Gaming merchandise is nothing new. As our regular Margin Makers section in the magazine shows, there's already something to complement almost every game under the sun, so much so that merchandise has now become a key element of modern games retail, be that online, on the high street, or increasingly via massive public events.
Despite all that activity, however, the brand owners, licensees, distributors and retailers we've spoken to are all confident it will see strong growth over the coming years.That can be seen here in the UK next month, with gaming taking centre stage at the upcoming Brand Licensing Europe (BLE) show, taking place at Olympia between October 10-12th. The show has long-featured gaming brands, of course, but this year there are a number of new aspects in order to really get games product flying onto – and flying off – shelves.
BEST IN SHOW
We ask Anna Knight, brand director of Brand Licensing Europe, about what’s new at the show for 2017: “We’ve really stepped up the gaming content at this year’s event, including a gaming-themed keynote panel on Tuesday October 10th featuring experts from all corners of gaming licensing,” she says.
The panel includes representatives from Sony Interactive Entertainment Europe and Activision, alongside leaders in design and distribution. MCV will also be represented, so best not to miss it. In addition, she continues, “GfK’s Dorian Bloch will deliver a seminar on the UK video games industry with an emphasis on the trends and opportunities."
As the market grows, so does the demand for accompanying merch.
Luiz Ferreira, GM UK
Meanwhile, the list of companies exhibiting include Sega, Ubisoft, Capcom, Sony Interactive Entertainment Europe, King, Activision Blizzard, Rovio, The Pokémon Company, Tinderbox and many more.
“We’re also working with SIEE as our key gaming partner and launching the Gaming Activation Area," Knight adds. "That includes a very cool mock store to help retailers who are yet to dip a toe into the world of games merchandise see what they’re missing out on.”
We wonder why all this is necessary. Has the industry been a bit slow on making the most of gaming licences? Knight is emphatic: “Yes," she says. "Given the creativity, fanbase size and growth forecast, it's surprising that it remains such a relatively untapped market licensing-wise.
"That’s partly because of a lack of understanding and education on the part of licensors and retailers. Don’t get me wrong, there have been some fantastic brand extension programmes. Angry Birds and Minecraft, to name just two, have been recent licensing phenomena with merchandise including everything from duvet covers to birthday cakes, books to mobile phone cases.”
The success of those massive brands are a big part of what's kickstarted the sector’s interest, says Daniel Amos, head of new media at Tinderbox, a brand extension agency that’s working with Activision on Call of Duty.
The character parade at last year's Brand Licensing Europe
“Gaming franchises have always gathered huge followings with higher levels of engagement than any other media but I believe the [recent] growth in the licensing industry is linked to the initial explosion of mobile games entering the space. This opened the door to licensees and retailers discovering PC and console gaming franchises with huge fanbases and made them aware of what we know to be evergreen franchises.”
That awareness of the gaming sector, and a bigger effort to service it, means serious growth for licensed products. Luiz Ferreira, managing director at Gaming Merchandise UK (GM UK) is also convinced about growth. “Undoubtedly so," he says. "As the video game market in general grows, so does the demand for accompanying merch. And products are permeating through to new categories – homeware, board games, cosplay, for example.”
With more brands and more product categories, the licensing industry is keen to make more out of gaming brands, and sell them at more outlets, too, says Amos: “What’s really exciting is that this product isn’t restricted to specialty and gaming retail any more. We're seeing product at major grocers and fashion retailers, including those you wouldn’t consider gaming retailers at all.”
Knight adds some analysis to the chorus of upbeat voices: “Video game licensing is growing. According to the LIMA Annual Global Licensing Industry Survey 2017, global retail sales of licensed merchandise within software, video games and apps grew by eight per cent between 2015 and 2016. What’s more, it’s predicted to continue growing over the next five years at least.”
So where will the best opportunities lie for new licenses and products? “The opportunity for game-inspired product is huge, with the popularity of both new and old IPs seemingly bigger than ever before," says Amos. "This, coupled with remasters of much loved franchises, new console launches and new IP, means that supporting product for the fans is in high demand.”
This suggests the recent retro boom is the best place to look for the next wave of big sellers, but Knight isn’t so sure it’s that simple. “There’s always some element of security when dealing with retro brands – you’ve already got an installed fanbase and consumer loyalty in place," Knight explains. "And nostalgic products – when done well – can be a huge hit at retail. But look at Angry Birds and Minecraft – neither of those are retro. They are both relatively new IP,” suggesting that watching the app stores is perhaps a better indicator than looking to the past.
At the other end of the gaming spectrum lies esports, which brings a whole new aspect to licensed products, says Andre Schmitz, owner of Gaya Entertainment, a major manufacturer and distributor of licensed merchandise across Europe.
“Esports are a driving force not only in events, but every part of the industry," says Schmitz. "Supporting and promoting esports is an important part of our strategy. We’ve partnered with a few popular esports teams to produce branded apparel, and we’ll continue to explore opportunities in this regard. As esports become more mainstream, we can legitimately see merchandise becoming as important to participating teams as it would be to, say, a sports franchise.”
We wonder whether the interest in the sector means more competitors for firms such as Gaya? “The approach varies on a publisher-by-publisher basis, but we’re actually beginning to see some consolidation here," Schmitz counters. "IP holders are seeing the value in being more selective in respect to who they work with. They understand that the quality of accompanying merch reflects on their IP and are increasingly keen to work with manufacturers that share their philosophy."
MERCH OF VENICE
There’s no doubt that traditional retailers are keen to diversify further into merchandise, if only to counteract the ongoing shift to digital sales, Schmitz continues:
“As the demand for boxed product diminishes, both on the high street and online, retailers are increasingly seeing the value of ranging a complementary selection of merch to replace that lost income. Provided you have a quality range, at the right price point, merch is a relatively straightforward add-on sale. It also adds ‘theatre’ and impact to a bricks and mortar offering.”
Indeed, merchandise can really enliven an in-store experience, breaking up the monotony of game boxes, and allows customers to go hands on with products and experience that level of quality for themselves – something that's simply not available when buying online. Schmitz is also keen to point out the stability of merchandise sales:
“While demand for merch spikes on release of its ‘parent’ game, there is a selection of evergreen merch that continues to sell through even years after a game’s release – Skyrim, Half-Life and Portal have been around for an age, yet the merch still provides a steady and reliable source of income for those ranging it. In an industry where incomes are so dependent on new-release product, it’s comforting to be able stock items that will sell all year round.”
Beyond bricks-and-mortar stores, merchandise is now a huge part of the equation at practically any major gaming event, as anyone who’s seen the jam-packed merchandise hall at Gamescom can attest. Schmitz sees more advantages in this, too:
“For many customers, it’s the only opportunity to see and touch merch first-hand," he explains. "This allows us to get amazing qualitative feedback, which informs our product development. Quantitative data can also be shared with our partners to help inform their ranging decisions."
As the demand for boxed product diminishes, both on the high street and online, retailers are increasingly seeing the value of ranging a complementary selection of merch to replace that lost income.
Andre Schmitz, Gaya Entertainment
However, both online sales and events are troubled by one common problem, says GM UK’s Ferreira: “Counterfeit merch is continuing to cause real problems in the industry. You only have to walk the floor at an industry consumer exhibition, or take a cursory look at eBay, to understand the scale of the problem. A holistic approach is needed from industry stakeholders – IP owners, manufacturers, retailers, industry bodies, government agencies, event organisers – to truly tackle the issue,” he says.
“Encouragingly, we’re starting to see real action from event organisers, particularly EGX and MCM, who are taking proactive steps to weed out counterfeit merch before their shows begin, and walk the floor once they open their doors to confront any traders who have slipped through the net. They can’t win this on their own though – it’s time for the industry as a whole to step up and take responsibility.”
It can sometimes seem that gaming merchandise is stuck in a rut. There's usually a t-shirt, action figure, guide book and mug, but not much else. BLE’s Knight is having none of it, though:
“No, it’s not stuck," she says. "There has been some truly creative gaming merchandise that goes way beyond the basics. There just needs to be more of it – more brands need to realise the potential licensing and brand extension can offer them in terms of creating new channels to market, consumers and revenue. And more licensees from different categories need to dig deeper into how they could work with gaming licenses.”
Amos, from Tinderbox, agrees: “There's always going to be a need for gift product and basic fan merchandise, but there are also incredible innovators out there in the licensee space making great product. Sometimes retailer demand drives the decisions on product categories, but there are retailers willing to push the boundaries. Ultimately, I want to help bring to life product that I’d want to buy.”
Gaya Entertainment’s Schmitz agrees that things are improving in this regard: “This may have been a fair criticism 18-24 months ago, but as competition increases there’s an increased desire and necessity to innovate and differentiate. We’re maintaining our core range while moving towards a range of higher-end products – statues, plush toys and cosplay items are particular areas where we’re pushing that envelope.”
A wider range of product will help the market to expand, then, but a wider range of price points is another way to stimulate growth, primarily in value rather than units, says Schmitz: "[We’re] seeing a number of boutique manufacturers producing much more expensive high-end items," he explains. "It’s clear there’s a body of customers with levels of disposable income that allow them to be more discerning purchasers.” And those higher price points also mean it’s easier to expand the range, as larger and more luxurious items can be branded.
If you’re a games publisher or brand-holder, just how big does a game have to be before potential licensees might be interested? Knight says there are surprising number of opportunities across the board.
“It depends what kind of licensee you are," she replies. "If you create very high-end products targeted at a very specific consumer demographic, then volume isn’t your number one driver, so you could strike up a really strong relationship with a developer or publisher of quite a niche, almost underground title. If your products are at a lower price point and numbers are important to you in terms of sales, then you will want to work with a game brand that can reach those numbers.”
There has been some truly creative gaming merchandise that goes way beyond the basics. There just needs to be more of it.
Anna Knight, BLE
GM UK’s Ferreira agrees: “We’re also seeing smaller developers dipping their toes in the water. It’s a means of servicing a smaller, yet loyal fanbase with masses of passion for the product.” He reckons a great example is a title such as Stardew Valley, which, while not a household name like Minecraft, is still well-positioned with regards to its strong community.
It’s not just about the right license, either, as having the right retailer can create synergies well beyond what either could achieve alone. “Uniqlo has nailed it on several occasions working with Japanese gaming behemoths including BLE exhibitors Capcom and Sega, as well as Nintendo, on limited edition t-shirt ranges,” Knight says.
While taking your smash hit title and putting the logo on a shirt will certainly bring profits for publishers, licensees and retailers, there are obviously far better ways of approaching merchandise. As noted here, there’s huge potential growth in sales, whether it's on November’s blockbusters or the next indie darling.
It’s just a matter of getting the right partners onboard to make the most of the brand and further amplify the community’s attachment to that game. After all, if they’ve bought the t-shirt and the mug, you shouldn’t have to remind them about your next big DLC drop.
With BLE returning next month, it’s well worth attending to get a real feel of the breadth and strength of the sector and the opportunities it can provide your business. We hope to see you there.