The ongoing passion and time that videogame players put into their favorite games – even traditional entertainment companies mention videogames as a big competitor for kids’ attention — are driving licensees and retailers increasingly to leverage them with broader product arrays and instore displays. The player communities – sometimes numbering in the millions – surrounding such games as “Fortnite” and “Call of Duty,” among others, offer an attractive target market whose involvement can be translated into ongoing purchases of physical product.

The breadth of the videogame category for the licensing community to leverage encompasses everything from retro titles that evoke nostalgia – the year 2022 will mark a half century since Atari first brought Pong to retail — to the most cutting edge multiplayer worlds that bring in tens of thousands of combatants at a time and have given rise to a huge business category – eSports – that barely existed a half decade ago but now is measured in hundreds of millions of dollars of sponsorship, media rights and other revenue.

The appeal of nostalgic titles – think of such examples as Tetris, Sonic the Hedgehog, Pacman and others – draws primarily on their resonance with an older age group who remember playing them way back when. But the market is definitely broadening.

Fortnite “Dominated”

“Clearly ‘Fortnite’ has dominated the landscape this year, where video games had only up until recently scratched the surface,” says Ross Misher of Brand Central, which has begun representing well-known gamers who are trying to build their own brands. “In previous years, video game licensed product felt reserved for the hardcore gamers, like the avid fans of games like ‘Call of Duty,’ ‘Halo,’ and ‘Red Dead Redemption 2’ with merchandise targeted [at ages] 18+ and limited to specialty retail. Then a few years ago ‘Minecraft’ really opened the door for licensed merchandise targeted directly at kids. Now ‘Fortnite’ has not only propelled kids and teen licensing forward but has become multi-generational and has become a cultural obsession.”

To evaluate the potential of current games to generate significant business in physical products, licensees weigh such metrics as social media activity, number of downloads and MAUs (monthly active users) as measures of engagement. Those are all stepping stones toward determining is the property’s lifetime value — a measure of how often and over what period of time consumers are playing a game, says BD Labs’ Mark Caplan.

To be sure, the licensing prospects for most games still falls well short of the potential of a hit theatrical film or episodic TV/streaming platform series. That’s because film and TV producers tend to put millions more in marketing dollars behind a film or show (which rubs off on the licensed merchandise), while game companies typically invest their marketing around the game itself, leaving licensees to promote their related products through social media and other means, says Funko’s Brian Mariotti.

Steadier Sales

On the other hand, when a game hits big, with users that play it for weeks and months at a time, it can generate steadier sales over a longer period than a film that has a big opening then steadily declines.

The multiplayer games and communities are being fed by services like Twitch and YouTube that allow consumers to watch games being played, further deepening ties to a title. For example, Richard Tyler Blevins, a former professional gamer better known by his “Ninja” handle, had 21 million YouTube subscribers as of January. He regularly streams his playing of “Fortnite” on Twitch and last March set a record for a single individual stream.

“People are engaged in other people’s game play and that has turned videogames from straight gaming to an entertainment experience not unlike watching a movie or TV,” says Striker Entertainment’s Marc Mostman, whose firm represents such games as “Five Nights at Freddy’s”  and “We Happy Few.” “This helps extend a brand and drive awareness and interest in merchandise. It is no longer about someone going to a store, buying a game, playing it over a weekend and moving on.”

In most cases, licensed merchandise remains a relatively small concern of the game developers and publishers, who are more focused on recurring revenue from their millions of active users. But licensing is slowly moving from an after-thought to piece of the marketing puzzle. Merchandise licensing wasn’t top-of-mind for “Fortnite” publisher Epic Games, but fans clamored for merchandise, says Funko’s Mariotti. So an agent (IMG) was hired early in 2018, and a program developed, with such companies as Jazwares (master toy), Funko (vinyl figures) and Mad Engine (apparel) among more than a dozen licensees.

“For a company that is doing well (like Epic) and doesn’t need as much exposure, it more of a nod to the fans to give back by signing a licensing deal,” says Mariotti. “There is always demand from the fan base and all they (fans) want is something to show their support.”

Evaluating the Potential

To evaluate the potential of more current games to generate significant business in physical products, licensees are weighing such metrics as social media activity, number of downloads and learning such terms as MAUs (monthly active users). Another important consideration is lifetime value — a measure of how often and over what period of time consumers are playing a game, says BD Labs’ Mark Caplan.

There’s generally a significant lag between a game’s debut and the appearance of any product on store shelves – whether online or in physical retail. For one thing, there’s the uncertainty of whether a particular game will develop enough of a following to justify investment by licensees and retailers. Publishers and developers also tightly guard a game’s assets, and changes are sometimes made right up to its release.

“You likely won’t see it (licensing) at the launch” of a game because “the IP might be new and you want to make sure there is brand awareness. Retail buyers want to know why they should buy the brand,” as a licensed product, says Sega’s Anoulay Tsai, whose company is weighing plans to expand the Sonic the Hedgehog brand into food, confections and seasonal products and seeking exclusive apparel deals for retro titles such as “Streets of Rage”, “Altered Beast”, and “Golden Axe”.

Game-based merchandise has been gaining an increased presence through mass channels in the U.S. – Walmart and Target have both established collectibles sections in their stores in recent months. Also, specialty chains such as GameStop, Hot Topic (and its sister BoxLunch) and Newbury Comics cater to the pop culture marketplace, as do a growing cadre of online merchants. In some cases, fan sites and social commerce can be viable channels, though the amount of business that can be done that way may not be enough to justify the cost of creating and manufacturing a toy or action figure line.

One increasingly common marketing hook for licensed goods: Some licensees are including codes on packaging that tie back to the game, letting consumers unlock additional features or characters and cementing a link between physical and digital products. McFarlane Toys took that approach with figures licensed from Take-Two Interactive’s NBA 2K19 videogame when it was released last summer, says McFarlane’s Todd McFarlane. The figures came with a bonus digital code that unlocked content that gamers could use in the title’s “MyTeam” mode that lets gamers customize their teams of current and former NBA players. McFarlane says the company is in discussions with other pro sports leagues – it’s also an MLB and NFL licensee — about similar programs.

Contacts:

BD Labs Inc., Marc Caplan, 310-245-5813, mark@bdlabsinc.com

Brand Central Group, Ross Misher, CEO, 310-268-1231, ross@brandcentralgroup.com

Funko, Brian Mariotti, CEO, 425-783-3616

McFarlane Toys, Todd McFarlane, CEO, 480-491-7070, tmcfarlane@mcfarlane.com

Sega America, Anoulay Tsai, Licensing Dir., 747-224-2538  , anoulay.tsai@segaamerica.com

Striker Entertainment, Marc Mostman, Partner, 818-225-9355, marc@strikerent.com

Traly, Adam Litvack, EVP New Business and Product Development, 561-573-2263, adam@traly.com