18 Nov Merchandising: Fact or Fiction
The idea that big budget movies never lose money (no matter how they bomb at the box office) because of merchandising is one of the great myths of filmmaking.
The merchandising concept was best summed up by Mel Brooks in one of the few funny scenes in Spaceballs. The formula for success is simple. Make a big expensive movie full of marketable characters and gimmicks. Cut licensing deals with toy manufacturers and cereal companies and fast-food restaurants across the globe. Then kick back and watch the money pour in.
Once upon a time, it actually worked that way. Years ago, I saw the living embodiment of this approach. It was just a few weeks before the opening of the 1989 Batman and, while driving across town, I noticed a gentleman waiting at a bus stop in his Batman sneakers, Batman t-shirt and Batman ball cap while sipping a large Batman Slurpee. I suspect he had also eaten a bowl of Batman cereal for breakfast. So the old school theory sometimes works.
Then there was the 1990 production of Dick Tracy. It attempted the same approach to massive merchandising. Around this time a regional budget department store was slowly going out of business. The stores had several months to sell everything. On the last day of this grim process, I stepped into one of these stores. Vast aisles of nothingness, except way in the back where all of the Dick Tracy movie merchandise stood untouched. Sometimes, it doesn’t work.
But merchandising does account for lots of money. Within just the past year at least $51.4 billion dollars was made in merchandising. Likewise, major Hollywood movies will partly support their high budgets through advance licensing agreements for merchandising, allowing some costs to be covered before the filming even starts. Now that China is in discussion to open the door to an increase amount of Hollywood merchandising, profit margins should swell like crazy. It’s a sweet system for all involved.
Except that there are no sure things in business. That rule applies to merchandising the same way it applies to everything else. Some movies are made for merchandising. All of the Star Wars movies have been a dream come true for the toy industry. Others are not so amendable. For decades, the producers of the James Bond series have tried. Back in the 1960s, they went for such hot items as 007 aftershave and other male oriented products. No go. More recently, 007 digital games. With a few exception, the various James Bond games have not been well received by gamers (some of whom call Bond 00-crap).
Then there is the licensing issue. When people start talking about merchandising as if it were a miracle means to create money, they forget about the license thing. Traditionally in these deals, the film studios have to sell the movie license to various other companies. That means that the profit made from the merchandising is divided between the studio, the manufacture, the supplier, the retailer etc. Out of every dollar generated by the merchandise, the film company will only see a small percent. Sure, they are making money. But they are not necessarily earning the profit margins some people think.
The business is also changing. T-shirts are still a given. Heck, they are the “old reliable” of the trade. For certain movies (read: Disney) toys and dolls are still essential. But many film companies are moving into smart phone apps and other forms of digital marketing. They have to, because that is where the market is going. Besides, it involves fewer companies and hence less profit dilution.
However, the major players are still trying to figure out the digital market place. Traditional movie merchandising has always been a straightforward one-way street. You see the movie. You buy the product. Then you go home.
Digital marketing is more of a two-way street with multiple intersections and many roundabouts as well as various access lanes. A year ago, the filmmaker Vikramaditya Motwane did a quick YouTube talk about digital marketing. It is a fast, insightful introduction to many key concepts and I am still trying to figure out what he is saying. And it is not because of his accent. Digital marketing is very new and extremely fluid. It changes every other day. This is true with film production, distribution and promotion, all of which are interconnected in merchandising strategy and tactics.
Which also means indie filmmakers have a unique chance to enter a level playing field. Sure, your indie movie is never going to be on a cereal box. But who cares? Those days of merchandising are fading. There are other formats. The recent movie Fury made a promotional deal with the video game World of Tanks. I know of an indie filmmaker who has given some thought to a similar arrangement involving a documentary on aerial warfare in World War II.
In some ways, the indie filmmaker is in a better position to capitalize on new media merchandising opportunities than a major film company. For one thing, most are closer in age and personality type to folks in the digital trade than the average studio executive. Increasingly, many indie filmmakers are themselves in the digital trade. Some are also game designers. So it is a pretty seamless transition.
Of course, you will still be doing t-shirts. They are a useful piece of eye candy for your Kickstarter campaign. Ball caps, anyone?
Dennis Toth Copyright (c) 2014 All Rights Reserved