Licensing, marketing and retail expert/opinion leader Tony Lisanti, provides insight and perspective for the top headlines of the week. “Licensing and Merchandising Report” is a must read for top execs who want objective, straightforward and authoritative analysis.
The ‘A’ Word is Week’s Buzz
The AT&T acquisition of Time Warner is a go, as the deal was finally approved by U.S. District Court on Wednesday. And investors, Hollywood, consumers, and licensing execs are bracing for potential changes, opportunities and more acquisitions. When you peel away the layers of rhetoric, the usual scenario of major acquisitions, or any size and type of acquisition for that matter, starts to unfold. Consider the following:
• More mega acquisitions. This much-anticipated decision now opens the floodgates for additional mergers and acquisitions especially given the strong economic factors and the need for media, tech and providers to own content and get bigger to effectively compete. Watch Apple, Google, Amazon, Verizon, Viacom, CBS, Lionsgate, among others all of which posted a decent stock performance upon news of the decision.
• Higher prices for content. There are always promises about lower costs for consumers, but there needs to be a skeptical attitude regarding this factor as cord cutters continue to eliminate their subscriptions and a la carte pricing becomes more prevalent. And let’s face it: ultimately, some has to pay for the investment.
• Little change for Licensing. While brand licensing is a strong, popular and important business to individual brands and franchises particularly within the Time Warner structure, which includes Warner Bros, Cartoon Network, and HBO, it represents a much smaller percentage of the total business deal valued at $85 billion. And remember that licensing is barely on the radar in AT&T’s portfolio, which includes DirecTV. Therefore, at least in the near term, there will be little change and it will likely remain business as usual.
• A New Name. In all likelihood, the elimination of Time Warner name will occur in a similar manner as Meredith did when the media company acquired Time Inc. In fact, the ink on the final agreement was barely dry when the building logo was removed from Time Inc.’s headquarters in lower Manhattan.
• More competitive at retail. When companies get bigger it usually means that they want to deal with companies of somewhat equal scale and size. So, the mega retailers will continue to get their share of licensed products, while smaller companies will continue to fight for such retail space and will need to look for alternative retail distribution, ecommerce and social media.
• Potential layoffs. In such types of mergers, there are always redundancies and therefore layoffs. It’s too soon in the integration process to know what divisions or how many staffers will be affected.
• The biggest winner. Believe it or not, one source reported that Time Warner CEO Jeff Bewkes’ total exit package could top a whopping $434 million. If true, or if anywhere close to that number, it should be interesting to hear the rationale and debates about that type of payout.
Comcast vs. Disney Beyond the Box Office
Comcast, as expected for weeks, released its counter bid for 21st Century Fox challenging rival The Walt Disney Company and possibly starting a bidding war for Rupert Murdoch’s empire. Comcast offered $65 billion topping Disney’s offer last year of $52.4 billion. Both companies crave the popular Fox franchises that would give their respective companies greater scale and clout around the globe. The deal would give Comcast more distribution opportunities and a stronger global presence. Disney would be able to grow and expand the core Fox franchises with more content and story lines in much the same way the company leveraged and expanded Marvel and Lucasfilm. Disney would easily remain the world’s largest licensor with the addition of Fox, while Comcast/NBC Universal would clearly become the second largest entertainment licensor.
ABG Gets Nine West
So, it took only a few weeks after Licensing Expo for ABG to make another acquisition adding to its already robust portfolio. ABG acquired Nine West and Bandolino following a bankruptcy auction. The deal is expected to be official in mid-July. From the time he founded the company in mid-2010, ABG chairman Jamie Salter has made a major commitment to expand around the globe and acquire new brands. And ABG now has almost 40 brands and has earned designation as the single most impressive growth story of the decade in licensing.
The ‘D’ Word is Back Again
PetSmart, which is reportedly seeking advice regarding how to manage and reduce its debt load, raises concerns about the specialty retailer’s long-term health.
When TRU announced its liquidation plans, many observers provided various reasons for the demise of the beloved toy retailer. And while all these “reasons” such as its high pricing, its challenge to grow ecommerce, its tired store design, and so on, may have contributed in part to its demise, the key problem was the company’s huge debt of more than $4 billion.
While PetSmart’s $8.2 billion of debt doesn’t fully mature until 2022, it obviously raises serious questions as to what can be done to pay it down.
For now, it’s not a major problem. But any licensor that has a long-term contract with PetSmart must be concerned and watch this business closely.
Brand Stores to Open in New York
Coty, one of the world’s largest beauty companies, announced that its Cover Girl brand will open its first store this Fall in Times Square. The flagship 10,000 sq. ft. store will be “an experiential interpretation” of the brand’s “I am what I make up” philosophy of self-expression.
Ferrero, a global confectionery company and the maker of Nutella announced it will open a second Nutella Cafe in New York by yearend. The first Nutella Cafe opened in Chicago in May 2017.
Last December, Kellogg opened a permanent café in New York featuring its various cereal brands such as Frosted Flakes and Fruit Loops, Eggo waffles and Pop Tarts.
With challenges to traditional brick and mortar stores along with the availability of real estate, the time is right for major brands in various categories to expand direct to consumer sales either through their own stores, ecommerce, or social media. Furthermore, the experiential factor allows brands to connect with consumers in ways never thought possible or cost-effective.
World Cup Mania from Russia to the U.S.
Is it too early to start planning? As World Cup 2018 kicks off in Russia, it was announced that the U.S., Mexico and Canada will co-host the 2026 event with the final scheduled to be held at New Jersey’s MetLife stadium, home of the NFL Giants and Jets. Imagine a World Cup final in the greater New York metro area! The potential is huge. So, I guess it’s not too early to start thinking about all the brand licensing deals, partnerships and other sponsorship opportunities.
Quote of Week
Mad Money host Jim Cramer on Mattel, Inc.: “A lot of smart money is buying Mattel, but I cannot recommend a stock on a takeover basis where I think the fundamentals are going down, particularly not when I think that Hasbro is so terrific with [CEO] Brian Goldner, so that’s the one I would own.”
Best Deal of the Week
It’s always great and inspiring when a smaller licensee does a deal with a longstanding franchise, but not one of the mega billion-dollar licensors. Sock Fancy, a subscription driven company offering unique and odd sock designs delivered monthly, launched a collection of socks based on Shark Week. Discovery’s Shark Week 2018, which begins July 22, marks the 30th anniversary of the popular franchise. And ABG’S Shaquille O’Neal was featured in the first promo spot which aired last month. Check out the socks here.
In the Field
My weekly spotlight of licensed products at retail
Disney Consumer Products Interactive recently launched a major Mickey Mouse licensed program with Target, The retailer featured more than 350 exclusive products across a broad range of categories. The photo shows an endcap with a variety of products that made a major statement on main aisle across from home area of the store.
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