Licensing Hangs Tough

Spain's licensing business is holding up reasonably well in very tough economic conditions.

Licensed product plays a significant role in Spain's retail landscape. In 2008, the licensed sector grew by €1.153 million ($1.6 million), hitting €354 million ($496 million) and representing 33 percent of all retail sales.

Keeping price points in line with non-licensed product is important to the success of the category. According to Maria Doolan, managing director of brand and business development at Spain's Zinkia, in terms of pricing, licensed products are pretty even with non-licensed product. "Currently the average licensed product sells for €18.1 as against €18.2 ($25) for non-licensed products," she says.

One other notable feature of the Spanish licensing market is its seasonality—Christmas accounts for 70 percent of all Spanish licensing sales.

As in most countries, a softening 2009 economy will take a toll on the business. "There is no doubt that 2009 will see a fall in licensed sales," asserts Doolan.

Given that at the end of first quarter 2009 the government's own figures put unemployment at 17.4 percent, up from 9 percent at the start of 2008, that is hardly surprising. However, Doolan does have some optimism, believing that, "in general terms, the licensing sector is not doing as badly as might be expected," although she does acknowledge that "the one exception is the toy sector," which she describes as, "experiencing a significant downturn."

As is often the case, however, broad statements and figures hide significant differences. Doolan reveals that, "in the 2 to 7 age range, 60 percent of all toy sales are of licensed products."

Laura Navarro, licensing manager at HIT's Iberian agent Imira Entertainment, estimates that "licensed toys account for around 35 percent of all toy sales in Spain." Imira represents the Australian TV property "H20" in Spain.

Both Doolan and Navarro agree that the big trend in Spanish licensing over the past two years has been the emergence of an increasingly important preschool market. "Two years ago, preschool almost didn't exist, but now it is a very important sector, and one which is growing strongly. This is partly a reflection of Spain's increased adoption of Western and American values and products. For better or worse, Spain is now adopting shopping malls, fast food, licensed products and daytime television," explains Doolan. The adoption of daytime television is, believes Doolan, another reason for the growth of preschool.

"Much of Spain's FTA channels," she points out, "escape the normal European censorship criteria allowing daytime content to be aired that is much stronger than in the rest of Europe, and unsuitable for children. This has led to huge audiences for niche kids' channels."

And there is a bigger audience for younger programming as a result of a baby boom which occurred five years ago when Spain's economy was strong, and due to a large amount of immigration over the same period.

The importance of the newly emerging preschool sector is underlined by the success of Zinkia's Pocoyo, which has sold over 2 million toys, 1 million DVDs and 600,000 books in Spain alone and which, along with Caillou and Disney Princess, are the leading brands in this sector.

"Boys' action animation properties also work well in Spain, with the three leading brands being Ben 10, Gormiti and Bakugan," says Imira's Navarro. Bakugan is a card collecting game, which also involves magnetized metal balls which open the cards when they strike them.

Navarro goes on to tap, "video games, toys, sports products, fashion products and mobile content as the biggest-selling product categories in Spain," and she also notes, "It is also fairly easy for Spanish companies to do business in Portugal, with many Spanish companies already working there successfully, especially in the toys and food sectors."

An ambition to operate beyond Spain's borders is an increasingly common feature of Spanish licensing companies. "Zinkia," asserts Doolan, "operates on a European-wide basis, as is evidenced from the fact that we produce our packaging in five languages—Spanish, English, Portuguese, French and German."

Interestingly, the company does not produce packaging in any of Spain's regional languages such as Catalan, Euskara or Gallego, although Doolan does acknowledge that, "We do sometimes produce advertising in Catalan, and Eroski [a major supermarket chain] produces food packaging in Castilian Spanish, Catalan, Euskara and Gallego."

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