India - Current Licensing Trends

INDIA

By Rutika Malaviya Founder & Editor-In-Chief, Rooh Entertainment | Licensing Corner Mumbai, India

rutika@roohentertainment. com www.roohentertainment.com www.licensingcorner.com

Current Trends in the Licensing Industry 2021

No points for guessing that the product licensing community has suffered due to the sudden advent of the COVID 19 pandemic. There has been a dramatic shift in the consumer’s buying patterns and businesses have struggled to keep up with the trends. 2021 is the light at the end of the tunnel, experts suggest that the economy will bounce back to normal after the second wave subsides and Licensing Corner believes brand licensing market size will significantly grow. The global market is expected to grow at a CAGR of 4.5% between 2020 and 2025. This means that licensing enterprises will remain exciting spaces to work in. Despite 2020 being a slow year in terms of revenue growth, licensing deals, issues concerning the overstocks due to lockdown and other restrictions, there are few trends that have stuck through the pandemic.

CURRENT STATE OF THE INDUSTRY

We have all witnessed a paradigm shift in the way customers purchase products. Consumer spending is slowly increasing as the economy begins to reopen. From 14 INR trillion in the second quarter of 2020 to 17 INR trillion in the third quarter to now 22 trillion rupees in the first quarter of 2021, spending is only increasing. The earlier dip in numbers could be explained due to the lockdown and the surge of COVID cases in India. After the steep fall in private consumption, the situation is only going to get better. In the first quarter of 2021, we saw new licensing projects being undertaken and the industry beginning to flourish. Today, every industry has adopted brand licensing, collaborations and extensions to earn an extra source of revenue and explore more ways to attract consumers. This trend is especially more apparent in the digital space.

Content Licensing

Indian digital media is set to grow at 20% to reach a market size of 18,938 crores by 2021. Experts believe that by 2022, it will be over 70,000 crores with a CAGR of 11.59%. With digital media growing at such an exponential rate, it will only give rise to content creators and influencers. Today content creators can reach any brand’s ideal audience without being too salesy or preachy. A testimony of the growing popularity of influencers is google searches, in the last three years there has seen a 1500% increase in the number of google searches for influencer marketing. The global influencer market is valued at 7.68 billion dollars and is only expected to grow. With good reach on social media, influencers can negotiate not only when it comes to sponsorship or brand deals, but also royalties and launching their own collection. In the last year alone, we have witnessed a stupendous growth of social media use and individual creators. Influencer marketing remains a lucrative option for brands across all niches. The crux of the influencer culture is that individual licenses will continue to grow. Big creators can now give permission to brands to use their content in projects. The

Samai Raina

Anubhav Singh Bassi

influencer market size is expected to grow from 1.7 billion dollars 2016 to 13.8 billion dollars in 2021. Content creators now have a newfound opportunity to make use of their licenses. Some of the recent examples of influencers using brand licensing for monetization are comedians selling their own merchandise. Comedian turned chess streamer Samay Raina launched his official merch in the first half of 2021 and it was an instant success. Another Indian comic Anubhav Singh Bassi who has a following of over 2 million YouTube subscribers launched his own merch in the midst of the pandemic. All products had a one-liner joke performed by Bassi. Needless to say, they sold like hotcakes. Another creator, Prajakta Koli also known as MostlySane hopped on the bandwagon and announced the launch of her merchandise on her Instagram. Social media has allowed us to maintain a direct connection with celebrities of our choice which is why content licensing and influencer marketing is there to stay and grow exponentially.

Music Licensing

The Indian music industry will be worth 19.2 billion INR by the end of 2021. The industry is said to grow at an annual CAGR of 10.8%. The digital music licensing industry is valued at 665 crores according to the music consumer study in 2021. Today consumers can take online licenses in exchange for online payments and the digital sales contributed to the revenue by 78.5%. The music licensing journey flourishing with the introduction of big players entering the local market continues. India will be a battleground for these streaming services which could, in the end, spoil customer with too many choices. Music streaming services will license their catalogs to social media platforms or video platforms. In April 2021 Saregama licensed its entire catalog to short-form video platform Triller. Facebook launched a caravan with old songs, allowing it a robust music library of over 1,30,000 songs. Saregama was compensated well for the legacy they have built over the years. Saregama has a rich collection of songs in over 25 languages which feature legendary artists such as Gulzar, R.D Burman and Geeta Dutta This was also mainly due to the TikTok ban in India and with the launch and rise of Instagram Reels, Facebook Shorts, and YouTube Shorts. Many other short video platforms have seen a surge. If 2020 was the year for OTT players, 2021 can easily be termed as year of short-video platforms.

Prajakta Koli

Experiential Licensing

In 2021 more and more brands are likely to invest in experiential marketing which will, in turn, open avenues for new forms of licensing. Consumers are now more than willing to pay for an experience provided they see some potential value in the proposition. In fact, one third of consumers have paid for a brand experience. Live events can invoke a sense of nostalgia and community. We have all seen Louis Vuitton restaurants, FRIENDS cafes, or birthday parties themed ‘Sacred Games’ or ‘Tinkle’. Kidzania has built successful brand relationships by understanding the value of experiential licensing. One thing that we all can safely agree upon is that 2021 would keep reminding us of the “good old days of the past.” This isn’t by accident, after the initial lull in business, brands started to capitalize on Nostalgia. In 2019, Amar Chitra Katha Alive Centre hosted live events so that children could experience mythological stories. The program was called Kala Gurukul and it was a massive success. In a screen-dominated world, experiential licensing is a great gateway to exchange intangible value. The success of Disney Land, Jungle Book, and Robinhood theme indoor parks is proof that experiential licensing will only grow in the coming years.

• Simplifying complicated products by licensing

As Marvel continues to entice audiences, the use of its characters to simplify complicated products grows. There is an unending list of brands that have benefitted from this model. FIFA for example uses Marvel characters to explain strategies that could be used in football. This keeps the user’s interest alive despite the information

being seemingly educational in nature. Such propositions are endearing for the consumer, which is why there can be ample licensing opportunities in this segment.

• Fandoms will continue to dominate

By generating a revenue of over 11 billion dollars worldwide, Marvel remains one of the profitable franchises ever. In 2004 2005 Walt Disney merchandise was available in India, back then they featured characters who were meant for the school-going audiences. Disney now has a range of products that cater to the needs of everyone from toddlers to adults. A few years ago people would have been reluctant to buy a premium product simply because it had a picture of some Marvel character on it. Today, people are more than happy to spend on character-based products since these products are now associated with fandom and instil a sense of community. The success of McDonald’s collaboration with BTS is proof that people would be willing to spend more to experience a sense of belonging. After the collaboration, visits to McDonald’s rose by 12 % despite the ongoing pandemic. The success of Licensing enterprises like the Souled Store, is a proof that Fandom enterprises such as Marvel, DC, and F.R.I.E.N.D.S is not going away anytime soon.

Toy Licensing

The Indian toy market was estimated to be worth approximately 38.1 billion in 2020. After the border dispute with China, India made the trade policies more rigid and discouraged the import of Chinese goods. The government had effectively imposed a BIS - Bureau of India Standard certification mark for toys. The absence of the certification mark can lead to criminal prosecution. Such strict government policies have given a chance to local artisans to showcase indigenously produced toys along with Atmanirbhar and Make in India campaign by Government. Homegrown toys such as the Chhota Bheem franchise today have a brand value of over 300 crores. It is also one of the top-selling toys in the back-toschool category in the South Asian markets. After the augmented viewership of over 40 million, the character is destined to be a success. The show gets 40% of its revenue through licensed merchandise only.

AROUND THE WORLD:

E-COMMERCE GROWTH IN 2020 7 - 8% 18.5% 20.0%

India USA China Source: Forrester Research

E-commerce Industry

Movement control restrictions owing to spread of COVID 19 in India has propelled the E-commerce market, resultant sector turned out to be the most preferred shopping option during 2020. COVID 19 created strong growth outlook for the E-commerce as during the lockdown period this channel worked as saviour for many. The pandemic has brought a massive change in the buying behaviour and preferences of people and led to massive digital adoption. CoD is the preferred mode of payment in the ecommerce sector however 2020 has brought a shift in consumer behaviour towards selecting modes of payments with digital payments like GPay, Whatsapp Payment, PayTM etc. Mobile payment has grown considerably with 50% of online shopping is done on mobile. The pandemic pushed everyone to go digital and motivated people to shop online. There is no denying that the nationwide lockdown had an impact on the current commerce industry as well but the online retail sector quickly recovered with the onset of the festive season in 2020. Ecommerce sales were estimated to have risen by only 7 8% in India. Low consumer spending and travel restrictions have led to a slower growth. China and the USA both adopted contactless delivery and

fewer travel restrictions to encourage people to spend more money which is why their e-commerce sector grew by 18% and 20% respectively. IIndian internet penetration has reached 50% and it is expanding to bring internet access to more and more people. A report from Statista says that the ecommerce retail businesses grew from US$ 3.535 trillion in 2019 to US$ 4.206 in 2020, and is poised to grow and cross US$ 5.695 trillion by 2021. No one can

doubt that the industry will continue its unrestrained streak in recent years and hit big numbers. If you are an investor, you will definitely want to develop a custom e-commerce website to leverage the unprecedented growth of the industry. That’s for sure. The number of users of e-commerce is set to hit 3.814 billion in 2021 with an excellent year-on-year growth of 10%. E-commerce giants such as Amazon and Flipkart have managed to retain their target audience and are expecting strong sales in 2021. If there is one business that has distinctly gained during the unprecedented Covid-19 pandemic, particularly during the second wave in 2021, it is ecommerce. And this gain has occurred across all product categories and sectors. Building on this advantage, there will only be more traction for e-commerce in the coming year. What will particularly be more noticeable is the entry of a whole lot of new players, both big and small, democratizing the e-retail marketplace. However, this expanded and democratized e-commerce marketplace will coexist with the physical brick-and-mortar retail spaces. The sector saw big upsides from new online shoppers, existing shoppers buying more food and grocery, and mature shoppers moving more of their spending to online platforms.

Retail Sales

after a year-long lockdown, the side effects of the lockdown still persist. The 900 billion dollar retail market has invariably suffered due to the pandemic. Leading brands have closed operations due to low sales. The Chief Executive of The Retailer’s Association Kumar Rajagopalan admits that the retail loss has been over $25 billion to $30 billion during April and May of 2021. The number of retail players will decline if consumer confidence remains low. Sales are set to revive only once the lockdown is fully at ease in most metropolitan cities. In 2020, there was a 45 percent drop in sales during the 1st lockdown period from March to October, however, the sales revived during the festive season. Experts believe that similar history would repeat itself in 2021 as well. Sales will resume as the lockdown begins to ease. Live sports interaction remained limited. Merchandising played a pivotal role in maintaining an emotional connection between the sports players and the fans. There was disruption in the revenue collected due to the health emergency. BCCI had to recover major revenue loss, it was estimated that if the matches were called off there would have been a loss of 2,000 INR crore. Despite no ticket sales, the players were paid in full as per the contract. The official sponsors, Tata, Unacademy, Cred, Upstox, PayTM and Dream 11 had to pay 300 cr (approx) for the full season, however in 2020, they did not pay over INR 155 crore. The advertising budget was reduced by 60 percent and broadcasters such as Star Sports were forced to offer huge discounts to woo advertisers. Merchandising played a critical role in monetization. The sale of official jerseys, sports souvenirs, and sports equipment was the only light across the tunnel. With an incredible retail network, official merch was available despite the pandemic. FanCode & Shop by Arena was launched way ahead of IPL 2020/21 to provide an affordable range of fan gear from leading sports brands.

Conclusion

While these are some trends that remain at the top of the chart, the world of licensing is as unpredictable as the year 2020. What it does tell us is that the industry needs to innovate otherwise brands are destined to fail.