Licensing and Merchandising

David Perry

Computer Games Developer Conference, 1997
David shares his experiences at Shiny as they invested into the field of character licensing, by explaining how to exploit your games to get Television shows, comic books and toylines from your video game characters.

I am David Perry, President of Shiny Entertainment.

FIRSTLY, THIS IS NOT A SALES PITCH.

This talk really is focused on: "HOW YOU MAKE MONEY"

– Most licensing lectures I have been to are REALLY BORING!

THEY COVER TOPICS LIKE…

•  Cognition and awareness
•  Concept Uniqueness
•  The G.A.T.T. Trade agreement
•  Demand & Entertainment Value
•  Face Validity
•  Marketing & Distribution Assistance
•  The 1989 signing of the Berne Convention
•  Company Prestige
•  Political Necessity

I WILL COVER…

•  REAL LIFE stuff
•  I will REVEAL my SECRET TRICKS
•  Tell you HOW TO BE SEEN AS RELIABLE
•  I’ll explain WHAT a LICENSE ACTUALLY IS
•  In case you GET BORED I will also discuss GIRLS
•  If you get a BIG HOLLYWOOD MEETING set up…
•  I will tell you how to impress them!
•  Then if "THEY LOVE IT" I will tell you
  what to do next.
•  I will talk about pirates that STEAL YOUR IDEA
•  I will tell you what to do THEY THINK YOUR IDEA
  TOTALLY SUCKS
•  Finally, I will discuss what stands in your way.

SO LETS START…

SOME COMPANIES have caught on, e.g. ACCLAIM buying Mortal
Kombat from WILLIAMS.

Only a FEW VIDEO GAME COMPANIES SELL their licenses…

A few examples are…

•  CAPCOM, (Street Fighter)
•  ORIGIN, (Wing Commander)
•  INTERPLAY, (Deals to be announced)
•  SHINY, (Earthworm Jim)
•  NINTENDO, (Mario)
•  SEGA, (Sonic)

It is really hard to learn about a subject where…

I HAVE NEVER HEARD of CLASSES…

CAREER TEACHERS seem to know NOTHING about it…

There are FEW DECENT BOOKS on the subject…

BELIEVE ME, I’ve LOOKED…

You end up CRAWLING on HANDS ON KNEES to find a good book
on Licensing and Merchandising.

Yet sales of licensed merchandise for fictional characters
in North America alone are now over $70 billion a year.

BUSINESS SIDE

You need to get a good ENTERTAINMENT ATTORNEY.

– Forget looking in the yellow pages

– They are not NORMAL attorneys…

– You need an ENTERTAINMENT attorney with ADVISORS!

If you are REALLY rich and lazy GET AN AGENT.

– Worse still an AGENT & ATTORNEY tag team…

I had an AGENT/ATTORNEY combo package for about a day.

– How was I to know?

– ATTORNEY WANTED $400 per hour and 10% of my income.

– The AGENT WANTED his expenses and 10% also.

– Any good deal that they find, they give to the person that
pays the highest retainer.

– In true Hollywood fashion, "You have to buy their
loyalty!"

– I walked out…

MY ATTORNEY represents PETER LAIRD & KEVIN EASTMAN, the
TEENAGE MUTANT NINJA TURTLES guys.

– I heard a rumor that one of them walked into his office
with a 16 MILLION DOLLAR CHECK.

– He said "IT’S BEEN IN MY WALLET FOR A WEEK. I DON’T
KNOW WHAT TO DO WITH IT"

– Attorney says – "I CAN HELP YOU!" (Just
joking)

The property made over 2 BILLION DOLLARS PER YEAR IN RETAIL

In 1988 they sold more toys than all their competitors combined

Four years later they still sold more than all their competitors
combined!

They used a licensing agent called Mark Freedman who is
also now a very wealthy man.

Then the movie directed by Steve Barron became the largest
grossing independent movie up to that time.

Peter and Kevin earned so much cash, they HIRED ARTISTS
to do all the artwork so that they had time to go and spend
it.

Numbers like 2 BILLION BUCKS PER YEAR – AND JUST SELLING
SIGNATURES – CAPTURES MY ATTENTION.

This year the Turtles WILL BE BACK

•  New Toys
•  New movie
•  New TV show

PROBLEM – YOU ONLY GET ONE CHANCE LIKE THIS…

Let me ask you a question….

* PLEASE PUT YOU HAND IN THE AIR… *

IF YOU DO THE FOLLOWING THREE THINGS REGURLY…

•  When you start a project, you File standard $20
  Copyrights and …
•  Establish Credible Creation Dates and …
•  File Trademarks for the Characters in the games.

IF YOU DON’T AND YOU GET A HIT, YOU CAN LOSE OUT.

So, LET ME SAY IT AGAIN….

YOU ONLY GET ONE CHANCE LIKE THIS!

Kevin and Peter have been trying to come up with the next
Turtles ever since with no luck.

That said…

Kevin Eastman married a Penthouse model & bought Heavy
Metal magazine

– We can’t quite say he is suffering

Let’s move on to NEGEOTIATING THAT TOY DEAL

One EPISODE of Earthworm Jim was BANNED.

– Because, it made fun of TOY COMPANIES.

– They wear SUITS and are usually rather straight and serious.

– In the episode Jim was pissed off because the toy company
kept forcing him to wear different stupid mission suits.

– Toy companies don’t think that stuff is funny, BUT
IT’S TRUE.

– These are the people that you will be dealing with.

– Before you even start to talk to them put on your reality
hat.

DO YOU BELIEVE YOUR IDEA IS BLOODY BRILLIANT?

REALLY? HONESTLY?

Your big decision will be MONEY NOW or MONEY LATER.

If your idea SUCKS…

– Sign the contract whilst wearing your running shoes.

– Then take the check and run.

If your idea is really bloody GOOD!

Getting lots of CASH up front is a good way to test if they
are really serious.

NOW IT’S YOUR TURN

OFFER it back directly into marketing…

THAT WILL SHOCK THEM….

Now the cool part….

If it is a monster hit and they make hundreds of millions
of dollars, it is only fair that you tag along… Right?

Slip in STEPPING ROYALTY RATES at the VERY end of the negotiation.

If the property fails, they have invested more than you
have in things like molding, they are going to be the ones
that will loose big time.

If it does well, you will quickly become a financial player
and be getting a higher rate than they would have considered
offering.

A decent toy deal is $250,000 up front and 7.5% of Net Sales.
Worst case 5%, best 12%.

Be careful if they want part ownership in the characters.

– If you handle it right, this will not be necessary

– If they offer to fund the TV show then seriously consider
it

When you negotiate your contract….

– Use words like "FAIR" & "IN THIS TOGETHER"

– Keep the relationship warm, don’t let it become a
cold calculated business deal.

– You will need their passion later.

So, What ACTUALLY is a LICENSE?

TOYS are HIT DRIVEN like GAMES

A LICENSE is RATED by it’s "NAG FACTOR"

The nag factor is – "Just how much nagging will a kid
put their parents through before they move onto something
else?"

MORTAL KOMBAT was a great example…

– I was in a toyshop

– I saw a GRANDMA & Kid

– She offered to buy a Sega Genesis game but only had $20

– MORTAL KOMBAT was $60 & GUNSTAR HEROES (a great game)
was $20

– He took the licensing hook and bought Mortal Kombat LCD
watch (terrible game!)

After WITNESSING that, I wanted to learn more…

– I WENT TO LICENSING SEMINAR, Santa Monica, California.

– Lady in charge of SNOOPY asked if we thought it still sold
$100 MILLION per year?

– Actually 500 million+

– "GOOD GRIEF Charlie Brown" – 1/2 Billion bucks

PROPERTIES WORTH OVER $750 MILLION

•  MICKEY MOUSE
•  BARBIE
•  SESAME STREET

TOP SELLING LICENSED PROPERTIES (Playthings March 1997)

1. Barbie
2. Star Wars
3. Lego
4. Toy Story
5. Hot Wheels
6. Sesame Street
7. 101 Dalmations
8. Mighty Morphin’ Power Rangers
9. Nerf
10. Batman

Where am I leading you???

– CHARACTERS ARE WHAT SELLS!….

– In the top 25 VIDEO GAMES in America usually around 22
ARE CHARACTER BASED.

SOME of these characters do have the potential to be Television
properties….

The bad news on television is that the top Saturday morning
childrens TV shows are by FOX.

– SO, If you want the best audience, go to Fox

– They will give you the worst deal, and take some ownership
because they can

So we picked the right industry…

Compared to last year, Sales in Video Games have risen 46.8%

Action Figures have risen 43.7%

This is a truly great year to get this whole thing right!

I will take this further in a moment…..

AS PROMISED, LET’S TALK ABOUT GIRLS

There are really very few toys for girls.

The Barbie/Princess concept still reigns on.

And the rest of the market is tied up in dolls and fashion
stuff.

SUDDENLY from nowhere SKYDANCERS appeared (they are basically
a helicopter wearing a fairy dress).

They SOLD and SOLD and SOLD.

They even gave GALOOB the number one toyline for quite a
while.

Every one in the toy industry was left scratching their
heads….

Then they realized, oh yeah, girls (being around 50% of
the world) want to have fun too.

Mattel Interactive has proved the same with Barbie game
on the PC.

They are currently planning Infrared Barbie and Hairdressing
software!

I can’t wait!

SO YOU HAVE COOL PROPERTIES!

HOW DO YOU GET THEM TO LOOK AT YOUR STUFF?

– DON’T SEND IT TO THEM!

– IF THEY LOOK, you can accuse them of COPYING it.

– TOO MUCH stuff arrives, most is CRAP, they just DON’T
HAVE TIME.

– For those reasons NOBODY IMPORTANT WILL EVER SEE YOUR STUFF.

THE TRICK I USE TO GET IN THE DOOR?

– I OFFER TO WRITE A GAME FOR THEM…

– They really want development teams.

– They bring me in.

– BUCKSHOT technique (they blast me with every idea they
have planned for the next 5 years).

– Listen to their ideas.

– I tell them why they wouldn’t make great video games
(unless you get lucky and they have a killer game concept!).

– I remind them about things like Donkey Kong Country selling
7 million units and that the video game industry turns over
more bucks than the movie industry.

– Then I would say "I have a great video game property
that I think might work in the TV & Toy world".

– "Would they like to see it"

– Now you have a captive audience with the power to make
it happen.

If you want to pick up some big licensees.

– Be clever, training shoes in the US = $2.39 billion

– Make a property that would have training shoes companies
drooling

– This sort of focus can be very successful

I heard a VERY clever way to get started….

– Say you have a killer character…

– You can’t find anyone to fund the development of the
TV Show

– Childrens TV shows cost $250,000 to $500,000 per episode

– If they start with 13 episodes = $3.9 Million

– So how to make it happen with no help?

– Here is a trick, write a comic strip

– Give it to a magazine for FREE

– Tell them they get the first 4 then it will go on release

– The trick is choosing the magazine

– Say "SEVENTEEN" said yes…

– Now you have 2.3 million readers!!!

– No Toy company will ignore that.

– Think about it!

REMEMBER: Don’t waste your time, if you don’t believe
in your idea.

WHAT MISTAKES DO WE MAKE?

MISTAKE NUMBER 1

Do not give the pitchee the benefit of the doubt!

– THEY ARE NOT CREATIVE…

– They are usually unimaginative business people

– YOU HAVE TO SPELL IT ALL OUT

– "A PICTURE PAINTS A THOUSAND WORDS" and all that!

– For Earthworm Jim, we created a comic book to tell them
the story with PICTURES!

– That didn’t work, so me made a video of the comic
pictures being explained. That worked…

What is hot at the moment?

– Bizarre is in.

– Funny is in.

MISTAKE NUMBER 2

EXPECT CENSORSHIP:

– No drugs, no graphic violence, no advertising.

– No alcohol no religion or symbols or recognizable retail
products.

– No cigarettes or smoking or swearing.

– ABC is VERY tough – NO CUSTARD PIE IN FACE, on ABC it’s
a PIE IN CHEST!

– Don’t even give them a chance to get on their soapbox,
it will not make you look like a reliable professional if
you make these mistakes.

MISTAKE NUMBER 3

No special HOOK (teaching kids how to play)

– Don’t just have a spacecraft, teach kids how to play with
it.

– Attach a famous person or Hollywood star…

– Most want to be in video games

– Treat them with respect

– Their agent will put them in the game, toys, TV show…

– How do you find them?

– Go onto the Internet and visit http://www.pkbaseline.com

MISTAKE NUMBER 4

Most teams do not add a great paper illustration artist!

– Hire an illustrator as a team member

– You will need to hire more later (if it becomes successful)

– He does not work on the game, just the characters

MISTAKE NUMBER 5

Don’t waste your time designing board games!

Board games are VERY hard to get into, the current top 10
by ownership…

– The whole market is controlled by two companies

1. Monopoly (Parker Brothers)
2. Candyland (Milton Bradley)
3. Yahtzee (Milton Bradley)
4. Connect 4 (Milton Bradley)
5. Clue (Parker Brothers)
6. Scrabble (Milton Bradley)
7. Chutes & Ladders (Milton Bradley)
8. Sorry (Milton Bradley)
9. Battleship (Regular) (Milton Bradley)
10. Trouble (Parker Brothers)

Once again, we are in the right market!

– Kids play average of 4 hours & 11 Minutes on Video
games per week.

– Kids play average of 2 hours & 20 minutes on Board
Games per week.

WHAT SHOULD I AIM FOR?

FIRST THING TO AIM FOR

Try to sign a TV show

– They will want a toyline and vice versa

– The trick I use?

– Invite them both out to dinner at the same time!

SHOWS ARE MADE IN KOREA

– They could care less about the show.

– They don’t’ get your jokes.

– They need concise instructions.

– It is just like video games, things are always late.

– There is no time to make changes.

– INTERESTING POINT: Remember cliff hangers?

– Zorro, Flash Gordon etc..

– It is nearly impossible to get a Saturday morning television
company to make one nowadays.

– The reason is because they can’t get each episode done
on time.

Not much 3D around yet, there is a lot of room to move…

– Most companies use SGI’s, that cost’s too much per episode

– HIT Entertainment made REBOOT for 1.2 million per episode

– You should target $350,000. $500,000 is on the high side.

– Find a studio that uses PC’s, their work costs much
less!

– Make a demo reel

– MINIMUM – Your main character doing a move

– MEDIUM – The INTRO tune & animation

– MAXIMUM – The pilot

SECOND THING TO AIM FOR

Be crafty! – YOU OWN THE CHARACTER!

– When the publisher comes up with adverts for your game…

– Make sure that YOUR character is the main focus of the
advert.

– ALSO, KEEP CREATIVE APPROVAL AT ALL TIMES

– Then you get to see EVERY contract

– Make official APPROVAL FORMS

– Give them to every company that licenses your product.

The legal solution….

– Have the form attached to your contract…

– Have it state clearly YOUR NEED FOR A FIVE DAY NOTICE…

-Some companies give a 2 second notice, I can’t even
read that fast

THIRD THING TO AIM FOR

THINK LONG TERM!

You are looking for a CLASSIC.

– That is loosely defined as a property that has lasted for
EIGHT YEARS.

Keep your stories, characters and plots open.

– Turtles Time Portal period

WHAT DO I NEED TO MAKE FOR A GOOD PITCH?

I once had a meeting with the Chairman, MCA and 27 vice-presidents
at their headquarters.

– I had to pitch Earthworm Jim.

– Jim has really bizarre humor…

– I found people don’t have a sense of humor until after
lunch.

– And it was early in the morning.

– I find before lunch people are rushed…

– Postpone your pitch if they have a fax in one hand and
a coffee cup in the other.

What did I bring…

Model sheets

– Clear instructions on how to draw your character.

– Pictures show front and back

Attitude Sheets

– Show your character doing serious and funny stuff.

– Controversial is good – Mighty Morphin Power Rangers

– Kids karate chopping their parents

– Anything that makes the headlines

Save yourself the yawn

– Don’t say "he has a real attitude"

– Proove it on paper!

Background Artwork

– This is your chance to set the look of the show

– It is funny to see levels of our video game being used
as backdrops to the Earthworm Jim show.

– This is also a chance to stop your show blending in with
all the rest!

Toy designs

– Surprisingly enough toy companies want to make life easy
for themselves.

– You will have to fight for anything different or detailed

– Problem with Evil the cat – REFUSED

– He was KEY in the TV show and the GAME

– "CATS DON’T SELL"

– They ended up giving him free with a toy they designed

– You need to understand how toys are made

– Joints cost money, but joints are fun

– Springs = Money etc…

– Deco ops – Paint operations 1 cent

– 30 ops is a lot

– No undercutting

– No fur, no tartan/plaid

– LATEST INNOVATION: SCRATCH OFF BLOOD

12 Inch high Sculpture of key characters (Maquette)

– Show your character in 3D

– Paint it to show color

– This will stop some crappy studio artist screwing it up

– There are a lot of women in the licensing indusrty

– If your character is male, I have noticed that it creates
free conversation if he is also really cute.

Bible

– Good bible shows everything.

– All colors in pantone numbers

– Black and white line art

– Every character in complete detail

– All in one folder

– Proposed merchandise look

– It’s a bloody pain to make, but saves a lot of explaining
after pitch number 50

Line Look

– Design packaging look, any licensee should be instantly
recognizable.

– A good example is Snoopy’s FONT.

– Look to the future here also, if the line look is going
to be out of fashion next year, that will hurt your property.

Voices

– ELECTONIC GISMOS are appearing everywhere

– Think about voices for characters.

– I was once driving down the freeway listening to voice
tests

– We needed Bob the Goldfish

– Here I was listening to Mark Hammil (Luke Skywalker, Star
Wars) trying to sound like a goldfish.

– I was thinking NAH, not very good.

– Come up with Guh-roovey sayings ("Come get some"
– Duke Nukem)

PRESSURE AND TIMING

A big problem is TIMING

Shows need to be developed January->June

Sold by September/October

Developed through winter and spring

On air Summer following year

Just like video games everyone runs late, also networks often

have no slots free. They go VERY quickly.

– DON’T GO TO EXHIBITIONS, you won’t get the attention

– DON’T PITCH TO TOO MANY PEOPLE (word spreads fast)

– RESEARCH WHAT THE COMPANY NEEDS

NAME DROP AND LEARN NAMES

Make them feel comfortable with you, buy them a nice lunch
and impress them will your focus/determination knowledge and
reliability.

– DONT PRESSURE THEM (They are used to that)

– Become their friend

– A trick I use is to not ask for anything.

– By the end of lunch they are trying to think of ways to
work with me.

WHAT IF THEY STEAL MY IDEA!

How to cover your ass part 1

Trademarks

– File for all categories that your character would work
with.

– Easily said… There are SO many choices…

– They charge per class

– In America, Pick 16, 21, 24, 25, 28

– 16 is Paper goods

– 21 is Household goods

– 24 is Household textiles (bed covers etc…)

– 25 is Clothing

– 28 is Computer Games

– Find a good trademark attorney

– Cost over $100,000 ($70,000) to file worldwide

– Don’t waste your time this is a gamble

– If you do it, to save money make your mark REALLY REALLY
clear

– They rejected

– Queen

– Bloated

– Pulsating

– Sweaty

– Puss-Filled

– Mal-Formed

– Slug-for-a-butt

– They said it was de-rog-atory to HOMOSEXUALS

– The QUEEN bit…

– Then have to pay an attorney to fight….

– Save money, be clear.

– The Shiny Logo was rejected three times because….

– They thought we were sending bad photocopies of our logo.

– Actually our logo was made with a RUBBER STAMP effect.

– I repeat, SAVE MONEY, BE CLEAR.

How to cover your ass part 2

Confidentiality agreements

– They are akin to a condom, they sorta break the mood

– Use only if your idea is easy to copy

How to cover your ass part 3

Copyright!

– Very simple, file copies of your model sheets as artwork.

– Use a notary as EARLY as possible.

– This gets a date registered as a point in time.

– There are "pirate" companies overseas…

– They look for up and coming properties in the United States…

– They then file trademarks in their countries.

– Fighting these guys is expensive and very time consuming.

– They just want a settlement, then they move on to the next
property.

How to cover your ass part 4

GET AUDIT RIGHTS

– In the Turtles case, they lost hundreds of thousands of
dollars.

– The simple solution is the right to audit in your contracts.

– DISNEY wanted Earthworm Jim

– "Nobody gets to audit Disney."

IF THEY HATE MY STUFF, WHAT DO I HAVE LEFT?

I tried to think of good things about people hating your
work…

I could only think of one.

– You’ve got a really good excuse to get drunk…

BE YOUR OWN CRITIC!

Some people are a pain in the ass…

– ALLOW CHANGES – BE FLEXIBLE

I have a friend that when he pitches his stuff he jumps on
the presidents desk and DEMANDS that he directs the TV show.

– THAT IS ANNOYING

– You are being examined just as much as your property

WHEN ALL IS SAID AND DONE, THE KIDS WILL DECIDE!

AND BOY DID WE MAKE A MISTAKE THERE!

– We focus tested Jim with a bunch of kids

– I asked the question "If JIM were to fight Batman
who would win"?

– I was expecting them to say JIM because he has a great
big gun.

– They said "BATMAN"…

– Quote "HE WOULD JUST STEP ON JIM AND KILL HIM"

– Because they did not realize….

– That Jim was not a normal sized worm.

– We had never considered scale!

Worse than that…

– We signed a deal for Earthworm Jim Halloween masks.

– Only thinking for a microsecond, we expected kids to wear
long pink pointy heads.

– Now, that’s begging to be beaten up at school.

I HAVE TO STOP SOMEWHERE

So that I can answer questions properly….

And give proper consideration….

I JUST WANT TO SAY….

I HAVE GIVEN MY TIPS TO HELP YOU…

WHEN YOU GUYS HAVE EXPERIENCES TO SHARE….

I WILL BE YOUR AUDIENCE, HERE NEXT YEAR!….

Decent information!

The Toy and Game Inventors Guide 2nd Edition

An Insiders Guide to Royalty Rates

Published by Kent Press

Tel: (203) 358 0848

The Art of Character Licensing

Published by Glasser Legal Works

ISBN 888075-57-0

Playthings Magazine

(212) 689 4411