A famous playwright once said “ What you consume is what you become”……
THE CASE FOR THE LICENSING BUSINESS IN INDIA
Today our planet consumes all kinds of natural resources and some unnatural resource as well. When I refer to unnatural resource I mean brands. We eat them, we LIVE them, we drink them and we dream about them. There is no escaping them. Brands hit us in all forms and sizes…be it superheroes, coffee, toys, apparels and even events. They leave an impression on us.
India is possibly the worlds youngest population filled nation. More than 500 million people in India are under the age of 40. They are not just 500 million in number, they are 500 million with smartphones, internet access, good education and an aspirational mindset. If somebody were to find the two inflection points in Indian consumer evolution, I would pick 1991-92,1995,1996 and 2009.
In 1991 India opened its doors to liberalization and a universe of ideas and opportunities.
In 1992 with Tamil Sun TV, India forayed into private television broadcasting.
In 1995 Cartoon Network first launched its India channel becoming India’s first kids channel.
In 2009, HTC launched HTC Dream, India’s first smartphone featuring a Google O/S.
Today we have over 28 million smartphones with data, 857 TV Channels and over 450 million Indians have access to Internet.
The above landmarks represent the landmark shift in consumerism in India.First came great content, then came great fanhood. Today people consume their favorite stars, brands on multiple levels. You might love watching Pokemon on TV, but you can now have a Pokemon lunch box, T shirt, stickers, toys and more. These expanded consumer product/ service related to a specific intellectual property or creative is essentially the face of the licensing industry. Licensing in India largely related to the consumer products space.
Licensing is not very old in India. From my perspective, Licensing industry is an industry created for the fans and people who hold mad love and passion for heroes, brands etc.
The need for licensing is there because somebody needs to assuage the hunger of fans!
The Licensed products consumer group
Lets delve into this. Somebody who knows a cartoon character, star or a hero decides that consuming just on TV/Theatre is not enough. He/She decides to display their love and passion for them by buying a product or service. This act is the first sign that there is a special relationship between the consumer and the brand as he/she buys a product which essentially gives them a license to celebrate this relationship. Kids are top rate consumers in this category as their affinity for their favorite stars extends into dozens of categories. Delhi toddler Arjun Gupta at 6 years owns around 17 different products with Captain America on it. There are countless kids in your locality who do exactly what Arjun or any other fan kid does.These children represent the eruption of a new age consumer, the consumer who wants the fullness/ wholesomeness in his brands experience.
A WORLD DOMINATED BY THE PERFECT CREATION, LED BY CHILDREN
Now what makes a cartoon character or star license worthy? He/She should have qualities which are not present in a normal human being and he/she should generate interest in themselves by their adventures and activitites. For Eg Kids love the costume of Captain America and the principles of “Faith” and “Honor” which guides his stories in beating up bad guys. Barbie still remains every living girl’s dream doll, it just weaves some magic into generations of kids by its appearance. Be it ChottaBheem,Spiderman, Wolverine, Superman or Batman, they all connect with their fans at some “spiritual” level.
In order for this to happen, companies need to create world class literary characters who suit the palate of a variety of audiences. The writers/creators of characters and superheroes have to create a world which attracts audiences and invites them to live in it with open arms.
AN INDUSTRY TO RECKON WITH
The Indian licensing products industry generates a revenue of over $350 million USD
(Rs 2340 crores) in retail sales according to some estimates but the potential is at least 10 times of that. This industry operates at multiple levels.
First, there is the studio/tv channel/production house who own a hit TV Show/movie etc. Second, there is a licensing division of this company or uses an independent licensing agency to license its cartoon characters or IP’s, Third are the licensees/ entrepreneurs/companies who pick up licenses of different IP’s for different product lines. Eg Hindustan Lever etc. And the last mile is the distribution/retailer ecosystem which sells products to the consumers directly.
The major licensors in India are Disney, Viacom 18, Warner Bros, Dream Theatre, Green Gold Animation, A.I.Licensing, Black White Orange, Carving Dreams and a clutch of selected agencies.
The products range from foods, apparels, toys,board games, back to schools products ( tiffin boxes, pencil boxes, backpacks, stationery products, sports items etc), book publishing and more.
Formula One Grand Prix also gave out license to build The Buddh International Circuit to Jaypee Group which put in an investment of over $200 million.
CHALLENGES BIGGER THAN IMAGINED
If one looks at the organized and unorganized retail market which is pegged at over $24.5 Billion USD in 2015 in a report by IBEF, the size of licensed merchandise business is tiny at $300 Million USD in retail sales. According to a recent study by VcCIRCLE and Technopak, the Indian education industry itself which is home to 10,000 plus colleges and over 1 million schools is estimated to be generating revenues of over $100 Billion USD with over 52% coming from schools alone. The licensing industry pales in comparison. WHY?
Lets try to get a perspective…
A SEMI BAKED PIE
Licensing is an extension to the entertainment business which is already reaching 75% of Indian households through television, mobile phones, radio, internet. This ensures the brands get a huge audience and fans. So what is the reason the sales are so tiny. A lot of Licensees complaint of not being offered a fair market to sell in. As in piracy and smuggled goods reach retailers very fast who are not willing to pay the steep license fees and minimum revenues share. The case of for MG’s come from the high expectations of the Indian retail business. Somebody high up in Disney or other studios drum up the logic of a country of half a billion target consumers with at least a billion dollars in revenue. The reality of this is quite different. These overestimation of business revenues from India results in this lopsided state of the licensing industry in India. Then there are sectoral problems like high real estate prices, high rents and expensive man power. Otherwise what will explain this mismatch of $300 million USD for a market size of at least $20 Billion annually. Moreover 95% plus retail business owners (small family run businesses) in India don’t know about licensing and its benefits.
I have been engaged in producing and executing kids expos and help children brands improve their brand experience for over half a decade.The kids market is attracting 100’s of new entrepreneurs joining in every year.
In my experience , the following benefits can enable entrepreneurs kickstart their businesses from the licensing business. :-
1. The Licensing business already gives you a readily built brand. For an entrepreneur that’s the toughest thing to do. Telling a customer who visits your store about who Doraemon/Angry Birds is a non existent issue. The buyer knows exactly what he wants, all you need to do is give a good product at a competitive price.
2. Connects the entrepreneur to a global brand and its practices. As a license is obtained, a licensee is expected to match up to high quality manufacturing which ensures global exposure to him/her.
3. As we head to GST, and a more sharper tax regime, the licensee is far better equipped as he tabulates and manages his numbers more transparently as opposed to a regular business owner.
4. Content for television and film is exploding at the seams which ensures that the licensing business is here for many years to come. This should help entrepreneurs to plan for the future and even raise capital. Content ensures that the fan is always ready to buy a product.
5. The humongous growth of modern retail is here to stay, giving larger shelf space and more visibility to licensed products.
6. The potential of the kids space/licensed products is immense and is fundamentally a strong consumer story.
NEED FOR THE GOVERNMENT TO STEP IN AND TREAT LICENSING AS A PURE INDUSTRY
As licensing industry is only at less than 1% of its minimum potential, the Govt should look at Licensing as a made to order industry at a time when they are cracking on black money, changing currency and continuously reforming the tax structure. Licensing has everything transparent to offer. A good clean ecosystem, a sector which deals with the future generation of the nation and a unicorn area which can explode if given support.
I feel the government can do the following things :-
- Set up a Licensing committee at FICCI and CII to give the industry a voice on a big platform.
- Educate entrepreneurs and people in general through start up India and Make In India initiatives as a business/job of choice.
- Engage the I&B Ministry in the industry more actively
- Set up a anti piracy task force to crack down on fake goods in the market. This itself will give a revenue fillip.
- LIMA India should be involved in policy making to do with children consumer group.
In a country dominated by fans with their undying love for sports and entertainment, the future is nothing but bright for licensing businesses. With increasing tele density and wider coverage of 4G networks and a vast network of cellphones retail, content will reach more than 90% of India’s population. This will give fillip to both Indian and foreign content. Netflix and Amazon Prime TV have set up massive budgets for local content production in India.
Recently Mattel India created the exclusive Krrish action figures and merchandise for The Krrish movie franchise. The products were of world class quality. It was the first time an Indian IP went into such high quality merchandise strategy. Green Gold Animation’s stellar ChottaBheem character too has crossed borders by having a growing base of fans in Asia.
Theatrical Films release of Hollywood titles now has parallel release dates in India as with the US and other western markets. This keeps in full access to their favorite superheroes and cartoon characters.
India should eventually create an ecosystem of top rate licensed and should be the worlds top 5 licensing market given its enormous population and love for entertainment and sports.
Entertainment and Event properties are mushrooming all over India. IPL , ISL and Pro Kabaddi League are India created IP’s which can do phenomenally well as they are having a hug fan base.
In addition, the digital and web ecosystem are creating their own superstars like AIB,TVF etc.
Its my view that licensing as a business will grow exponentially. It just needs the right support and a fair playing field. With a revenue potential of billions of dollars, the Govt. should have a look at this promising industry which will benefit the consumers and the establishment.
About The Author:
Rahul Gupta is the Founder of World Children Expo(WCE) in India. In addition he runs a brand consulting outfit which helps kids focused brands/start ups in the edtech and retail spaces in fund raising and improving customer experiences.Rahul earlier worked with The Gotham Group in Los Angeles. He Holds a CFM from New York Film Academy and an MBA from S.P.Jain Institute of Management & Research, Mumbai.