Long-standing and successful licensed toys have traditionally been based first on published characters, and then on TV properties. Think Paddington Bear, Mr Men, the various Disney icons and more recently, Peppa Pig, In The Night Garden and Ben 10, to name but a few.
But there’s a new kid in town. The developers of apps and virtual worlds are increasingly branching out into physical product with licensing programmes including toys, games, magazines and more.
With the internet and mobile phones becoming increasingly prevalent in kids’ lives, it seems the characters and worlds held within are catching their imagination.
Jeff Jones, VP and general manager, digital games, The Walt Disney Company EMEA, explains: "Virtual worlds provide a really immersive and engaging storytelling environment. In Disney Club Penguin, kids can play their part in adding to the story-world, enhancing the experience not only for themselves but also for other players.
"In a virtual world you can include the little back stories and tangential things that make the experience even more entertaining, which in turn can help kids create their own myths."
He adds: "Kids love gaming, they enjoy having a digital dialogue with their favourite characters, they want to influence the journeys their character takes and with this kind of connection it’s no wonder that they also want to prop them up on their pillow too."
In this interactive, immersive environment, it’s clear why children are becoming more attached to its characters. But is this licensing model likely to overtake more traditional routes to market?
Outfit7 is the creator of apps including Talking Tom Cat, Talking Larry the Bird, Talking Gina the Giraffe and many more. The firm’s chief marketing officer, Paul Baldwin, thinks apps and virtual worlds are the way forward for licensees.
He offers: "Because of the interactive nature of apps, they may one day overtake TV. Watching TV is a passive experience, while touching and speaking to an app is an interactive experience."
Darran Garnham, head of global licensing at Mind Candy, the creators of Moshi Monsters, believes while new media is taking a share of the revenue, the two are likely to exist side by side. He says: "The fact of life is that all media is now accessible on numerous devices away from the traditional TV and big screen.
"The power is no longer in the hands of powerful Hollywood or television executives to what kids watch and when. The accessibility for kids to use PCs, laptops and all the gadgets Apple offers has opened a new world of opportunities.
"However, TV and big production movies will always have a place in the home, you can’t ignore the social nature of watching something with popcorn in hand – but the new kids on the block like Mind Candy will be taking more shelf space at retail."
Many of the early ‘virtual licensors’ began their businesses without incorporating licensing into the plan. Kat Delarvé, director of licensing at Stardoll, tells ToyNews: "Stardoll.com was not started with a plan to do toys or any other physical products. Stardoll was created to give girls a place on the web to be creative and to express themselves through fashion and design.
"For us that will always be the driver and that is why our fashion dolls we have created together with Mattel will have a strong tie in to the virtual world of Stardoll.com, unlocking exclusive virtual replicas of the doll fashions for your own Avatar (MeDoll) and much more."
Jones agrees and explains the ‘pester power’ that Disney experienced from users to create a toy line: "When Club Penguin was founded the ambition was to create an online environment that was entertaining and fun for kids and with safety at its heart, provide peace of mind for parents.
"As the community grew, there were increasing requests from members to have plush, video games and lots of other toys. We are in a really privileged position where kids can get in touch with us directly and tell us what they want."
Users have also helped to develop licensed ranges further: "It was off the back of requests from kids that the Puffle and Penguin plush came, as well as our successful Nintendo DS and Wii games, all of which provide connectivity to the virtual world. New requests come in every day and we’ve got more exciting products in development as a result."
One of the most recognised apps is Angry Birds. Rovio’s game grew steadily from its launch in December 2009 to become number one in the App Store and something of a cult hit. The news that a toy line was on its way didn’t break until a year later.
Potential licensees contact Rovio on a daily basis, but the firm is careful when choosing partners. Rovio’s Peter Vesterbacka told ToyNews’ sister publication, MCV: “We turn most down. We’ve been very selective so far. The Mattel game really made sense – and they have massive distribution in retail.
"There have been so many suggestions, but the products we actually like are the ones that are a bit different. We have been looking at opportunities in sports for instance. It’s a case of ‘expect the unexpected’ from us. But at the same time it has to work with the brand."
Despite many of the existing licensors coming to physical goods further along the line, now that the model has proved successful, it’s likely that many will build the extra revenue stream into early plans.
Baldwin offers: "We are working on a line of toys, games, books and apparel in addition to film and TV. We had the vision that our characters appeal would extend beyond apps hence the licensing programme."
Garnham believes this will become the norm: "I think now that the code has been cracked and products from apps/online worlds are translating into retail sales, moving forward we’ll see companies building new applications and keeping one eye on the revenue available in physical merchandise. However without a good product first it won’t resonate with consumers."
A strong property is also important when ensuring product doesn’t hit shelves when the app or virtual world has waned in popularity.
Jones says: "The one thing that works in the licensee’s favour is that the success of a virtual world does not happen overnight. It takes time to build community but longevity comes from this, so just like any investment it’s important to watch and understand the market."
Delarvé foresees a different problem with timing: "It is equally difficult for a brand offline as for a brand online to stay relevant and successful. The difficulty is rather that virtual worlds have a quicker pace of innovation and product development than offline properties making it necessary to update offline products continuously."
As with product development, the renewal of content is often carried out with the help of the kids. Jones continues: "Our players can have an instant dialogue with us, they can let us know what they want to see in the world, the kind of parties, quests and games they’d like to play or the toys they want. As a virtual world we are in constant development and can more easily include ideas from the community into this process."
It seems like a win win situation. But, the all-important question is what makes a successful digital property in the first place?
Garnham muses: "This is the million, even billion, dollar questions. Know and listen to your audience and give them a quality product – kids deserve the best. Don’t be afraid to take some risks and continue to build on key factors to keep the brand fresh."
Jones’ theory: "The first priority has to be creating an immersive environment with great characters, an engaging story-world with lots of games and challenges."
And Baldwin believes: "It’s the same thing for all ages. It’s creating engaging characters that people connect emotionally with. The exact same thing that Disney or Pixar employ. Character first, then success will come."
Most popular virtual worlds
(Source: comScore February 2011)
Club Penguin - 1.224m
Moshi Monsters - 927,000
Stardoll - 754,000
Habbo Hotel - 481,000
UK Social Network Sites
(Source: Experian Hitwise, May 2011)
Share of Visits
1 Facebook -54.80%
2 YouTube - 20.03%
3 Twitter - 2.89%
4 Yahoo Answers - 2.19%
5 Gumtree - 1.50%
6 Tumblr - 0.64%
7 LinkedIn - 0.60%
8 Moshi Monsters - 0.53%
9 Myspace - 0.46%
10 Club Penguin - 0.37%