Licensing tip #9: Understanding the U.S. Licensing Industry - Facts, Figures and Future Trends

In an effort to continue to build on your growing understanding of our complex licensing industry, we've extrapolated some interesting and valuable information from The Licensing Letter's 32nd Annual Licensing Business Survey (EPM Communications, Inc).

As I'm sure you already know licensing is a multi-billion dollar business that continues to provide marketers with enormous opportunities worldwide. Unfortunately, given the general economic trends (i.e. the recession), retail sales of licensed merchandise in the U.S. & Canada was down 14% to $59.1 billion in 2008 from $68.7 billion in 2007. Many retailers of licensed goods saw sales decline substantially in the last quarter of the year (not a huge surprise for most since U.S. retail sales overall were down 1.8% that quarter).

Some property types were able to outperform the licensing sector as a whole. Below is some information on who they were and corresponding industry statistics:

Trademarks/brands

• $14.7 billion, down 12%
• Made up 24.9% of total retail sales of licensed merchandise in 2008

Sports

• $11.92 billion, down 13%
• Made up 20.2% of total retail sales of licensed merchandise in 2008

Fashion

• $8.46 billion, down 8%
• Made up 14.3% of total retail sales of licensed merchandise in 2008

Music

• $1.92 billion, down 4%
• Made up 3.2% of total retail sales of licensed merchandise in 2008

Property types which greatly underperformed in 2008 included:

Entertainment/character

• $9.88 billion, down 19%
• Made up 16.7% of total retail sales of licensed merchandise in 2008

Toys and games

• $1.95 billion, down 22%
• Made up 3.3% of total retail sales of licensed merchandise in 2008

Publishing

• $1.42 billion, down 19%
• Made up 2.4% of total retail sales of licensed merchandise in 2008

Nonprofit licensing

• $710 million, down 21%
• Made up 1.2% of total retail sales of licensed merchandise in 2008

The general consensus seemed to be that it was the last half of the year, particularly the last quarter, which pulled results down tremendously; three main reasons cited were:

• saturated marketplace containing licensed products;
• lower-than-expected retail price points for licensed goods caused by discounting;
• licensed products being distributed to discounters, dollar stores and price clubs.

In terms of licensed products by product type/category, coupled with percentage of share of total sales, Food/beverages came out on top with share of total at 12% and only a 10% decrease from 2007. The close followers were Apparel/Accessories with combined averages of 11% share of total and 13.5% decrease. Licensed product categories whose competition was from digital alternatives, such as music/video, stationery/paper and toys/games performed the weakest.

So what's in store for 2009? More than 60% of respondents expect retail sales of licensed merchandise to decrease an average 13.7%, almost equal to 2008. Another 25% expect the business to be flat and the rest predict increases for the business. While many reasons for the negative expectations were cited (retail compression, credit issues, discounting, inventory cautiousness, etc...) the common denominator was simply the poor state of the economy. That said, we believe the trend of licensed food/beverages will continue to grow in the marketplace with continued success at all levels providing brands/restaurants execute their licensing programs cautiously and correctly.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)