Licensing drives big profits to small manufacturers

September 04, 1991|By Susan Warner | Susan Warner,Knight-Ridder News Service

PHILADELPHIA -- If you're looking for a basic, no-frills air freshener for your car, they're easy enough to find.

But if you truly must have the official Teenage Mutant Ninja Turtles car air freshener, then you have to come to Mark Simon.

Mr. Simon is president of Marlenn Corp., a Baltimore manufacturer with the exclusive license to manufacture Teenage Mutant Ninja Turtles car air fresheners, one of 600 licensed products cashing in on the Turtles craze to sell everything from pudding pies to boxer shorts.

"We sell generic air fresheners," Mr. Simon said, "but when you put a popular character or a corporate logo on it, that immediately creates an awareness among consumers and obviously enhances the product."

In the licensing industry, the raw materials are T-shirts, key chains, collector's plates and hundreds of other chatchkas, or knickknacks. Add to that a -- of hype and the finished product emerges: T-shirts, key chains, collector's plates and chatchkas adorned with a licensed image such as Bart Simpson or Garfield.

It is an industry built on whimsy.

"This is not a science, it's more of an art," said Mark Freedman, president of Surge Licensing in Long Island, N.Y., who licensed the Teenage Mutant Ninja Turtles. "Everyone in this business thinks they have the next Ninja Turtles or the next Cabbage Patch, but no one ever knows. There's no formula to it; you just sort of get a gut feeling and you say, 'This is crazy enough to work.' "

The licensing industry has grown to $66 billion in retail sales last year from $11 billion a decade ago, and there are now more than 10,000 licensed names or images in the United States, said Murray Altchuler, executive director of the Licensing Industry Merchandisers' Association.

"Interest is extremely high today," he said. "The Turtles have created so much excitement. We're seeing tremendous growth."

Mr. Altchuler said sales of licensed merchandise were expected to grow at a rate of 5 to 8 percent a year for the next three to four years, thus continuing to outpace sales growth for general retail merchandise.

In short, licensing works like this: A company or individual legally protects a name, image or slogan, such as the Teenage Mutant Ninja Turtles, through a copyright or trademark, then leases it to a manufacturer or other business for use with a product, promotion or service.

The theory is that while a consumer might pass by a plain, white T-shirt, the consumer will be more tempted to buy a T-shirt emblazoned with Mickey Mouse or the phrase "Button Your Fly."

Consider Mr. Simon's air fresheners, which typically dangle from the rearview mirrors of cars.

"There's so many reasons our consumers buy air fresheners," Simon said. "Some just want to have a nice, fresh, clean scent in their car. But if they're buying a Playboy air freshener, they may identify with the Playboy lifestyle."

And while all this may seem rather flighty, Mr. Altchuler insists licensing is a growth industry that's here to stay.

"I don't think it's ephemeral. It's a fantastically useful tool," he said.

Woody Browne, vice president of marketing and licensing at Tyco Toys Inc., a Mount Laurel, Pa., manufacturer, said companies such as his were constantly mining American culture for ideas to adapt as toys.

"You've really got to be tuned in," said Mr. Brown, who also is president of the Licensing Industry Merchandisers Association. "What are they watching on TV? What's on the horizon? You can never predict what will be successful but you can look to certain places, TV or movies, where there is a mass market."

The industry is attractive to small manufacturers because, for a relatively small upfront fee, they can bring a product to market that also may be able to tap into the marketing and promotions budget of a big movie studio, television network or toy company.

The Licensing Letter, an industry publication, reports that manufacturers generally pay $25,000 to $75,000 for a license and agree to pay royalties equal to an average of 7 percent of sales. Most licensing deals are for terms of two to three years.

"You can tie into someone else's media budget, and magically you become a player in this business," said Lester Borden, general manager of Columbia Pictures Merchandising. "You are God. You have the Ninja Turtles."

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