Products Based on Apps Share Stage With Transformers, Superman

June 14, 2011

By Michael Stone, Advertising Age

Once again brands, manufacturers, retailers and agents from around the world are congregating at the Mandalay Bay Convention Center in Las Vegas for the 2011 Licensing International Expo.

According to the information provided by the organizers, Advanstar Global Licensing Group, the numbers for this year's show -- now in its 31st year -- are down from last year. In 2010, there were more than 500 exhibitors representing some 7,000 brands, while this year there are approximately 400 exhibitors representing 5,000 brands.

But the culled-down number of exhibitors and brands is not necessarily a sign of an industry slowdown as evidenced by the large number of pre-show deal announcements made by brands such as Mattel, Hasbro and Warner Bros., among many others. Additionally there are a number of new exhibitors and brands here for the first time, representing some very interesting categories.

For example, while walking the show today, I was struck by how many digital brands are present this year in a big way.

Licensing digital properties is certainly not new and goes back at least as far as Pac-Man, but there is clearly a renewed emphasis at this year's show. For the first time, there is a specific Gaming Zone section, featuring Sony PlayStation, EA, Ubisoft and THQ among others.

Even more intriguing is the number of online-only and mobile application brands present. The biggest online and app brands of the year are all here, positioning themselves as the next big entertainment franchises. Move aside, Transformers, Superman and SpongeBob SquarePants, because Angry Birds, Farmville by Zynga, Moshi Monsters and Talking Friends (full disclosure: a Beanstalk client) are now in the house.

While offline brand licensors have long been intrigued by the digital world -- and, more recently, apps -- finding a viable revenue model has often proven elusive. After all, apps are either free or very inexpensive, so adding licensing royalties into the mix often makes them too expensive for consumers. Even when the royalties are not a gating factor for the app manufacturer (the licensee), the actual revenue a licensor will see from the sale of apps is still fairly insignificant. This is why most brands with apps develop them on their own primarily as a marketing and branding vehicle.

But the exact opposite is true for an online-only brand or app that has distinguished itself and become a brand in its own right. For those properties born online that have amassed widespread brand awareness and established critical mass, the time is perfect for them to increase their consumer touch points, revenue, and brand awareness through brand licensing. The number of consumers already using entertainment apps is equal to a blockbuster motion picture franchise. For example, more than 135 million users have downloaded the Talking Friends apps in less than 11 months. I don't think it is an overstatement to say that these properties represent the new frontier in entertainment licensing.

As a result, we are only seeing the very beginnings of a major migration of mobile apps from the digital world into the physical world. Angry Birds was the first with a whole host of products at major retailers, including Walmart and JC Penney, among others, followed closely by Moshi Monsters, which just announced an exclusive line of plush toys and figurines with Toys 'R' Us.

With more tablets and app-friendly smartphones entering the market, I don't think it is inconceivable that next summer's biggest entertainment blockbuster is already on your phone.

More developing trends from the show floor tomorrow…

ABOUT THE AUTHOR Michael Stone is the president and chief executive officer of Beanstalk, an Omnicom Group-owned global brand licensing consultancy. You can follow Beanstalk @BeanstalkGroup.