Publishers of licensed books tend to rely more on distribution through mass merchants than children’s publishers at large, whose sales skew more toward trade channels. This fact has helped mitigate the sales declines that have accompanied the spread of the new coronavirus. On the other hand, publishing licensees are dealing with the unique challenges that come with releasing tie-ins to feature films that are being postponed indefinitely or being watched online instead of in theaters.
“We sell an awful lot of licensed books in mass merchant accounts like Target and Walmart, and they’re still open because they sell food,” says Jon Anderson, president and publisher of Simon & Schuster Children’s Publishing. “So we haven’t seen quite the impact in licensed books as we’ve seen in some other categories.”
Coloring and activity titles in particular have been selling well during the crisis. “Our coloring and activity and preK–2 workbooks are doing very well as a category,” says Ben Ferguson, CEO and president of Bendon. “There are 57 million kids at home who are looking for in-home, quiet activities, and that’s driving our product tremendously. The sell-through is better than we’ve ever seen.”
Bendon’s books have a strong and consistent presence in the planogram at mass and discount retailers. “They’re still open and are increasing their orders,” Ferguson says. “We have five million planogram pockets in mass, discount, and drug stores, and business is up, plus there have been some opportunity buys in mass and drug.”
Random House has also seen a boost in licensed coloring and activity book sales. “Parents are seeing their kids on their screens all day as they do their schoolwork at home, so they’re looking for things that give them a break from the screen,” says Chris Angelilli, v-p, editor-in-chief, and executive director of licensed publishing at Random House Children’s Books.
Educational, drawing, and crafts titles—anything that keeps kids occupied—are also selling. Samantha Schutz, publishing director of brand, licensed, and tie-in publishing at Little, Brown Books for Young Readers, reports that sales of the company’s already strong-selling Fortnite: How to Draw were up 75% in the third week of March compared to the second.
While mass channels have helped licensed titles, tie-in publishers are still feeling the impact of store closures in trade bookstores and other venues. “A fair portion of our customers are just not in business,” Ferguson says. “We’ve had products that we were making, or had already made, or were on the dock ready to ship, and the orders were canceled. And some of our customers are asking for extended terms that we’re just not able to give.”
Phoenix International Publications, best known for its licensed sound books and interactive formats, is facing a similar situation. “We’ve seen a drop in sales due to store closures, reduced hours, and foot traffic being down,” says John Russell, v-p of global licensing. “The Targets and Walmarts of the world are open and sales are pretty stable, and drug and grocery stores are still doing fairly well. And we’ve seen a huge uptick in Amazon.” Russell reports that sales through the latter in March of this year were double the level in the same month of 2019. The channel had already been growing at a fast pace, he says, but “this March exceeded our forecasts by 40% to 50%.” That said, he adds, “any increases in these channels don’t outweigh what we’re losing.”
The coronavirus closures in the U.S. coincide with the Easter selling season, an important window for licensed titles. “Licensing is really core at the major holidays,” Schutz says. She checked sales numbers on five key licensed backlist Easter titles and each is down from 15% to 55% this year compared to last. “They’re usually really stable from year to year,” she says.
Film Schedules on the Move
Aside from shuttered retailers, licensed publishers are dealing with scheduling uncertainties. “Our biggest challenge has been how the pandemic has affected theatrical release dates,” says Angelilli of Random House, which has five licensing programs tied to theatrical films on its schedule. “They need to be shipped by a certain date, and that’s changing as licensors have adjusted their release strategies.”
There has not been much disruption yet, however. “We are reacting to schedule changes on a case-by-case basis, if necessary,” says Mark Searle, publisher, licensing, at DK. “Though many theatrical release dates have shifted, we have seen minimal changes to our schedules and our licensed publishing remains largely unaffected by this crisis.”
“We’re still shipping big numbers,” Ferguson adds. “As of April 1 we are probably at 90% of our shipments. Very little has been canceled or postponed.”
A number of films have been affected by the crisis, however. Pixar’s Onward was released theatrically and then online shortly thereafter, as theaters attracted low attendance in the first weeks of the movie’s run and then shuttered entirely. Publishers say they are shipping their full programs on schedule for Trolls World Tour, which is set to release simultaneously both theatrically (in markets where that is possible) and on video-on-demand. In the U.S., the date is April 10. This day-and-date strategy is a first for a Universal movie (and for a major studio).
On April 1 it was announced that Minions: The Rise of Gru, which had previously been delayed indefinitely, will release July 2, 2021, almost exactly a year later than originally scheduled. The film, fifth in the Despicable Me franchise, is being animated at a studio in France, where the Covid-19 lockdown occurred before the movie was finished. Rise of Gru licensee LBYR has published tie-ins for all four films over the past 10 years, selling 4.3 million books. “This was one of our most anticipated programs of the summer,” Schutz says.
“There’s a significant feeling of being in limbo,” she adds. LBYR also is publishing tie-ins to the first two Bill & Ted films, timed to the release of the new movie, Bill & Ted Face the Music, currently scheduled for August. “We’re watching summer and fall releases to see what happens,” says Schutz, who is also facing delays in trying to acquire publishing rights for a movie initially scheduled for 2021 but now uncertain.
Other than release dates, the licensing pipeline is continuing as normal for most publishers, with new acquisitions being considered and development and approvals taking place at a typical pace. “As of right now it’s business as usual,” Angelilli says. “We have a bunch of new things coming out and I’m looking at five proposals for new properties.”
Publishers’ contracts call for minimum guaranteed royalties to be paid to licensors, no matter what actual sales are, with the amount of the guarantee based on forecasts. While it is far too early for any revisiting of contracts, that may occur in the future if sales are much lower than expected thanks to Covid-19. “I’m sure licensees are all checking the usually overlooked force majeure clause to see if it will offer any contract relief in a pandemic like this,” Russell says. “If not, there may be some difficult conversations when it comes time for the minimum guarantee payments.”
One concern in the early days of the global pandemic, in January and February, was the impact on the supply chain as Chinese factories were shut down for a long stretch. “We use lots of different vendors in China,” says Sophie Partridge, v-p and publisher at Phoenix International Publications. “The printers came back online pretty quickly. We use a lot of smaller companies to make components, and those have been slightly slower to get back. But things now are pretty much back to normal.” She fears delays in the future if the crisis lasts for a while, however. Retailers are making commitments to programs later, closer to the release date, while licensors may provide assets even later than usual due to shutdowns. This makes it difficult to get tie-ins printed and shipped in time.
Fan events and festivals, which have become extremely important as promotional vehicles for tie-in programs, are being canceled due to the pandemic, requiring a pivot to new forms of marketing. LBYR is doing more advertising with online retailers, for example, as well as participating in virtual versions of fan events, such as YALLSTAYHOME in April, the virtual version of the canceled YA fan festival YALLwest.
Licensors and licensees are particularly concerned about the fate of San Diego Comic Con, which organizers are hopeful will remain scheduled for July 23 to 26. “San Diego is the extreme opposite of social distancing, and if Comic Con is canceled, that will be big,” Schutz says. “Our new list has a lot of titles appropriate for that demographic. I’ll really be bummed out about losing the Con.”
Licensed characters can be a good way to help children with their emotions or get them through difficult times. “We have been looking at our backlist to identify titles that address topics relevant to the pandemic so we can bring them forward and make sure they’re available for anyone looking for information or an easy way to talk to kids about difficult issues,” says Rich Thomas, v-p and publishing director, HarperCollins Children’s Books.
Licensing is a business of relationships, and that is truer than ever in the current climate. “We all need to keep the lines of communication open and remain flexible and forgiving,” Partridge says. “There’s a sense that we’re all in it together.”