I’m getting asked a *lot* about this topic lately. With the merchandising success of Rovio (Angry Birds), Mind Candy (Moshi Monsters) and Activision (Skylanders) it’s become clear that games can become genuine entertainment brands. Rovio and Mind Candy are each generating $100M+ through combined digital/physical sales and Activision recently announced they’d passed the $500M mark with Skylanders merchandising.
The retail and licensing world has struggled to catch up with this trend. Historically, they’ve lacked the experience to make judgement calls on game metrics as a measure of popularity. Unsurprisingly this is now changing. Talking to licensing companies at the Toy Fair in London last week, there seems to be a growing consensus about benchmarks;
- 400k MAU to start thinking seriously about a licensing program
- 1M MAU to roll out a master toy license (i.e. putting toys on shelves)
These are obviously very approximate and very context-dependent. Also, there’s a very big difference between signing a licensing deal and actually making that license work. In many cases, success has been a function of tightly integrating the merchandise opportunities into the game. One of the secrets behind the success of the Moshi Monsters magazine (top-selling kids magazine in UK) is that it’s produced in-house, essentially side-by-side with their game team.
I often get into arguments with game developer friends of mine. Their companies are generating tens (or hundreds) of millions from digital revenue and really don’t see the point of investing in a category which will give them 8-18% net margins. But with game life cycles shortening (particularly on mobile), surely the opportunity (with the right properties) to turn them into genuine brands is something that can’t be ignored?