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How Will Licensing Fare as Film Studios Weigh Mergers? image

How Will Licensing Fare as Film Studios Weigh Mergers?

By Maura Regan

With a wave of potential studio mergers on the horizon, it’s unclear where licensing will land in a more consolidated landscape.

The industry is bracing for licensors to further sharpen their focus on proven IPs, leaving less room for smaller projects that may have devoted fans but may not warrant the investment for licensing, industry executives said. Disney’s Firefly, for example, has dedicated fans but has been dormant in licensing for several years.

“With consolidation, there may be some IP that has a cult following but it’s not priority and the studios can’t put too much effort behind it because you only have so many people and marketing dollars to devote to it,” said Julian Montoya, SVP at The Noble Collection and a former Warner Bros. executive. “The 80-20 rule will start to play a bigger role in licensing in terms of where the licensors are able to prioritize their efforts and which IP is going to be available. If you are a Mattel, Hasbro, or Spin Master, you tend to deal with the properties that are in the 80 percent [in revenue] range, but if you are a collector company and some of your IPs are on the niche side, as companies consolidate they might not be able to keep the lights on for some of those properties and they [may] go dormant for a while.”

This increase in consolidation comes as film studios—struggling with declining revenue from theatrical releases, network and cable TV, and home entertainment (DVDs)—are trying to strengthen their position in competing against streaming services like Amazon’s Prime Video and Netflix.

Amazon’s acquisition of MGM in 2022 may have been a starting point for this most recent round of consolidation, and several potential mergers arose at the end of 2023. Paramount Global has drawn interest from both Warner Bros. Discovery and Skydance, and it was reported that Apple was interested in combining its own streaming service with Paramount+.

Lionsgate recently closed on its $375-million acquisition of eOne from Hasbro, giving it access to 6,500 films and TV shows. And that was after Lionsgate unveiled plans to spin off its TV studio and motion picture division, encompassing franchises like John Wick, Hunger Games, and Saw as well as its licensing business. Lionsgate is planning “multiple” spinoffs of the John Wick series, including Ballerina on June 7, while The Hunger Games will debut as a Running Entertainment licensed stage play in London in April, said Joe Drake, Chairman of Lionsgate’s Motion Picture Group.

Overall, Lionsgate expects to release 14 films this year, including Highlander and Now You See Me 3, Drake said. Lionsgate’s cable network Starz, which it acquired in 2016, will remain separate from the TV studio and motion picture group. It is consolidating its operations, shutting down its on-demand businesses in the U.K. and Latin America, Lionsgate CEO Jon Feltheimer said.

“Franchise upside will come from location-based entertainment, digital/gaming, and consumer products,” an executive at a licensing agency said. “If you look at the Disney ecosystem, the parks are one of their most potent income generators on the balance sheet. And if you marry [Warner Bros. Discovery’s] DC Comics, Harry Potter, and Looney Tunes with [Paramount Global’s] SpongeBob, Paw Patrol, and Teenage Mutant Ninja Turtles, that is a very rich library. And that assumes they continually get new and refreshed entertainment offerings, and the respective consumer products teams can seamlessly merge and have a franchise strategy that a newly formed division can embrace and support.”

Yet consolidation could also lead to less content being available for consumer products licensing. As studios sought to cut costs in the face of growing debt, some projects were shut down. When Discovery merged with Warner Bros. Media, for example, the high-profile Batgirl film was scrapped. Disney is cutting its content spending to $25 billion this year, down from $27 billion in 2023.

“My concern is that the more consolidation that happens, the more great properties will be neglected from an advertising and consumer product point of view,” said David Born, CEO of Born Licensing, which licenses film and TV characters for adverting, including Charlie Brown, Willy Wonka, SpongeBob SquarePants, and Flash Gordon.

The fans will still exist, Born said, and they will feel like these properties are still active and continue to demand new products. “There will be properties that could have amazing consumer products, but they just are not a priority for studios. It will all come down to bandwidth,” he said.

However, some studio executives remain optimistic that the growing amount of content available, especially through streaming services, will spur licensing programs even if consolidation continues. Indeed, Netflix and Amazon initially did not field licensing programs since they did not have the licensing rights to the streamed content. But once the companies launched original content like The Boys, Squid Game, and Stranger Things, licensing emerged as a focus for them.

“Regardless of consolidation, the biggest trend driving licensing is the continued increase in consumer demand for content across every kind of platform,” a studio licensing executive said.

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