Licensing deals have always been popular with publishers. As Publishing Technology COO Randy Petway astutely pointed out in his recent Publishing Perspectives article, “When sales are not something that can be planned for or predicted, publishers rely heavily on brand awareness through licensing deals, both to sell books and open new markets for intellectual property.” Since the digital revolution, start-ups have taken to buying up licensed properties to give them a jump-start in the market – to such a degree that some people are wondering if a start-up needs licensed content in order to succeed.
It’s not shocking to hear that licensed products are dominating the children’s market, but the actual numbers and statistics are surprising. The 2014 Nielsen Children’s Book Industry Report noted that “the largest brands tend[ed] to center around a specific author, especially those with movies attached to their properties.” Of the top 20 titles sold from the third quarter of 2013 through the fourth quarter of 2014, 18 of them were attached to a movie, video game, or personality. The other two titles, If I Stay and Paper Towns, have since been made into movies.
More recently, Publishers Weekly reported that “global retail sales of licensed products saw a rise of 2% in 2015, to $158.8 billion.” Nielsen’s 2015 Book Market Report stated that 17 of the top 20 children’s bestsellers had some attachment to a movie, video game, or radio personality. The three exceptions were two Dr. Seuss titles and the board book Little Blue Truck.
It’s long been understood that blockbuster books can turn into movies. The obverse is also the case, with movies, games, and personalities becoming books. This trend accounts for almost half of the top 20 bestseller lists in Nielsen’s 2014 and 2015 reports. This is especially evident with the sale of Frozen titles in 2015: the top 50 tie-ins in 2015 sold a total of 4,733,677 copies and of those top 50, 73% were Frozen titles. The next highest percentage were titles related to the Disney animated show Sofia the First at 3%. Numbers aren’t available for Star Wars licensed materials since the release of Force Awakens, but it seems likely that those numbers will displace Frozen as the highest percentage in 2016.
Almost 85% of the top 50 media-tie ins sold in 2015 were books published by one of the Big 5. That doesn’t mean that smaller publishers and startups aren’t finding their own space in the licensing market too. As Edda USA (a branch of a Nordic publishing company launched in the US in 2014) CEO Jax Olafsson put it, “The market is screaming for coordinated efforts in marketing and selling books supported by movie or brand,” which means there’s plenty of room for many publishers to take advantage.
And take advantage, they have. A few that come to mind are Sourcebooks’ bestselling Put Me in the Story series, which lets customers add their own pictures to a book featuring characters from brands like Sesame Street, Spongebob Squarepants, and Dora the Explorer. They recently announced an exclusive deal with Barnes & Noble; Igloo Books in the UK (acquired by Bonnier Publishing in 2014) which publishes books based on Dreamworks products, particularly sticker books. They found that when it moved into licensing, its revenues increased significantly; and the aforementioned Edda USA which publishes lifestyle books like Disney Frozen Fever Hairstyles: Inspired by Anna and Elsa.
Current publishing consultant and former President of Pearson’s Family Education Network Jess M. Brallier said that, “Although I think [start-ups using licensed properties] can be a very effective strategy to gain quick initial momentum, to state ‘hello, we’re here and we’re viable and we’re going to make a difference,’ it can be very risky.” Brallier explained that because of the cost required to acquire a license, a start-up might overspend on developing a product and then if it underperforms, it has to absorb that loss.
Brallier said that if a start-up has initial success with licensed content, they’ll continue with what works, but if they “trip out the gate” then they’ll probably look more into original intellectual property. “Each start-up wants to find their DNA in the marketplace, what works for them,” Brallier said. A good example of a start-up that’s found its DNA is Edda. Eighty percent of its products are licensed content and 20% proprietary, although Olafsson is currently working to expand both lists.
However, echoing Brallier’s sentiment that licenses have risks, Olafsson believes that finding your own niche is what makes you successful. For example, he believes Edda is a competitor with the big publishers because it focuses “on quality and content people would like to read and buy,” and on “never trading the quality for shortcuts.”
Another company that’s found a lot of success with licensed books is Parragon. The UK children’s publisher recently acquired North American licenses for coloring, sticker, and activity books for many of Disney’s franchises, titles that were published by Random House before 2016. Parragon President Paul Gregory told Publishers Weekly in March 2015 when the deal was announced that, “The future’s a blank sheet of paper. We’ve been presenting 40 different formats to retailers [in North America] and getting feedback about what they like and what their customers want. We want to get their thoughts and ask them how they can help shape the program.” So, maybe the keys to success in licensed publishing are good quality and knowing your consumer, which is a statement that oversimplifies a complicated, and crowded, market.
Regardless of the risks, licensed content will continue to be popular in the children’s market, as Nielsen’s report acknowledged: “This is a trend we expect to see more of in the coming years, as media companies like Disney refine their strategies for integrated product development, and savvy publishers like Scholastic continue to look outside their walls for licensed properties like Minecraft that offer tremendous market depth, as well as the repackaging of core backlist for new media opportunities” like Goosebumps, Star Wars, and Lego.
Start-ups should go in knowing that the rules of licensing are changing, largely because of streaming services like Hulu and Netflix. “Since the platform delivers more shows at once, it allows the child to build familiarity with a property quickly,” Dreamworks’ Global Head of Licensing Tim Erickson told Publishers Weekly. “They understand the characters and the premise, and that immersion allows them to turn to consumer products.” But this also creates a volatility in the market where what works one season might not work the next, meaning publishers, especially start-ups, should tread lightly.
“Consideration of licensed products is a lot like publishing, period,” Brallier said. “Book publishing might not seem as sexy or complex as other industries but it’s about constantly learning lessons and reevaluating,” and he thinks the pressure in the industry goes up a little when you’re paying to use licensed products that might not sell well, especially for start-ups.
For all of this and more, please attend the Starting Up: What Works, What Doesn’t, and Lessons Learned Along the Way panel at Launch Kids at DBW on March 7th, 2016. Register here.
