Mickey Gets the Force

November 8th, 2012
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DisneyLucasFilm_489x295_0Analyst Insight by Utku
Tansel, Global Head of Toys and Games Research at Euromonitor International

On 30th October
Disney announced its purchase of Lucasfilm, the maker of Star Wars, in a
US$4.05 billion deal that will see a new series of Star Wars feature films.
Disney plans to release a new film every two to three years after bringing out
Star Wars Episode 7 in 2015. When determining its long term geographical
expansion strategy for Star Wars, the Asia Pacific region should not be off
Disney’s radar. Seven out of the top ten most heavily licensed traditional toys
and markets globally are in Asia Pacific. In 2011, it was also the most dynamic
toys market
recording 9% value growth compared to the global average of just

World’s Top 10 Markets with Highest
Penetration of Licensed Toys, Traditional Toys and Games, %, Rsp

Source: Euromonitor International

Lucasfilm acquisition undoubtedly
represents the biggest toy related acquisition for a very long time and the
move came part of Disney’s expanding licensing strategy and portfolio in recent
years. It gives the company a multitude of opportunities that will justify its
investment much like its acquisitions of Pixar in 2006 and Marvel in 2009 which
ensured a number of important properties. 
With Lucasfilm, the world’s largest licensor gets the 15th largest
licensor, putting Disney Consumer Products at US$40.5 billion in retail sales
of licensing products worldwide.

Disney’s licensing portfolio now includes,
Spiderman, Iron Man, Thor, Hulk, Mickey Mouse, Disney Princesses, Disney
Fairies, Cars, Star Wars, Indiana Jones, Toy Story, Wall-E and Finding Nemo.
Surely, there are other important licenses such as Transformers, Hello Kitty,
Moshi Monsters, Thomas and Friends, Peppa Pig, Ben 10 and Sesame Street among
many others, however, ownership of these are largely dispersed between various
players. Disney is now the only company in the world that controls so many successful
and popular global properties that are directly related to the toys and games

Toys are very licence driven

Licensing is an extremely important area
driving sales and new product launches within toys and games. Licensed toys –
with some sort of entertainment media backing – often carry a higher price tag
than other toys. The share of licensed toys in overall toy sales continues to
increase across the majority of countries; in the US, for instance, licensed
toys accounted for 26% of traditional toys and games sales in 2011. 


Consequently, it is no surprise to see
securing popular properties has become the Holy Grail for many traditional toys
and games manufacturers. Exactly one year ago in October 2011, Mattel, the
world’s largest traditional toys manufacturer, acquired British media company
HIT Entertainment for US$680 million. The deal gave Mattel total control of
franchises including Thomas and Friends, Bob the Builder, Fireman Sam, Barney,
Angelina Ballerina and Mike the Knight providing a strong footing in
licensing.  In 2011, Mattel was the 4th
biggest global licensor reporting US$7 billion in retail sales of licensed
products. In 2012, the company teamed up with Saban Brands and as a result of
this agreement, new Power Rangers-inspired Hot Wheels products will hit toy
retail in 2013.

Hasbro, the world’s second largest toy
, has also been seeking to expand its portfolio. In 2011, the company
outbid and acquired the toy license for the popular Sesame Street series that
had originally been held by Mattel. Through the acquisition of Sesame Street
(and producing it under the Playskool brand name), Hasbro has managed to grow
at Mattel’s expense in the baby, infant, and pre-school categories. In 2011,
Hasbro’s combined sales in those categories grew by 9% to reach US$478 million;
while Mattel’s combined sales declined by 8% to fall to US$1.4 billion.

Seven out of the top ten most heavily
licensed toys markets are in Asia Pacific

In 2012, Star Wars was one of the best
performing properties in key toy markets globally. Disney’s expertise and
experience in toys, retailing and licensing alongside Star Wars’ evergreen
popularity could place the company in a very strong position in the industry
that will surely keep some other players awake at night. Having said that
Hasbro is projected to be one of the beneficiaries of this acquisition as the
company has held the official licence for Star Wars toys since 1991 and retains
those rights until 2020.

While Lucasfilm has leveraged its brand extensions
perhaps beyond any licensor ever has in the past, Disney’s “Star Wars saga”
strategy, announced by the company, leaves no doubt that the Star Wars licence
will be more heavily promoted at global level while being expanded to other
categories other than toys. Euromonitor International believes that Asia
Pacific should certainly be part of this expansion strategy.

Asia Pacific is one of the biggest licence
driven traditional toys and games markets globally. The World’s top ten markets
with the highest penetration of licenced toys include seven countries from Asia
Pacific. South Korea, Singapore and Thailand are the top three most heavily
licensed countries as more than 40% of toys had licence properties in 2011. In
actual terms, licensed traditional toys and games sales in Japan and China
exceeded US$2,253 million and US$673 million, respectively in 2011.

As the region is projected to overtake
Western Europe to become the largest toys market in a few years, the
opportunity it presents should not be overlooked.

Have a question or a thought to add? Leave us a comment below.