Licensing Letter: Sizing Up DVD Merchandising

Reprinted with permission of the publisher. Source: The Licensing Letter. © 2007 EPM Communications, Inc. All rights reserved.

DVD Launch Window Sometimes Offers A Second Merchandise Opportunity For Theatrical Films

August 1, 2007 -- Though the merchandising push for any major Hollywood film is obviously around the theatrical launch, when the marketing machine is running full tilt, studio licensing executives have long touted the  “DVD bump” as a secondary opportunity. How real that opportunity is open to debate.

Home video marketers are circumspect about revealing how much they spend on marketing a major DVD release, but knowledgeable watchers say it can run as high as $10 million-$20 million. 

Add to the mix renewed activity by promotional partners (often the same ones tied to the theatrical release), and there would seem to be a significant opportunity for consumer products  licensees.

For DVDs of big summer films, however, one of the challenges is to make sure that retailers are willing to put or keep goods prominently  in the stores for the fall and holiday DVD window. Retailers are typically offered several major promotional programs around holiday theatrical releases, but there’s only a limited amount of shelf space to go around. 

One licensee calls the DVD window “one of the most overrated factors” in the business, saying that “I don’t know anyone who plans in any significant way for the DVD release.” 

On the other hand, another footwear licensee says that in a sense, if a company has the right license, it can be easier to place goods against the DVD than against the original theatrical release. “Before the summer, the retailer doesn’t know what’s going to hit big, and has questions about what to support. But when it comes to fall, they already know what they want to support,” he says.


Missed Opportunities Versus Franchises

There are two lines of thought about which kinds of theatrical films hold the most merchandising promise for their DVD windows. One holds that the real opportunity is for films that didn’t get much support during the theatrical run-up because they weren’t known quantities.  Others say it’s the known quantities that already showed they can generate sales. 

One retailer says the theatrical success of Disney’s “Cars” caught many off guard, so the DVD launch was a time to catch up on lost business. That’s not so farfetched in an environment in which retailers are skittish about taking much merchandise against movies that don’t have  some sort of merchandising hook — i.e. a sequel or a property that’s well known from some other medium.

Every licensee knows that for many films like that, they’re going to hear buyers use some variation of the line “I’ll chase that if it happens.” A lot of that chasing comes opposite the DVD release. 

There are also some summer films, unable to battle the big franchises in the theaters, for which the DVD window looms as the biggest potential merchandising opportunity. Sony’s Juli Boylan says such programs end up being more soft-lines driven, because the lead time  necessary to make most hard goods can’t be squeezed into the  shrinking window between theatrical and DVD release, even for a surprise hit. (Soft-lines are apparel, fashion accessories, footwear and home textile such as bedding. Hard-lines are pretty much everything else.)

Other executives say that it’s the franchises that performed solidly in the summer that are likely to get extended to the holiday. From a licensing and merchandising perspective, having a big summer release followed by a holiday DVD launch is “our favorite” scenario, says Disney’s Eva Stoertz. It’s part of the process of making the DVD launch part of a marketing continuum, not an event unto itself. “The important thing is that step two begins at the same time as step  one,” she says. 

Kerry Phelan of DreamWorks stresses that, of course, the first step toward solidifying the DVD merchandising window is “to start to build a successful track record” by generating big sales during the  theatrical launch.

But that’s only part of the story. Merchandise will be refreshed for the fall DVD launch of “Shrek the Third,” and many of the theatrical promotional partners will have programs for the DVD window. In addition, she hopes to get a bump from the debut of an animated  holiday TV special with holiday-themed merchandise. 

Merchandise strategy is no secret. For soft-lines, seasonal factors dictate lines that are different from the summer collection, with different graphics and fabrics, so refreshing the assortment is a given.

In toys, the strategy can be more subtle. Stoertz says, for example, that a toy licensee might hold back larger ticket, more giftable items for holiday, rather than for the summer season. 

For “Spider-Man 3,” says Marvel’s Paul Gitter, the DVD release could be leverage for merchandise in a couple of different ways. One might be an on-pack promotion, another could be for toys and other merchandise to be included in the same shippers with DVDs to give the retailer a ready-made combined display.

The latter has long been problematic for retailers, since those are types of merchandise that normally go in different places in the store, controlled by different buyers. But Sony’s Boylan says that Wal-Mart, in particular, has developed internal systems to deal with those kinds of split displays, which are most often housed in the home video areas.