U.K. Licensing Holds On

As the U.K. economy struggles to avoid slipping into recession and many retailers in numerous sectors are struggling, the outlook for licensed product is stronger than a cursory glance might suggest.

The British economy, like that of many other countries, is facing challenges, and the recent headline numbers indicate serious concern is mounting.

In the three months to July, unemployment rose by 60,000 to 1.7 million, representing a rate of 5.4 percent, and reflecting a Treasury survey covering the same period, in which 10-out-of-13 manufacturing sectors surveyed reported a fall in output.

In the same month, the Bank of England announced inflation was 4.4 percent, double the government's target, and some—the Treasury for instance—put it higher at 4.6 percent.

Regardless of the exact figure, it represents a 16-year high, and the only thing everyone agrees on is that it will get worse before it gets better. Mervyn King, the governor of the Bank of England, says it will hit 5 percent before peaking and falling back to 2 percent by 2010.

King also recently forecast that U.K. growth for 2008 would be 1 percent and that it would be zero in 2009, clearly raising the possibility of a recession. The International Monetary Fund is a little more optimistic, predicting 1.4 percent for 2008 and 1.1 percent for 2009. Average earnings for the three months to June grew just 3.4 percent, down from 3.8 percent the previous quarter—the weakest growth in average earnings since August 2003.

Not only has an end come to the easy credit that fueled sky-high house prices, used by consumers to underpin a seemingly unassailable spending boom, but the costs of essentials such as food, energy, borrowing and gas are all rising at an alarming rate.

Food costs are now rising at the fastest rate for 28 years with basics such as eggs up about 45 percent from this time last year and potatoes up over 50 percent. Centrica, the largest supplier of domestic energy in the U.K., hiked gas and electricity prices 15 percent in January and then again in July by 35 percent and 9 percent, respectively, taking the average U.K. domestic energy bill to £1,240 per annum (U.S. $2,320). And gas at the pumps recently touched £5 (U.S. $9) per gallon. Add in an 11 percent fall year on year in average property prices, and anyone could be forgiven for thinking that the outlook was bleak.

But despite the economic woes in the U.K., brand licensing remains relatively strong.

"The first thing that has to be noted about the current U.K. licensing market," says Clare Piggott, vice president of licensing, Nickelodeon U.K., "is that preschool remains extremely buoyant." Although she does accept that "in this respect, it is bucking a tougher trend in other age groups." And, while acknowledging "these are difficult economic times in the U.K.," Piggott believes that "this can be good for licensing because a licensed product stands out and helps set a retailer apart from its rivals."

Mel Humberstone-Garley, U.K. territory manager at Chorion, agrees with Piggott that in U.K. licensing, preschool is where it's at. "Preschool has always been very important to the licensing industry and is the heartland of Chorion's business," she asserts. "What's changing is not the pre-eminence of preschool, but the preschoolers themselves. The market is oversaturated, and preschoolers have so much more choice and pester power nowadays. And they are getting older younger and moving into electronics and fashion at an ever younger age."

The move toward kids getting "older, younger" also is highlighted by Piggott, who sees this as especially true of girls. "Girls are moving out of doll play at a much younger age," she insists, "and the big move with girls is into electronics. Indeed, there has been a real movement toward the development of software specifically targeted at girls," she believes. One reason Piggott sees for this move is that "technology is always improving, and as it does so, it always becomes cheaper, making it available at price points that are viable for licensing.

"Another aspect of this move away from doll play at a younger age," believes Piggott, "is that girls especially are moving into live-action concepts, as is reflected by the success we have had with iCarley."

At the other end of the age range, Humberstone-Garley identifies another trend. "Right now," she asserts, "there is a big comeback of nostalgic or classic properties—especially in the adult clothing sector. In fact, it is on a scale that I haven't seen since the '80s." Underlining this trend, Humberstone-Garley reports, "For us, Mr Men/Little Miss is performing phenomenally well in the adult fashion sector and is also now starting to be reflected in younger markets."

Both execs agree that the dominant product sectors are toys and apparel, as has pretty much always been the case. And while cautioning that "fashion is fickle," Humberstone-Garley is confident in her instinct that "the move to nostalgic properties will be with us for many years."

For her part, Piggott, while not denying "there has been a huge increase in all forms of electronic products, especially interactive and music-related products," also points to "a recent boom in construction toys, which is great for us given our partnership with Leggo."

These comments all sound bullish, an attitude that would seem to be justified by a quick glance at the NPD MTA 2008 Tracker report, covering the 12-month period ended March 2008. During this period, the total expenditures on British children aged up to 14 was £11.3 billion (U.S. $21.1 billion), of this 19 percent, or £2.1 billion (U.S. $3.9 billion), was spent on licensed products. Of the total expenditures, £1 million (U.S. $1.8 million) was spent on boys and £1.1 million (U.S. $2.2 million) on girls. And although the figure for boys is slightly lower than that for the girls, it does represent a much bigger growth: 7 percent in the blue corner and 3 percent in the pink.

The question remains not only how long will licensing remain strong amidst the downturn in the U.K. economy, but how long will it take before the U.K. economy begins to show signs of recovery.

AddThis

Articles You Might Like

There are no articles classified under this Main Category.