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Steven Reece We are a leading Consultancy to kids entertainment brands including TV, toys & games. Our services include cutting edge qualitative consumer insight and consulting with entertainment brands to maximise their merchandising potential.

Licensing For Virtual World Brand owners – 7 Top Tips…

Posted in Uncategorized on 28 September 2012

How Virtual Worlds Can Set Up Successful Licensing Programs

With the rise and rise of Moshi Monsters, it’s become very clear that Toy/Game companies need to be abreast of the opportunities to license from Virtual world Brands. I’ve written about this elsewhere.

But lately I’ve been Consulting with several Virtual World Brands who needed help to embrace the world of physical product Licensing. So thought I’d post some Top Tips for Virtual Brands…some pitfalls, how to spot opportunities for Licensing Virtual worlds, and some practicalities.

1. Impressive Metrics – Potential Licensees will assess your Brand by analysing your metrics – topline stats on visitor numbers, engaged users and time spent in your online world. Make your stats as impressive as you can. Clearly you spend much of your time working to do this – so it’s obvious, but still critical! The bigger your reach, the greater the opportunity. And don’t presume that the same stats that are relevant for your core online business are the same for Licensees – Brand awareness is difficult to measure, but a combination of massive registered users and a strong core of devoted fans will work wonders.

2. Don’t Jump The Gun – Right now, this space is so hot for Licensee companies that you could easily get product on shelf before your Brand is ready. Your metrics may be good, but do you have a merchandisable Brand yet…not necessarily the same thing. if you do go too early you risk the product not selling off the shelf, which could kill the entire Retail opportunity stone dead.

3. Product Integration –  Licensees generally struggle to get any product integration with Entertainmnt Brands. In some countries and with some Brands/media formats it’s easier, but you have a massive advantage. Virtual World content is not controlled to the same degree as TV or Movies, and often some degree of product integration can be easily executed, delivering significant benefit to Licensees over other types of Licensor. (Obviously this needs to be done with integrity so as not to damage your user relationships, but with care that can be done).

4. Plan for success – it’s comparatively easy to generate interest in your Brand if you have decent reach. However, you will find that nearly everyone will want to slap your label on any old product to shift some boxes when you have reached critical mass. To ensure you protect your Brand, and grow both revenue and Brand Equity (a major factor in any eventual Brand sale), it’s critical to map out what a Licensing program should look like, and to define what Licensees will need to do your Brand justice.

5. The Job isn’t finished once you sign the deal! – The product approval process for Licensors can be onerous. We might all aspire to Moshi Monsters level of Licensing success, however, with that comes a mass volume of product concepts and executions to consider, approve and argue about! This process can be made less problematic by Tip 4 – plan for it, there are ways to reduce the pain – either by using a 3rd party or staffing up for instance.

6. Start With The End In Mind – the old adage of “If you don’t know where you want to get to, you won’t get there!”. If you are a Virtual World start up, you can scope out your world to make it more merchandisable. If you have an established world, there are still tweaks you can make, or features you can add which will significantly increase your Licensing efforts.

7. Seek Expert help – the reality is that most Virtual World companies have plenty going on keeping their sites running, interacting with users and dealing with various tech issues. Bearing in mind investment levels in getting to the point where you can License, and the potential multiplication factor on your valuation should you look to sell, you should consider seeking advice/assistance from those who know the world of physical products Licensing. Aside from helping you plan out, they are also likely to fast track the process of engaging with the right Licensees, as well as having the ability to actively broker deals for you. They should also consider differences in culture and geography – some products work better in some markets, and not in others.

If you would like to find out more about how to set up a Licensing program, or want help with an existing one, please feel free to email me: steve.reece@vicientertainment.co.uk

All the best

Steve

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How Toy Licensing Works

Posted in Uncategorized on 24 September 2012

Toy Licensing – The Basics

One of the queries I get asked most is how the Licensing process works for Toy and Board Games products.

So rather than explain the same thing over and over, decided to post this here as an easy reference tool.

This is for people who want to understand how the process works, it’s the real basics. It isn’t going to give you more the more advanced stuff, maybe I’ll do another post on that some time!

What is Toy Licensing – basically, this is where the owner of a Brand or Brands wants to generate 3rd party income from their Brands. They might not have the capability or interest in commercialising their Brands in every category, and might choose to ‘License’ the rights to particular product categories to companies focused on those products. These companies can then use the imagery, logos and other assets owned by the Brand holder.

Licensee & Licensor –  The Brand owner, the one who is Licensing their rights out is the Licensor. The company who will commercialise the product is the Licensee.

Commercial Terms – The Licensor gets paid via royalties paid on the Licensee’s sales, royalty rates would typically be c. 8-12% of Licensee’s net sales. The Licensee would normally be required to commit to an M.G. (minimum guarantee), which is a minimum amount they will pay the Licensor for the rights, regardless of whether they sell anything or not. The M.G. is normally split into an initial ‘Advance’, and subsequent installments over the period of the term of the license. The Licensee does not pay any additional royalties until they’ve sold enough to cover the M.G.

Contractual considerations – Clearly I am not a Lawyer, so always seek qualified legal advice, but some points which I have found to be important are: The definition of what counts as ‘Sales’ can make a big difference to how much royalty needs to be paid. It’s in the Licensee’s interests to define ‘Sales’ in such a way as to reduce the total sales value so that less royalties are owed, clearly the Licensor has the opposite interest. This is usually a point which leads to some ‘skirmishes’ in the contractual negotiations. In particular, I would suggest that Licensees should never accept royalties based on ‘gross sales’, only on net sales i.e. money they actually receive. The difference between Gross and Net is often due to retailer trading terms and discounts, which while often negotiable are an inescapable fact of doing business.

Term – most Toy Licensing or Board Games Licensing agreements are for 3 years. Because we have an annual sales cycle, three years is effectively 3 selling opportunities, anything less is perceived to not offer enough opportunity to recoup the M.G. and development expenses.

Royalty reporting – royalties are normally reported on a quarterly basis, with most contracts stipulating between 30-60 days from quarter end as the reporting and payment deadline. If you are a Licensee, 60 days gives you more time to collect cash from customers/ensure reported sales are not bad debts, if you are a Licensor, clearly 30 days gives you quicker cash!

Competing for Licenses – it’s normal to compete for Hot Toy Licenses. If the Brand you are trying to license is a clear driver of merchandise, the Licensor will be very likely to solicit interest from several competing companies in order to try to get an auction process going, which normally delivers better deal terms for them. There are ways and means to get ahead in an auction process – we once bid less than half of a major rival on a License which was critical to us…don’t have space to explain how we won that here, but check below for more details on a report which covers this!

Style Guides/Approvals – most Brands will deliver some type of style guide or Brand guidelines on how to use their Branding, imagery etc. Some won’t. So the development and product approval process normally goes one of two opposite ways: a). A very structured micro restricted approach, where the Licensor will give very specific guidelines/mandatories. b). No guidance at all, often leading to constant failure to approve, wasted R&D expenses and sometimes missed ipportunity/backlash. Neither of these is easy to handle, so my message is – don’t presume the work is done once you’ve won the License!

Getting in touch with Licensors – often Licensors will make themselves very available, as they selling rights. Most established Licensors will be at the Licensing Expo in Las Vegas in June, or at Brand Licensing Europe in October.

That’s the basics for those who want to know how it works.

For anyone wanting more advanced information, as well as some powerful Tools, Tactics and Tips on how to Win the hottest Licenses, check out my published report:  http://www.stevenreece.com/shop/

If you have any comments, or questions on this topic – please feel free to email me: steve.reece@vicientertainment.co.uk (I’m not responding to comments left on the Blog due to excessive Spam comments, so get in touch via email if you want).

All the best

Steve

 

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The Pendulum Swings Back From Video Games To Toys…

Posted in Uncategorized on 20 September 2012

Physical Toys Trending Up…

A few points in this Blog post may seem counter intuitive, but bear with me, because there are big momentum shifts afoot.

For decades there has been a shifting from physical play to digital play, from real tangible objects as playthings to the ethereal.

And the funny thing is that Toy companies were right at the heart of the start of the digital play phenomenon, but what happened then was that the massive R&D costs, and very different business model and culture of Video Games, left the Toy industry as a whole floundering somewhat.

Now in the meantime, Toy companies have hardly been quiet, the industry has embraced the Entertainment industry, as well as utilising low end consumer electronics well in play.

However, the big shift I am seeing is the accessibility of many widespread and much loved consumer technologies increasing drastically. We’ve moved from expensive software to $1-2 Apps, from expensive hardware bespoke to Gaming towards multi faceted devices which can do so much more than just one thing. And best of all, we’ve moved to a model where Toy companies can again compete on the tech playing field.

Now don’t get me wrong, Skylanders proves that Toy companies still have threats from within the Video industry, especially as boxed Video Games sales nosedive. As I’ve written before, I don’t see Toy companies replicating the Skylanders model with it’s comparatively massive R&D spend…BUT there are many other top selling Toys with significantly less barriers to entry.

We’ve seen Tablet technology deliver top selling Toys, even Toys R Us are launching one now.

But there are thousands of low priced technologies out there just queuing up to come to market in a Toy format. As ever, it’s just a case of sifting through the crap to find the real winners, and of course of delivering fanatstic Toys. The focus must always be on enhancing the play experience, but as long as Toy companies follow that, it seems to me that the future of the toy industry is looking brighter.

And when we finally get through these tough economic times, I predict a golden age for the Global Toy trade!

All the best

Steve

P.S. Have you checked out our new Toy Marketing website? The articles on this site are specifically about Marketing of Toys: www.toymarketingacademy.com

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October – A Busy Month In The Toy Trade!

Posted in Uncategorized on 19 September 2012

Dallas Toy Preview, Hong Kong Toy Fair, Brand Licensing & Essen Games Fair!

October is normally a crazy time in the Toy trade. Aside from the Dallas Toy show and HK show, in Europe we also have Brand Licensing Europe which is our main Licensing show (the equivalent of the Las Vegas show in the US), plus for those whose business concerns board games of a certain type we also have the Essen Spieltage (a consumer and trade board games show).

We’re also of course dealing with any last minute hiccups/sell through issues up until Christmas, plus marketing execution and consumer response matters.

Frankly, the next few months are no time to go on vacation!

So for what it’s worth, here’s what I’m doing next month. I’m skipping Dallas & HK. Instead I will be attending Brand Licensing in London and the Essen Games fair in Germany. This might seem like heresy to some – to miss Dallas & HK, but that’s just where my business is this sales cycle.

Anyone who wants to meet up and is going to Essen or Brand Licensing, please feel free to drop me a line – steve.reece@vicientertainment.co.uk. If you aren’t going to those shows, see you at the January/February shows!

Finally, this is a time of year where we approach a new sales cycle full of hope, aspiration and perhaps slightly free of the grim reality of actual listings as per 6 months time! But let’s not forget that the faith shown in our Brands and product ranges by retailers is about to be validated or otherwise, and those companies and people who successfully pitch next year while proactively maximising customer results this year (in whatever way those can prudently be influenced) will achieve the best listings next year. Those who can only see the future i.e. 2013 ahead, and fail to deal with the here and now will as ever suffer!

All the best

Steve

P.S. Have you checked out our new Toy Marketing Academy Blog? This new site focuses specifically on Toy/Game marketing techniques, strategies and tactics only: http:www.toymarketingacademy.com

 

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Anyone Seeking UK Sales Heavyweight…?

Posted in Uncategorized on 15 September 2012

I’ve been approached by a friend who due to circumstances at a corporate level beyond his control he has found himself searching for another Senior level sales role.

With top experienced at both corporate giants, and smaller companies, with really strong amicable relationships with retailers in the UK & International, as well as a long term track record of growing Sales, he could be just the person to help a company wanting to make an aggressive entry into the UK, and to boost their international business.

If you’re looking for someone like that, please feel free to drop me a line: steve.reece@vicientertainment.co.uk

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Bandai Builds Factory In Philippines…Start Of Trend Away From China…?

Posted in Uncategorized on 13 September 2012

Bandai Builds Philippines Factory

Bandai recently announced they will build a new factory in the Philippines. Here’s the release:

http://japandailypress.com/toy-company-bandai-to-build-9-5-million-factory-in-philippines-0310983 

The question mooted by some is whether this is the start of a trend away from China?

So I thought I’d proffer my opinion on this. Starting firstly with China…

And here’s the thing about China, yes it may have seen rising costs and inflation in recent years, and yes that may have lead to price inflation for many Toy companies, which in turn has lead to ‘friction’ (to put it mildly) between suppliers and retailers.

However, the reality is that speaking right here, right now, there is just nowhere in the world that compares to China for the following reasons:

  • Massive population.
  • High proportion of less well off people.
  • Sheer scale of factories – when the downturn hit I remember reading that 100,000 factories in China were closed due to low or no work. That wasn’t every factory in China, that was just the ones that closed!
  • Established trading patterns.
  • Established excellence/competence.
  • Established and much visited trade shows.

The reality is that China as a manufacturing hub is not going away, far from it. Because as hundreds of millions of Chinese people build their own wealth and escape from factory employment, there will still be over a Billion more in need of all and any work available.

I’ll leave the debate about ethics to one side, as there are certainly points to discuss there, but the reality is that there is no alternative when you look at the macro picture. If China suddenly stopped manufacturing Toys tomorrow, there is no obvious and easy alternative. Costs would rise. Capacity would be a major issue for years.

The reality is that while there is likely to be a trend towards less developed countries over the next decade or two, China is still going to be the source of the majority of Toy products for the forseeable future in my opinion.

So that’s the macro picture. On the micro scale, for sure companies are looking at alternative manufacturing locations, and if yours isn’t perhaps you should question that. There are several obvious candidates – South East Asia has numerous countries likely to grow their manufacturing base over the next decade or two. Companies are seeking a). competitive advantage and b). to reduce the risk of sourcing from one location/region.

As far as the Philippines is concerned, there are several advantages they have over there. Firstly there population, while dwarfed by China’s is still a very weighty 95m. They have anywhere from a reasonable to an excellent level of English language in general, and they are also used to using the $USD as a working currency.

The challenge they have is  they don’t have the established excellence and competence en masse compared to China, but there’s no doubt that they could easily build that over time.

So I would say that sourcing in the Philippines is going to be a growing trend, and we will see others join Bandai, if not in establishing their own factories, at least in terms of sourcing more products there.

If you need help finding good, reliable, cost effective manufacturing, please feel free to drop me a line, I work with dozens of factory across China and the world, and have helped numerous companies save costs / increase reliability. My email is steve.reece@vicientertainment.co.uk

Finally, one other opportunity the Philippines provides is a fantastic array of skilled virtual workers. Speaking from personal experience, I have had Web design, Graphic Design inc. packaging, admin support and even technical services such as CAD design done via the Philippines at a fractional cost versus what I would pay otherwise. If you haven’t investigated this opportunity I believe you may be spending more money across your business functions than you need to!

All the best

Steve

P.S.  I have a Free guide on Top mistakes Toy Companies make which you can download from here:

http://www.toymarketingacademy.com/toptoycompanymistakes/

 

 

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Top Tips For Toy Inventors…

Posted in Uncategorized on 07 September 2012

For those Inventors reading this Blog, thought you might like to check out my latest article in Toy News Online:

 http://www.toynews-online.biz/opinion/236/INSIDE-TRADER-The-invention-test 

There’s a couple of handy hints in there!

If you need help getting your Toy or Game to market, feel free to drop me an email: steve.reece@vicientertainment.co.uk,

and I’ll see if I can help/give advice.

 

All the best

Steve

P.S. Have you signed up for my newsletter? Just fill in your details on the right of this page to receive it.

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The Perpetual Cycle of Toy Consumer Generations

Posted in Uncategorized on 04 September 2012

Today is a bittersweet day for me. My youngest child started school for the first time. I’ll spare you the parental anguish and nostalgia, but it reinforced an age old maxim about the Toy industry – our consumer groups perpetually renew and refresh themselves by default.

Today one of our household moved from ‘Preschool’ to just straight ‘Kids’. So farewell Fisher Price, hello everything else that comes next!

Children naturally aspire and look up to older kids. So a child who last school year was surrounded by 3 or 4 year olds had younger influences versus the same child today who has just begun to be influenced by children as much as 6 or 7 years older. While we haven’t started clearing out all the old Toys, inevitably new Toys will now start to slowly fill up the space until we have to take such steps.

This cycle is a massive advantage as well as a challenge for the Toy industry, because when Brand sales are dipping and it seems like yesterday’s hero is today’s nobody in terms of retail sell through, a completely new generation starts to come up. And even if things falter so badly that the Brand in question needs to take a break, two or three years should be enough to completely replace the relevant consumer segment.

The challenge of course is that of always recruiting the next generation, a challenge many address by TV advertising. Normally it isn’t even necessary to create a new TVC, although the agency will always insist it’s critical to start again!

So here’s the thing, we always get another opportunity, but we can never take consumer adoption for granted…

Hope this article was helpful?

If you want more along these lines, I have a Free guide on Top Toy mistakes which you can download from here:

http://www.toymarketingacademy.com/toptoycompanymistakes/

All the best

Steve

 

 

 

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Getting New Toy Concepts To Market – 5 Tried and Tested Methods

Posted in Uncategorized on 30 August 2012

How can you get your Toy product to market?

This is one of the questions I am asked most often, so thought I’d write a post to summarise how you can approach this.

The following list is in risk order i.e. highest risk first:

1. Manufacture your own product and sell direct to retail yourself. In the end, this one will give you most control (as well as most stress!), and effectively starts you down the path of running a toy business.  It’s also the one which has the biggest payday at the end normally, as long as you can actually get some sales, stay solvent and stay sane to that big payday! The challenge is the risk factor, because once you manufacture that stock it’s all yours until you persuade some other kind soul to take it off your hands!

2. Manufacture your own product and sell it direct from the factory gates to retailers or distributors. (Known as selling FOB, meaning Free On Board). This method reduces your stock risk (although be wary, it’s not fool proof), because the buyer takes the full order quantity direct from the factory and ships it back home, stores it and deals with any over stocks. Clearly they will expect a discount for taking this risk, so in the end, if you have, learn or buy in the ability to manage stock, this may become a superfluous option.

3. Create and engineer a product, and hand it over to someone else to manufacture and take the risk on. This is normally very profitable, as long as you haven’t invested too much in tooling etc.  It also removes you from the day to day grind of dealing with orders, customers, stock issues and much else.  However, it is less likely to catapult you into the big time, and it’s often just as difficult to persuade a distributor or publisher to run your line as it is to persuade a retailer.

4. Concept Licensing route –  licensing concepts to publishers is a proven business model. In essence, this path allows you to focus on the fun stuff – coming up with ideas and trying to sell them on. In reality though, most companies are more likely to run with a product which is factory ready, so option 3 is something to work towards.

That’s just a quick summary to answer the most common question I am asked by those who are less established or newer to this industry.

Now the second question I often get is things seem to be taking forever, we don’t seem to have had much progress, what should we do? Which is an understandable question really. The challenge is that this industry (in most markets) has an annual selling cycle building towards a peak at the back end of the year (Christmas/Thanksgiving etc). And a year feels like a long time. But the reality is that one year is just a single selling cycle. If you can’t wait 3 selling cycles i.e. 3 years for any sniff of success, you are probably not going to make it…

I would say that is the biggest barrier to entry in this game…you can invoice finance and all sorts of other fun (or not) things to get around financing challenges, but the reality is, even with a great concept or product, it just takes time!

Hope this article was helpful?

If you want more along these lines, I have a Free guide on Top Toy mistakes which you can download from here:

http://www.toymarketingacademy.com/toptoycompanymistakes/ 

 

All the best

Steve

 

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The Eternal Appeal Of Power Rangers…5 Compelling Features

Posted in Uncategorized on 19 August 2012

Power Rangers – A Trip Down Memory Lane…

I just got back from a big family vacation trip (with 14 of us) to Norfolk (UK). Aside from the usual holiday fun, there was one notable feature of my trip…Power Rangers!

My Brother in law had rented a chalet with a fantastic selection of retro board games, books and VHS videos (remember those…the forward and rewind features are still very annoying, how did we ever put up with that for so long!!!).

Anyway, the most majestic discovery was 14 Power Rangers videos from around 1994. Rather than join the sophisticated adult fun, I found myself on a big couch with lots of kids, watching open jawed as episode after episode ‘wowed’ me and the kids. Sure the special effects now look almost comical, and the whole effect is much less slick than we would expect today…but there is sheer magic in the formula. And above all, my cynical eye may have identified those shortcomings while still being marvelously entertained, but the kids saw only compelling and immersive entertainment.

So why was it so entertaining, and perhaps more importantly, why has this franchise (despite any recent bumps) been one of the biggest perennial Toy brands of the last 20 years?

Here’s my 5 compelling features:

1.  Let’s cut the PC nonsense, kids love play fighting! You can call it nature, you can call it nurture, but the reality is kids love play fighting, especially boys. So an entertainment property where the heroes and heroines fight (without hurting any real people, we wouldn’t to alienate mom and dad now would we!?) is on the right tracks!

2. Good versus bad – let’s keep this short, because both you & I know it’s true…kids love the simplicity of goodies versus baddies.

3. Fantasy monsters – kids love rough and tough ‘baddie’ monsters. The bigger and badder the better!

4. A character for everyone – so rather than having just one heroic character to choose from, with one set of likeable or unlikeable characteristics, kids can take their pick. My daughter chose to aspire to the pink Power Ranger in the series we were watching, nephews liked one or other of the male characters, and so by creating a team of aspirational good characters, the franchise recruits a greater proportion of kids. Brilliant!

5. Humour – kids have highly developed senses of humour. Slapstick and juvenile gags work great for them. The light relief in between fight sequences truly lightened the mood, and stopped the kids from taking things too seriously…because let’s face it getting attacked by monsters could be frightening, but not if they are funny, and there is humour liberally interspersed with the action.

So there you go, that sure made for a fun vacation for me, and reminded me of why Power Rangers has been around for so long!

All the best

Steve

P.S. If you want more Toy insight, fell free to sign up for my newsletter by adding your details in the form to the right of this post, and you also get a Free guide at the same time.

 

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