|
In addition to Property licensing, the toy industry has been a leader in terms of "Concept" or Product licensing. While no one has tracked the actual impact of concept licensing in terms of percentage of product line that pays a royalty to an inventor, it is clear that with the increase of character licensing in the toy industry, concept licensing has been dramatically decreased. It is estimated that concept licensing made up as much as 70% total line offerings (including all products in a line, both new and old combined, that pay a royalty to an inventor), prior to the 1990's. Following a trend of corporate acquisitions, mergers, "back to basics", an increase in property licensing and internal "branding", concept licensing has fallen to an all time low. While toy companies were hesitant to reveal exact numbers, it is estimated that less than 1% of new product introductions were licensed from inventors in the year 2000. Combined with ongoing licenses that pay a royalty (this includes products such as: "Monopoly", "Scrabble", "Nerf", "Micro Machine", etc.), this number is estimated to increase to a mere 5% of all toy products for 1999; a far cry from that of a couple decades ago. Based on this 5%, and an estimated wholesale dollar figure of all toy products for 1999, (not including software or video games), and based on an average product royalty payment, annual royalty revenue from Concept licensing can be estimated at approximately $250 Million dollars in annual combined royalty paid to inventors for the year 1999.
Considering the minimal and declining participation that concept licensing has played in recent years, one might wonder why either toy companies or inventors make an effort in such a speculative and challenging market. The answer is really many fold. For one, toy companies and inventors alike hope to achieve the "big win" each year. The big toy and game successes have traditionally come from or been inspired by inventors. Inspired about the opportunities that potentially exist, inventors continue to knock on toy company doors and toy companies continue to maintain key positions within their company to maintain inventor relations. It is important to note that the toy industry is a cyclical business that changes with trends, fashion and technology. When fewer dynamic property licenses are available, concept licensing will likely pick up the slack by wooing buyers with more unique and dynamic product.
On a product cycle basis, toy companies look to strengthen their product lines by weeding out products with faltering sales and replenishing those products and product categories with exciting new products. The typical life-span of a toy or game is three years. Toy companies expect to have the greatest sales volume for a product in its' first year of introduction. Typically, it is expected that that product will diminish in sales by 50% the second year and another 50% in the third year. Products that perform better than expectations may enjoy a greater life span. This life cycle and product replenishment need underscores the importance of new product and product licensing within the toy industry. With this said, more toy companies are turning internally for product line extensions, brand creation and licensing applications.
Licensed products that are based on a timely event, fads, celebrities, movies, etc. typically have the most "limited" life-span and are the most "risky" forms of endorsement. Fad based licensing is considered "flash in the pan" marketing typified by a quick entry, high stakes and a quick exit. On the contrast is "ever green" marketing. "Ever green" products are those that stick around year after year. These products may or may not reach the high volume or numbers that a "flash in the pan" might achieve, but they are "blue chip", "tried and true" marketing successes. Some examples of "ever green" "Property" licenses include: "The Peanuts", "Mickey Mouse", "Dr. Seuss" and "Sesame Street". A few examples of "ever green" licensed "Concepts" or products include: "Trivial Pursuit", "Uno", "Monopoly", "Scrabble", "Lite Brite", and "Etch a Sketch". Many "ever green" products have entered into the "classic" realm of "back to basic" products as those previously noted, however, products of less notoriety may indeed still enjoy "ever green" status.
|
