Index → January 2003SpongeBob and Pals Provide Licensing Gold for Nickelodeon
SpongeBob and Pals Provide Licensing Gold for Nickelodeon
Source citation: Day, Sherri (January 9, 2003). "SpongeBob and Pals Provide Licensing Gold for Nickelodeon." The New York Times. Retrieved October 28, 2013.

Move over, Mickey Mouse and Bugs Bunny: SpongeBob SquarePants is moving in.

Over the last few years, Nickelodeon, the cable television network known for its irreverent and clever stable of children's programs, has become a big player in the business of licensing consumer products aimed at America's youth.

Vitamins featuring Nickelodeon's Jimmy Neutron and Rugrats characters are stealing market share from the longtime category leader, the Flintstones. SpongeBob SquarePants Band-Aids, based on the network's top-rated cartoon about a gullible sea sponge named Bob, have overtaken Scooby Doo as the No. 1 licensed adhesive bandage, and SpongeBob macaroni and cheese is Kraft Foods' top-selling licensed pasta brand. In gooey compounds (the industry category for Plasticine in day-glo colors), Goooze and Squeeeze are battling with Hasbro's Play-Doh for market leadership.

Nickelodeon Enterprises, which includes the networks' consumer products arm, is the fastest-growing segment of business in Viacom's MTV Networks family. Fueled by the success of licensed products, the division generated about $2.5 billion in retail sales in 2002, up about 19 percent over the previous year while the sales of its bigger competitors, Disney and Warner Brothers, were relatively flat.

The success of Nickelodeon's consumer products follows that of the network itself, which in 2001 had 41 of the top 50 television programs for children ages 2 to 11 -- including Blue's Clues and The Fairly OddParents, according to Nielsen Media Research. It has been the highest-rated basic cable network every year since 1995. Nickelodeon is also basking in the success of its feature films, including The Wild Thornberrys Movie, which has made about $32 million since it was released in late December. Nickelodeon's two Rugrats' movies have taken in a total of more than $250 million worldwide.

These achievements have company executives crowning Nickelodeon The New Disney.

The torch has been passed, said Jeffrey D. Dunn, the president of Nickelodeon Enterprises. Surrounded by licensed products like Rugrats' Kwanzaa videotapes and Dora the Explorer dancing dolls, Mr. Dunn noted that Disney's most popular licensed products were Winnie the Pooh characters and Mickey Mouse, both of which were created several decades ago.

We really are the hit makers of today, he said. Rugrats will be like Peanuts 10 to 15 years from now.

Disney is not so quick to concede defeat.

They've done a marvelous job of building their brand and building their property, said Tim Kilpin, executive vice president for franchise management at Disney. But when you look at it, in terms of scale, scope and reach around the world, Disney is still a more impactful brand to kids and families.

Nickelodeon's retail sales are dwarfed by those of other entertainment companies: in 2002, Disney earned approximately $13 billion in retail sales and Warner Brothers recorded $6 billion, according to License, a magazine that covers the licensing industry.

Still, officials at Nickelodeon said that they had been able to log steep gains by taking an unconventional approach to licensing. The company waits up to two years to observe how viewers respond to a television show before rolling out consumer products, rather than time the introduction of the products with the premiere of a new program or film. For example, the company waited a full year after the premiere of Dora the Explorer to introduce Dora products into department stores. Disney, by contrast, licensed products to accompany the release of its holiday failure Treasure Planet. Those products, like the movie, received a relatively cool reception from consumers.

Nickelodeon has also labored to roll out products in a variety of prices and in a range of retailers. SpongeBob SquarePants paraphernalia was first marketed in 2000 at Hot Topic, a chain of mall-based stores that focuses on teenagers and young adults. In August 2001, Target began carrying exclusive lines of the character's products, which appeared on store shelves of most mass retailers the following spring.

By initially aiming at older children and adults, Nickelodeon officials hope to have extended the life of the SpongeBob brand.

We're looking at the long term, and so we may turn down opportunities in the short term if it means that we're going to have a longer-term win, said Leigh Anne Brodsky, the senior vice president for consumer products at Nickelodeon. We're not interested in having a huge hit that then just falls off the face of the earth.

In 2002, SpongeBob products, including paper towels, toothpaste, underwear, bowling balls and neckties, recorded retail sales of about $700 million, far exceeding Nickelodeon's initial expectations of $500 million, Ms. Brodsky said. Dora the Explorer products also beat initial sales projections, earning about $350 million in retail sales in 2002, up from an early estimate of $250 million. Nickelodeon's best-performing licensed products were based on its Rugrats series, which brought in more than $1 billion in retail sales in 1999, the company said.

Despite Nickelodeon's success, analysts said that basing a business upon producing the most popular television programs is always a risky bet: merchandise based on the network's popular CatDog failed in the stores, for example.

Executives at Nickelodeon said that they would try to bypass the missteps made by other entertainment companies. Primarily the company plans to leave selling the goods it licenses to retailers. Both Disney and Warner Brothers had retail stores that opened with great fanfare and later floundered.

In other areas, however, Nickelodeon is departing from its conservative strategy. In 2004, the company will introduce EverGirl, a Web site featuring stories about four girls, and will depart from its practice of waiting a year until there is consumer demand for products and market a line of apparel and books based on the EverGirl webisodes. To capture the attention of boys, Nickelodeon has become a partner with THQ Inc., a video game company, to introduce characters through new games called Tak and the Power of JuJu. Nickelodeon is also exploring the creation of themed hotels and recently signed a licensing deal with American Greetings to market cards and party goods.

Executives at Nickelodeon said that they were diversifying their business in an attempt to have a presence in every area that is of interest to children. Even that may be risky, analysts said.

The mistakes that the companies make often in this business are trying to plan outrageous successes, and you just can't do that, said Marty Brochstein, the executive editor of The Licensing Letter, a trade publication. Ultimately, Nickelodeon has developed a good plan for evaluating what will work and what will not, Mr. Brochstein added. But, there are no guarantees here.

Photos: Jeffrey D. Dunn, president of Nickelodeon Enterprises, which licenses products like the SpongeBob SquarePants doll. We really are the hit makers of today, he said. (Michelle V. Agins/The New York Times)(pg. C1); The Nickelodeon network's licensed toys include a Dancing Dora doll, left, a karaoke machine, and the Little Bill doll. The company waits up to two years to study how viewers respond to one of its programs before rolling out related products. (pg. C5) Chart: Rugrats Rule Products adorned with characters like Mickey Mouse and Bugs Bunny have long made Disney and Warner Brothers among the leaders in licensing revenue. But now Nickelodeon, with shows like Sponge-Bob SquarePants and Rugrats, is growing much faster than its more established rivals. Nickelodeon '99 -- $0.7 billion '02 -- $2.5 billion Warner Brothers '99 -- $6 billion '02 -- $6 billion Disney '99 -- $10 billion '02 -- $13 billion (Sources: License magazine; company reports)
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