Australia: "Turn To Warp Speed. We´re Australian"

Last Updated: 21 June 2007
Article by Noric Dilanchian

[This article was prepared for Total Licensing, a London-based all digital industry magazine for the global toys and merchandising industry. It was timed for the 2007 Australian Toy, Hobby and Nursey Fair at the Melbourne Exhibition Centre 23-27 March 2007.]

CHARACTER LICENSING AND MERCHANDISING in Australia will continue in 2007 to rely on elements that have worked in recent history.

Players will continue to license toys, clothing and other products that have a history of working abroad or locally. But there are a number of key challenges on the horizon for licensors and merchandisers.

What will continue to work will be prominent use of well-known names, logos, images and brands protected by trade mark registrations, typically connected with a character, personality, musical group or highly engaging and promoted new entrant.

It was not always so, especially for adults. Compared to the US market, before say 1990 Australian attitudes could be summed up thus: "No merchandising please. We're Australian." In fact that's the title of a merchandising "how to" article I wrote in 1993 for Encore, an Australian film and television industry publication still in existence.

Now merchandising is everywhere in Australia. Walls of it greet you at mega-stores such as Target, Kmart and Big W and in boutique toy, DVD, record or book stores. In supermarkets such as Coles and Woolworths you get pulled up by your children requesting foods bearing the visage of famous characters. For example, Bob the Builder and The Wiggles appear prominently on several products including yogurt and biscuits.

Australia is now even a regular exporter of merchandising properties including the film Happy Feet and properties such as Bananas in Pyjamas and Hi5. Conquering all are The Wiggles, they now regularly top annual revenue lists for entertainment acts in Australia. Indeed, they have conquered the United States. Since 1991 worldwide they have sold over 22.5 million videos/DVD’s and 5 million CDs.

For adults, merchandising and licensing have spread considerably into numerous lines where once they were not so common. As in other countries, Australia is now bathed in celebrity-endorsed scents (eg Darling by Kylie Minogue and Channel No. 5 by Nicole Kidman) and celebrity-endorsed clothes and accessories.

In sports mad Australia that field too is fully represented by merchandising and licensing agents, distributors and retailers.

At the core of the licensing and merchandising sector remain children.

Prominent as providers to them in 2006 across a wide range of toys were Hasbro Australia Ltd (Playdoh, Star Wars, Tonka) and Mattel Pty Ltd (Barbie, Pixel Chix, Sesame Street, Hot Wheels).

Also prominent in toy sales in 2006 in Australia, though for specific line items, were Lego Australia Pty Ltd (building sets), Hunter Overseas Pty Ltd (outdoor sports) and Sports Cards Australia (sports cards).

Over the horizon what will be challenging in Australia is also the topic of considerable hype or concern currently in Europe and the United States. Here are some issues.

First, what do licensing and merchandising companies do about the ongoing erosion of advertising dollars from traditional media and entertainment?

Though restrictions apply where products or services are directed to children, still advertising has historically supported the bulk of print and electronic media publications and programs. With less advertising quality has to be affected as ad revenue decreases on its way towards online media, be it on the Web or mobile devices. The latter are on the verge of major developments.

Adding to concern, a sign of the times in Australia is that advertising dollars are draining overseas. For example in 2006 Google Australia became the biggest single generator of advertising revenue from Australia. It was placed by BRW magazine's estimate (A$206 million) ahead of Telstra's Sensis earning A$192 million in 2006. In third place was Fairfax Digital estimated as earning A$115 million.

A second issue now and over the horizon is where do DVD distributors and stores renting or selling DVDs find revenue given the DVD format is rapidly maturing? The signs of slowing growth include falling DVD prices. This is at a time when online media challenges the underlying business models of virtually all traditional media and entertainment sectors in Australia.

Roadshow Entertainment remains Australia's leading DVD distributor. Other majors include Twentieth Century Fox Home Entertainment, Universal Pictures Video, Buena Vista Home Entertainment, Warner Vision and Columbia Tristar Home Video.

The DVD rental and sale market is still growing but at a diminishing rate. There are also technology changes and uncertainty ahead. For example, current DVD players will not play future formats, eg HD DVD and Blu-ray, both of which are still in a format war.

There will it seems always be a role for agents. Leading the pack, still, is Gaffney International Licensing Pty Ltd which in 2007 celebrates 30 years of operation in Australia. It represents very big names, including relative newbies such as Pokemon and CareBears, and names from the 50s and 60s, eg Playboy, Elvis Presley and The Beatles.

Along with agents, lawyers are another species likely to survive a nuclear holocaust. Australia has a highly sophisticated regime of laws, courts and licensing conventions. They can be made to work for any type of product or licensing or merchandising strategy.

Trade mark and copyright law have provided the traditional legal base for many licensing and merchandising contracts. However, as software, the Internet and new business models emerge increasing attention is likely to be given to additional mechanisms for monopoly legal rights using design registration law and patent law.

The kids division of the fully government-owned Australian Broadcasting Corporation (ABCKids) continues to grow as a prominent licensee and licensor. So does its range of offerings for children, now providing well over 100 characters. Still, the old favourites remain and continue to thrive. In 2006 Play School, one of the ABC's pre-school programs celebrated its 40th birthday.

What is new and indeed exciting at ABCKids is a vast increase in the quality of games and activities available online.

More affordable for households in Australia then ever is some level of "broadband". That term is in quotes because it always needs specific definition to have any real meaning. "Broadband" is now cheaper from phone companies and ISPs. When its increasing consumer adoption is matched with the wonders of technologies such as audio streaming, Java and Flash, then kids and their parents have over the last 18 months or so experienced a previously unheard of level of interactivity with online shows, games and activities.

Online media's attractive qualities are taking more and more of the time of younger and younger children away from the toys and playthings that kept their parents busy in yesteryear. My four year old son was using a computer from the age of two and contemporary DVDs and online activities provide some of his most favourite pastimes, leaving the toy box untouched until friends drop by. This is not good news for those in the business of merchandising and licensing with no online strategy or at least positioning with respect to it.

These emerging challenges and the new environment for character licensing and merchandising calls for new or adapted business models. They do not have to replace existing revenue streams in one go, but they should be considered as a way of at least defending against the truly warp speed of change about to sweep us all off our historical foundations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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