Disney reports record year, but consumer products down; Activision blizzard exceeds outlook, but down for 3Q; Amazon mails first-ever holiday catalog; NFL partners with Fortnite; Williams-Sonoma teams with Harrods; and other licensing news highlights of the week.
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.
Walt Disney Delivers Record Sales, Earnings, But CP is Down
As the celebrations for the 90th anniversary of the iconic Mickey Mouse character have kicked into high gear this week, The Walt Disney Company reported record results for Q4 and fiscal 2018, despite a decline in its consumer products and interactive division.
On the one hand, the CP results demonstrate the unparalleled strength of Star Wars over the past few years, and the fact that there was no one franchise to replace it. Even Marvel’s Black Panther couldn’t replace the Lucasfilm franchise. Coming in March, Captain Marvel could possibly provide a shot in the arm for the CP division, but in all likelihood no one property will replace or come close to the widespread global success and retail sales of Star Wars.
The company’s total revenue for Q4 was $14.3 billion versus $12.8 billion for the same period last year, an increase of 12%. Net income for Q4 was up 33% to $2.3 billion from $1.7 billion last year.
For the fiscal year that ended September 29, total revenue was $59.4 billion versus $55.1 billion in 2017, an increase of 8%. Net income for the fiscal 2018 was $12.6 billion versus $8.9 billion last year, an increase of 40%.
“We’re very pleased with our financial performance in fiscal 2018, delivering record revenue, net income and earnings per share,” said Bob Iger, chairman and chief executive officer. “We remain focused on the successful completion and integration of our 21st Century Fox acquisition and the further development of our direct-to-consumer business, including the highly anticipated launch of our Disney-branded streaming service late next year.”
However, for the world’s largest licensor, consumer products and interactive media revenues for the quarter decreased 8% to $1.1 billion and segment operating income decreased 10% to $337 million. For fiscal 2018, revenues declined 4% to $4.6 billion from $4.8.
Disney stated that “the decrease was primarily due to lower income from licensing activities and a decrease in comparable store sales at our retail business.”
Disney further attributed the decrease in revenue from products based on Star Wars and Cars and lower minimum guarantee shortfall, stating that, “these decreases were partially offset by lower third-party royalty expense and an increase in revenue from products based on Spider-Man.”
Activision Blizzard Third Quarter Results are Down
Despite the introduction of three new game franchises over the past several months, Activision Blizzard third quarter results fell short of the company’s outlook and decreased over the same period last year.
For the third quarter that ended September 30, Activision Blizzard’s net revenues were $1.51 billion, as compared with $1.62 billion in 2017. Operating margin for the third quarter was 27% and earnings per diluted share were $0.42, as compared with $0.47 for the third quarter of 2017
“Activision Blizzard’s results for Q3 exceeded our prior outlook as we continue to entertain large audiences, drive deep engagement, and attract significant audience investment across our franchises,” said Bobby Kotick, chief executive officer of Activision Blizzard. “Our unique advantage continues to be our ability to create the most compelling interactive and spectator entertainment based on our own franchises, combined with our direct digital connection to hundreds of millions of customers, in over 190 countries. With these competitive advantages we continue to connect and engage the world through epic entertainment.”
Over the last three months, the company’s three segments have released top games: Activision launched Call of Duty: Black Ops 4; Blizzard released World of Warcraft: Battle for Azeroth, and King launched Candy Crush Friends Saga.
The company continues to be bullish on e-sports, as the Overwatch League continues to build on the success of its inaugural season with the announcement of the sale of another six teams in September at a substantially higher valuation than the team prices in the first season. These latest sales take the total league roster to 20 teams, with nine teams outside the U.S.
Amazon Mails First Ever Print Catalog
It would be an understatement to say that the holiday season is of critical importance to licensors and licensees as the performance of licensed products will determine not only success at retail but overall performance for the year.
While holiday 2018 marks the first season without Toys ‘R’ Us, the toy category as a result has been getting most of the publicity in the national media especially as so many other retailers have upped the ante and expanded their initiatives.
The new catalog reflects the fact that Amazon sees value in holiday traditions and obviously realizes the significance and success of the TRU’s annual catalog. It’s first catalog, which is 66 pages, doesn’t have any prices, but it does have lots of bar codes. It’s layout and design are well done and it presents toys in a fun and organized way.
Most importantly, A “Holiday of Play” features many popular licensed products from the major entertainment and toy licensors including Disney, Marvel, Warner Bros., Hasbro, Mattel, Lego, Universal, MGA, and Nickelodeon.
The Amazon catalog will not only drive sales for the ecommerce retailer, but it will also become the must have toy book creating brand awareness for popular toys and games.
NFL Partners With Fortnite
The National Football League has teamed up with Epic Games, creator of one of the most popular video games in the world, Fortnite. Team “outfits” will be available in the Battle Royale Shop offering Fortnite players the ability to purchase and customize up to eight outfits representing their favorite NFL teams.
This is a clever partnership that brings together fans of two popular games/sports and is a win-win.
In addition to NFL team outfits, there will be football-themed emotes, harvesting tools, gliders, and even a referee outfit, so players can bring their passion for football into Fortnite.
The agreement represents the first time Epic has partnered on special outfits inside Fortnite, enabling players to blend their passions for games and sports.
“We see the popularity of Fortnite every day at the NFL as many of our players are passionate about this game,” said Brian Rolapp, chief media and business officer at the NFL. “This partnership represents a great opportunity for millions of NFL fans who are Fortnite players to express their fandom inside the game while at the same time exposing our brand to countless others.”
“We have so many football fans at Epic and we know a lot of the game’s fans share that same enthusiasm,” said Mark Rein, co-founder of Epic Games. “Allowing our players to represent their favorite teams in the game was too cool of an opportunity for us to pass up, and we couldn’t be happier with how they turned out!”
Williams Sonoma Imports Harrods Products
Two well-known retail names, Williams-Sonoma and Harrods, have joined forces to offer a collection of 15 classic Harrods branded products. The deal is Harrods first venture in the U.S.
This partnership offers the next best opportunity to physical store expansion. It allows both retailers to expand their merchandise selection and offer popular products their customers recognize but could not readily purchase.
The selection includes Harrod’s hampers, signature tea blends, premium biscuits, and candy as well as Holiday items including Harrods mince pies and Christmas pudding, dark chocolate and ginger biscuits, blackcurrant Jam and English mustard. Products will be offered online.
“Williams-Sonoma is committed to bringing our customers the world’s best products and offering exclusive experiences,” said Janet Hayes, president of Williams-Sonoma. “Our collaboration with Harrods allows us to provide our customers with food products and gifts from one of the most iconic brands in the world.”
Said Harrods managing director Michael Ward: “Our partnership with Williams-Sonoma is an exciting representation of our ambitions for Harrods in the future. For the very first time, our iconic hampers, sweets, teas and biscuits will be available to order from Williams-Sonoma online, offering customers a taste of British favorites to be enjoyed at home or gifted to a dear one. Harrods Food Halls remain the heart of our business and our team of world class chefs and food experts are thrilled to venture into the next chapter of Harrods’ history with Williams-Sonoma.”
Harrod’s has previously merchandised of selection of Williams-Sonoma products in its Food Halls that includes its peppermint bark, baking mixes, sauces and flavored coffee beans.
Licensed Product of the week: “Ugly” NFL Sweaters
Forever Collectibles introduced the first series NFL team Bluetooth-enabled ugly Christmas sweaters will light up the Holiday season. “We always look for opportunities to make our products stand out to sports fans,” said Matthew Katz, senior licensing manager. “This year’s sweater can play any sound you want it to, whether it’s a touchdown celebration dance or the team’s theme song, we know our sweaters now deliver the closest in-game experience to fans.”
Stat of the week: A Trillion Dollar Holiday
Christmas holiday retail sales in the U.S. are projected to top $1 trillion for the first time, according to a study from market research firm eMarketer. Total retail sales in the U.S. will hit $1.002 trillion during the holiday period, an increase of almost 6% from the previous year, marking the “strongest growth since 2011.”