License to print money for Disney
$30 billion in branded retail sales projected for 2008
By Georg Szalai
The Hollywood Reporter
June 10, 2008, 07:47 PM
Branded entertainment merchandise has become an expanding business for those sector players who this week are showcasing their latest dolls, video games and other consumer product wares in the Big Apple.
Driven by such franchises as Hannah Montana, "High School Musical," "Cars" and Disney Princess, retail sales of merchandise licensed by the Walt Disney Co. are on track to rise 12% to a record $30 billion-plus globally this fiscal year, which ends September 30. Disney Consumer Products chairman Andy Mooney made the projection Tuesday at the International Licensing Expo.
Disney and other licensors usually receive a licensing fee of 5%-15% of total retail sales of product associated with their brands, according to experts. So, while the $30 billion translates into much less direct revenue for Disney, it is nonetheless fast becoming a key contributor for the company.
Disney is widely acknowledged as the entertainment company with the highest consumer products revenue. "Disney is unlike any other media major in its efforts, and ability, to build character franchises that can be evergreen in nature," said Miller Tabak analyst David Joyce.
Others also have used the power of their brands to boost their game in this growth business.While consumer product licensing has been an expanding activity for many entertainment giants, most companies don't disclose detailed financials. Disney's recent re-entry into the Disney Stores with a different business model "is part of the reason, I imagine, (why) they are starting to emphasize publicly their merchandising efforts and metrics," Joyce said.For Disney, the $30 billion target for this year -- with about 40% coming from North America -- compares to $13 billion just five years ago. Mooney said if trends continue, sales of Disney merchandise by the firm itself and its licensees would surpass $40 billion in about three years. He's already aiming for $50 billion over the next five to seven years.
Disney's "tween" franchises are key growth drivers, with the company predicting that "High School Musical" and "Hannah Montana" combined would reach $2.7 billion in sales for fiscal year 2008. That's nearly seven times the $400 million recorded in the year-ago period.
Mooney suggested Tuesday that the Jonas Brothers, who star in the "Camp Rock" movie that premieres June 20 on the Disney Channel, could well become a third major tween franchise worth about the same as the first two.
"We're nowhere close to being overdistributed," leaving room for further upside in consumer product licensing, Mooney said.
For example, he said that Disney products' share of the children's apparel market is only 2%, and most other categories have a share that can be calculated in fractions of a percentage point. Only in the toy segment is Disney's percentage higher.
And Mooney notes that popular entertainment consumer products are recession-proof. "People on the fringes really suffer through a recession" while consumers continue to pay for strong established brands, he said.