The Wild West of Licensing: Retailers Hesitant to Put the Cart Before the Angry Bird

September 24, 2012

By Michael Stone

It seems that everyone is talking about entertainment apps these days.  Angry Birds, Doodle Jump, Cut the Rope, Fruit Ninja, Temple Run, Where’s My Water?, and on and on.  Articles are showing up in main stream news media like The New York Times, The Wall Street Journal and USA Today, among many others.   What is intriguing everybody is how and whether or not these apps can make the transition to consumer products or transform themselves into other media, like television.  Even I wrote about the topic in my blog last June:  App Attack: How Angry Birds, Swampy & Talking Tom Are Transcending the App Store.  There is no question that this is the new frontier of entertainment, just like video games were back in the early days of PacMan and Mario.  And video games, as an entertainment genre, have grown, transitioning into major consumer products programs as well as motion pictures (remember Lara Croft?).

So, what’s up with these apps?  Many ask, are they or will they surpass television or motion pictures as the primary source of entertainment?  My guess is, not any time soon.   But that doesn’t mean that they won’t be a significant source of content that can be monetized, if done properly.  Gaming apps (like Angry Birds and Doodle Jump) and entertainment apps (like Talking Friends) have been downloaded millions and millions of times, in fact, it’s been reported that Angry Birds has a billion downloads! (By the way, I’m not sure who authenticates this kind of data.) Name one television show or motion picture that has ever made it to a billion viewers! You can’t. That is because apps provide an entirely different engagement experience than film – they have turned viewers into users. Unlike viewers, users are already interacting with apps’ characters, and then look to other channels, such as merchandise, in order to extend that experience and interact with the brand in new ways. But, that’s not to say apps couldn’t learn a thing or two from TV/Film. With users engaging with apps for short, but frequent periods of time, expect apps to begin developing new complex characters and more robust story lines in the near future.

The challenge many apps face is determining what the target demographic is, before bringing product to market. Unlike television shows and motion pictures, which have very distinct age groups that they target, many apps are used by people of all ages.  So, to whom do you target merchandise, five year olds or 50 year olds? Angry Birds has figured it out, leading the pack with a robust licensing program offering products that appeal to users despite their age. But, right now, it’s the wild west of licensing.  Even though Angry Birds was first to market and has experienced success in the consumer products space, no one is quite sure where this will all lead.

The fact of the matter is retailers are still cautious.  Over the past week, Walmart released its Top 20 Toy List and Toys “R” Us released its Holiday Hot Toy List featuring 36 new playthings as well as 14 additional toys on its Contenders List, all for the upcoming holiday season.  With over 70 toys on both lists combined, perhaps surprisingly, only two toy licensed apps were on either list. They are Apptivity Angry Birds by Mattel and Words With Friends by Hasbro, and they were featured only on the TRU Contenders List. While I am certain that there will be plenty of app licensed toys available at retail this coming season (including at Walmart and TRU), what the lists tell me is that retailers are still taking a “wait and see” attitude about all of this.  They surely recognize that these apps are hot (they aren’t blind!), but they aren’t willing to say that the toys are also hot (thus the Walmart and TRU lists).  Retailers need to see continued success of those products that are reaching the marketplace.  They need to see that any particular app not only has tens or hundreds of millions of downloads, but that the app is here to stay and will continue to resonate with consumers.  It takes time to get product to market and retailers are not great at placing bets, particularly in these economic times.  Retailers (including Walmart and TRU) will be looking to see if the app-based products that are on their shelves for the holiday, are still not on their shelves in January.

Even a marketing machine like Disney, which has entered the app space with Where’s My Water? featuring the wide-eyed alligator named Swampy, has not yet put the full muscle of its merchandising prowess behind the app.  But you can be sure that Disney and the other entertainment giants, like Nickelodeon, are all just waiting in the wings.  As for me, I’m hoping that this is actually the next new source of great, creative content with which consumers become really emotionally attached and drive product sales.  Hopefully the app developers will support their apps with a business-minded fashion (as do the owners of television and motion picture IP) and help to drive sales.  Success in the licensing space rarely just happens serendipitously; it takes focus and support.  I’m betting that some of these apps will not only create consumer excitement, but that their owners will also know how to compete in the cluttered consumer products market.   I’m keeping my fingers crossed and looking forward to many more app toys hitting these lists in the future.  Stay tuned.