DECEMBER 1983 - VOLUME 4 - NUMBER 12
Putting A Label On Fun
by Kathleen Selvaggio
Pac-Man, that ubiquitous round little muncher with seemingly tireless drive, has long since eaten his way out of the video arcade. Children now breakfast on Pac-Man cereal, courtesy General Mills, and last year swallowed enough Pac-Man vitamins to make them the second best selling vitamin in the U.S. In 1982, Pac-Man made his debut as a Saturday morning cartoon, joined by Ms. Pac and Pac-Baby, both showing equally insatiable appetites. Together Pac-Family is gobbling up fat royalty returns for PacMan owner Bally/Midway Mfg. Co., which has licensed more than 90 companies to sell some 600 Pac-Man products.
Licensing of names and characters is now the hottest marketing strategy in the mass market toy and game business, an industry where a single promotional campaign can make or break a new product. While Saturday morning television advertising has traditionally been the mainstay of toy promotion, marketing strategies are shifting into new areas such as sponsoring special events, licensing, and television programming.
These strategies have made a few winning characters like Pac-Man highly visible, leading to a virtual flooding of children's daily activity with their images. But parents and consumer groups think that creativity is suffering as a result of this lack of diversity, and are concerned that aggressive promotional efforts capitalize on children's impressionability.
Compared to other businesses, the toy and game industry spends a relatively large proportion of its budget on advertising. In 1982, the $8 billion game, toy, and video game industry spent more than $400 million on TV advertising alone. (Breakfast cereal makers, who cater to children through Saturday morning TV, spent $300 million.) To account for such hefty bills, industry executives point to the quickly changing toy fashions, the short pre-Christmas buying season, and the intense competition between companies. Tom Murn, editor of Toy and Hobby World and Licensing Today, candidly admits that manufacturers recognize that "children are very impressionable," and if they "keep plugging away at the product on Saturday morning TV, the message will get through."
With the phenomenal growth of discount chain toy stores, department store retailers have devised new ways to lure cost-conscious customers toward their higher-priced merchandise. Large department stores frequently set up displays and boutiques containing all licensed goods of a given character. Customers wandering into Marshall Fields in Chicago last year could find a separate "Strawberry Shortcake Shop" featuring the cuddly doll and her special sheets, jewelry, video games, cycle, and "berry" nice doll friends combined in one sugary pink display. Department stores have also begun to sponsor special events tied to toy and game product lines, such as Barbie doll fashion shows, Strawberry Shortcake Tea Parties, "Smurf Day" featuring blue milk, and personal appearances by star characters such as Brooke Shields, Darth Vader from Star Wars, or life-size Monchichi characters from Mattel.
The approaches are new and novel, but the goal is still the same: higher sales. Playing upon children's imaginative fantasies, these clever promotional gimmicks are designed to make the children want things they hadn't ever thought of wanting. And children only too easily swallow up the bait.
Licensing: It's the Look That Counts
Popular movie and music stars and the inventors of cartoon, video game, and even toy characters, are increasingly licensing companies to create a broad array of products based on their characters. Besides Pac-Man, which last year raked in well over $50 million in retail sales, Masters of the Universe, Cabbage Patch Kids, and G.1. Joe promise to be the biggest sellers this holiday season, followed by last year's favorites, Strawberry Shortcake, Care-Bear, and Smurfs. For each of these characters, between 30 and 90 companies manufacture hundreds of related products including dolls, cereals, jewelry, toiletries, clothing, bicycles, costumes - and many, many more.
Humorous cartoon and comic strip characters have been a staple in the licensing field ever since Walt Disney introduced Mickey Mouse in the 1930s. But licensing has mushroomed in recent years, growing from a $6.6 billion industry in 1978 to $20.6 billion in 1982, according to Licensing Letter, a trade publication. Of these sales, toys and games accounted for almost $4 billion last year, or 19 percent. Current trends point to an increase of at least 30 percent in sales for 1983.
Seth Siegel, vice president of Hamilton Projects, licensing consultants in New York, finds two reason for this explosion: the heavy licensing of the new video arcade characters, a trend which is soaking up billions of consumer dollars; and the decided tendency among toy companies to rely on toys and games already "pre-sold" through film or video rather than developing new toys. "It's a lot safer to take a standard toy and slap on a label of a character that already has high media exposure," he says. In addition, toy producers find retailers much more willing to make space on their shelves for spin-offs of popular characters than for new, untried items.
Thus as long as the film or new video game character succeeds, licensing works to the advantage of both the licensee, who is assured market success, and the character inventor, who collects royalties on each licensed product sold. Some of the biggest product sellers come from artist/producers who are also marketers. One executive of Twentieth Century Fox Licensing Corporation told Business Week last January that George Lucas created Star Wars "with the toy byproducts in mind. He was making much more than a movie." Steven Spielberg, too, did not pass up the opportunity to profit from his E.T. character. The filmmaker devised an E.T. alarm clock that glows in the dark.
The multiple products reinforce one another's popularity, an effect euphemistically referred to as "heightening consumer awareness" within the industry. But a few toy industry observers do not hesitate to call it "free advertising." "Because licensed products are so visible, they are another form of advertising," says Tom Murn. "If a child sees Miss Piggy on a t-shirt or bedspread, that stimulates an unconscious demand for other Miss Piggy products."
Parents are not so sure promoting consumerism in youngsters is such a good idea. Frank Palumbo, a pediatrician and father in Washington, D,C., wonders whether children are becoming more materialistic. "Kids are being bombarded - they see so many things and they want so many things. The whole effect is to play into the capitalist dream, where everyone will buy everything." Parents also criticize the licensing practice for overlooking creativity in the search for successful, if unimaginative, characters. Industry observers note that consumers have "burned out" on a few licensed characters that have generated an excess of noncreative products and suggest that the licensing trend may be in for a down turn. But most agree that licensing is here to stay.
Saturday Morning Fever
Another important new marketing development closely related to licensing has been the introduction on children's television of cartoon shows based on an already existing toy or game. Wallace Berrie and Co. was the first to use this technique in 1981, when it launched the "Smurfs" cartoon based on its toy. Since that time, 14 such shows have appeared - including "G.I. Joe" and "He-Man and the Masters of the Universe" drawn from adventure toys, "Donkey Kong" and "Pac-Man" based on video arcade games, and "The Shirt Tales" based on a Hallmark card character. Eight more are currently on the way.
While television characters like Mickey Mouse or Shirley Temple have spawned products for decades, the new TV shows are generated in the reverse - from the toy or game itself. In addition, commercials for the very same toys that yielded the shows also appear during the Saturday Morning prime time hours, sometimes featuring both the toy and the cartoon character together.
Some parents and consumer groups have become alarmed at this trend, which they say is gradually integrating TV programs with commercials and manipulating children by blurring the distinction between entertainment and advertising.
Leading the battle is the Association for Children's Television (ACT), a 15-year old coalition of parents, teachers, health professionals, and unions based in Massachusetts. ACT charges that these new TV programs violate federal communications standards by "interweaving program content so closely with the commercial that the program must be considered a commercial." The group has filed a formal complaint with the Federal Communications Commission (FCC) asking them to classify these shows as "program-length commercials." If the FCC agrees, stations airing these shows would easily exceed their commercial time allowance. The FCC plans to rule on the request within several months.
"Someone has to let broadcasters know that they cannot get away with turning children's television into the big sell," declares Peggy Charren, president of ACT. Charren can produce impressive evidence from the industry's own literature that toy companies deliberately use TV shows to sell their products; Hasbro, maker of G.I. Joe, for example, states openly in trade publications that "Each G.I. Joe figure, vehicle, and accessory available for retail sales will appear in the television series."
Toymakers deny that they use television programming for commercial purposes and warn that ACT's campaign could set a dangerous precedent. To John Wood, a spokesman in Mattel's TV programming division, ACT's success would mean "we would have to banish Mickey Mouse." "That would be un-American," he says. Doug Thomson, president of the Toy Manufacturers Association, criticizes ACT for seeking regulatory solutions to problems, he believes, can be best handled individually. "We go through all this bullshit with the FCC and the lawyers get richer and richer and you can turn the damn television set off just like that."
Charren counters that kids usually don't know enough not to watch shows with strong advertising messages, and that companies take advantage of this naiveté. "If such practices occurred during adult prime time, it would be stopped immediately. The new prime time series `Hotel' is not called 'Marriott Hotel.' "
Taken together, the barrage of advertising, sophisticated new marketing techniques, and the steady integration of children's television serials and commercials add up to an enormous commercialization of children's culture. Nearly all observers agree that this realization is more disturbing in light of the fact that children as a group are much more susceptible to commercial messages than adults. As one mother notes, "Children are not just little adults. They perceive things differently." ACT's campaign may prove to be a significant step toward protecting children's interests against profit-seeking sellers of "fun."
Michael Stone contributed research for this article.