Licensing deals live: Retailers, studios rekindle love story

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Hollywood loves a good come-from-behind story, and it had one to tell at the Licensing 2004 International convention in New York. After several years without a merchandising hit approaching "Lion King" levels, studios trotted out a slate that licensing veterans believe could turn the tide.

Entertainment properties still account for the largest share of licensed merchandise, 43%, although sales slipped 3% in 2003 from the prior year. But the current crop of hit films, led by "Harry Potter and the Prisoner of Azkaban" and "Shrek 2," and coming attractions such as the highly anticipated "Spider-Man 2" have put Hollywood back in the licensing game.

Next year looks as good or better, with such films as Warner Bros.' "Batman Begins," Lucasfilms' "Star Wars: Episode 3," Disney's "Chronicles of Narnia," Fox's animated "Robots" and DreamWorks' "Madagascar."

"I'm more bullish now than I have been in a very long time," said Gary Caplan, president of Gary Caplan Inc. and a 25-year licensing consultant. "The studios really have the goods."

`a bad taste'

If the upcoming movies perform at the box office, and their related merchandise flies off of shelves, it could thaw a chilly relationship between Hollywood and retailers that dates back to 1999, when "Star Wars: Episode I" fell far short of licensees' expectations. Howard Roffman, president of Lucas Licensing, said $2 billion in merchandise ultimately was sold worldwide, but admitted there were more products on shelves than demand from fans.

"It left a bad taste in retailers' mouths," Mr. Roffman said. "We knew we'd have to earn our place back." A more measured product line will roll out for "Episode III," he said.

All of Hollywood felt the fallout from "Episode 1," which coincided with a trend toward consolidation in retail and as chains developed more of their own product rather than relying on licenses.

"Retail overcorrected, but the pendulum is swinging back," said Jordan Sollitto, exec VP-worldwide marketing at Warner Bros. Consumer Products. "We've responded by becoming better partners with them."

`trust was lost'

Warren Kornblum, chief marketing officer of Toys "R" Us, said retailers also learned some tough lessons. "We all got disappointed," Mr. Kornblum said. "The cost of bringing goods to retail got knocked way out of proportion. No one made money, trust was lost and we all lost sight of the consumer."

Even so, he's looking forward to the next 18 months of movies, and said he hopes "filmmakers will really hit the ball out of the park," and that licensees will develop product consumers will clamor for.

Sequel-happy Hollywood has become even more so because those movies are more appealing to risk-averse retailers. Sony has "Spider-Man," and DreamWorks has a third "Shrek" on the fast track.

"If you can cement the property in the culture," said Michael Malone, senior VP-marketing, Sony Pictures Consumer Products, "then retail can have a comfort level that it won't be here and gone in a few weeks."

For the most part, executives have stopped the "shotgun approach" to licensing-throwing too much product into the market, said Brad Globe, head of DreamWorks Consumer Products. What makes sense now is "fewer, better," he said.

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