process of relaunching as licensed brands. There is also some speculation that Fortunoff and Eddie Bauer may end up doing the same thing (the Beanstalk Group does not work with any of these brands). The idea here is that while the financials may not have worked to keep these venerable brands in business as they were (or are), they are still extremely popular with consumers. A licensing business model allows them to still exist in the mind of the consumer even though the products themselves are made by other manufacturers (the licensee).
I, for one, am extremely curious to see how these brands fare in 2009 and beyond. While I think this strategy makes sense for some brands, it certainly doesn't make sense for all. The Sharper Image, for example, seems like an ideal candidate. Not only did it have a licensing program in place before it went bankrupt, it also sold a number of Sharper Image-branded products in stores, catalogs and online (all closed in the bankruptcy). So it isn't a stretch for consumers to buy Sharper Image-branded products through channels other than a Sharper Image retail store. But the jury is still out on some of the others. Will consumers be interested enough to buy a Circuit City TV or stereo or a Linens 'n Things duvet? Those are products that never existed in the heyday of those retailers. Only time will tell.
I suspect next year we'll see even more well-known brands fall victim to weak consumer spending and try to use licensing as their lifeline. Some will survive, many will not. But I guarantee it will be interesting.
More developing trends from the show floor tomorrow ...
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Michael Stone is president-CEO of the Beanstalk Group, an Omnicom Group-owned global brand-licensing consultancy.