Ben Alexander
FutureFront Interdisciplinary Research Institute, New York, USA
Abstract:
Chinese movie licensed merchandise is highly active in the internet era and exhibits distinct internet characteristics. The value of movie merchandise is amplified by the power of the internet, but its impact remains limited. This study employs in-depth interviews to understand the current state and challenges in the development and marketing processes of movie licensed merchandise. From the perspective of symbiotic marketing theory, a sample survey and data analysis of European and American films reveal that the genre and series of a film directly influence the development of its licensed merchandise. Meanwhile, box office success and critical acclaim do not necessarily determine merchandise sales. Consequently, the paper proposes that the symbiotic marketing model for Chinese movie licensed merchandise should focus on the “symbiotic conditions” between movies and merchandise and choose products that can establish strong connections with the films to achieve value co-creation. This approach aims to maximize the value of movies and promote the prosperity of the movie market.
Keywords: Traffic, Movie Licensed Merchandise, Symbiotic Relationship, Symbiotic Marketing, Consumer Demand
According to media reports, on December 29, 2021, at midnight, Shanghai Disneyland’s “2021 Duffy and Friends Christmas Series” merchandise was released for sale with a limited time and quantity. This merchandise could only be purchased through a lottery system. At 3 a.m. on that day, more than 5,000 people were queuing to buy plush toys at Shanghai Disneyland, and the related topic even topped the Weibo trending list. Previously, the “Lina Bell” plush toy, also a Disney product, was priced at only 219 yuan but soared to over a thousand yuan after resale, and the original price of 500 yuan for a full set of Lina Bell merchandise was sold for more than ten thousand yuan. For these consumers who are willing to queue in the early morning or pay a high premium to purchase Disney merchandise, consumption behavior and process become a kind of “ritual.” Consumer emotional capital is fully mobilized, transforming consumption into a form of cultural activity. This phenomenon aligns with what the famous French thinker Jean Baudrillard pointed out in his book The Consumer Society: In today’s society, what attracts consumers is not the function of the goods themselves but a kind of symbolic meaning that is manufactured. The consumer’s “demand is not aimed at the object but at value. The fulfillment of demand primarily holds significance attached to these values. The basic, unconscious, and automatic choice of the consumer is to accept a specific social lifestyle.”
The consumption of movie licensed merchandise is also a symbolic and meaningful type of consumption. Movie merchandise is a product that has been “carefully packaged” by the movie itself. The movie serves as an advertisement for the product, creating stories and purchase motivations. Whether it is Disney’s “Lina Bell” or the timeless image of Mickey Mouse, these symbols act like decoders that can decode the products and automatically attach themselves to new coding rules, allowing ordinary products to exceed their inherent value.
There is no lack of market for movie merchandise, but the lack of high-quality IP in China has led to a greater pursuit of foreign merchandise. This is not conducive to the expansion of the Chinese film market or the construction of a Chinese cultural consumption society. Therefore, exploring the development dilemmas of Chinese movie licensed merchandise and proposing targeted solutions has become the focus of this study.
I. Reconsideration of the Definition of Movie Licensed Merchandise
Regarding the definition of movie licensed merchandise, academia has not yet formed a unified understanding. Xiting (2004) referred to movie licensed merchandise as “post-movie products,” mainly covering rights transfers and product development, aiming to maximize all downstream revenues beyond cinema screenings. Wang Qinqin and Zhang Hong (2011) suggested that movie licensed merchandise includes “post-products” based on the content of the completed film and “derivatives” based on elements within the film, focusing primarily on the overall movie project with copyright transactions as the basic form. Liu Fan and Zhao Yuqi (2012) proposed that, in a narrow sense, movie licensed merchandise refers to related products derived from the elements of the movie itself, while in a broad sense, it includes various TV programs, documentaries, books related to the movie, or props, toys, stationery, souvenirs, etc., made from movie content. Additionally, it includes bumper ads, product placement, theme parks, and movie shooting location tourism products.
The term “licensed merchandise” is not an imported term. In terms of etymology, some scholars have directly translated “derivative” as “derivative,” but “derivative” itself has two interpretations: one is a mathematical derivative, which is the rate of change of a function with respect to a variable; the other is a specialized term in economics, referring to financial instruments derived from primary assets, which have strong liquidity and self-transformation ability. In this regard, it has a certain similarity with the characteristics of movie licensed merchandise. However, financial derivatives in economics convert the value of one form of asset into another form to reduce the risk of holding any particular form of asset. Movie licensed merchandise, on the other hand, is a tool to increase the value of a movie and is not intended to shift investment risks.
The corresponding term for movie licensed merchandise overseas is “movie merchandising,” which is a marketing strategy for movies. For manufacturers, incorporating elements of a successful movie into a product can stimulate sales at a lower cost than advertising; movie companies also use products to enhance the added value of movies. Generally, movie companies sign two types of agreements with merchants: one is a product placement agreement, where manufacturers directly display their products in the movie; the other is a merchandise licensing agreement, where movie companies authorize manufacturers to use the names, characters, or images from the films to produce related toys, clothing, and other peripheral products. For movie companies, the marginal cost of this type of authorization is almost zero, but the marginal revenue is incalculable. However, manufacturers must bear the risk of not selling the products if the movie fails.
Another high-frequency term related to movie licensed merchandise is “franchise.” The European Franchise Federation defines franchising as a business strategy that can increase customer and market share through a strategic alliance around a marketing system, created through the joint efforts of the franchisor and the franchisee to create an image in the customer’s mind about how the company’s products and services help them. Specifically, franchising is the franchisor granting the use of its trademarks, products, patents, and business management models to the franchisee in the form of a franchise agreement. In movies, franchising not only refers to the serialized production of films but also relates to consumer products, video games, home entertainment, music, books, comics, theme parks, and other industries, maximizing the value of the movie brand while controlling risks.
Based on the understanding of movie licensed merchandise both domestically and internationally, this paper defines movie licensed merchandise as “licensed goods with a movie as the core,” distinguishing them from content products disseminated through broadcasting authorization on the internet, TV, DVD, etc., as these products only change the medium of play without becoming physical commodities. It also distinguishes them from comprehensive venues such as theme parks, cultural tourism real estate, and movie museums, which are application scenarios and consumption channels for movie merchandise, focusing on services and experiences rather than creating a specific product.
II. The New Business Model of Chinese Movies under the Background of “Internet+”
The technological and industrial innovations of the internet have rapidly triggered chemical reactions with the key elements of various industries, and Chinese movies have quickly embarked on the path of internetization. The year 2014 is regarded as the “internet year” of Chinese movies, where “the marketized movies needing new capital and channels, and the equally marketized internet needing new content and users, instantly ‘clicked.'” Thus, the “internet gene” has fully permeated every link of the movie industry chain. Movie licensed merchandise, the most neglected link in the industry chain, has received unprecedented attention, and the value of movie copyrights has been amplified by the internet, giving rise to new movie profit models.
Movie licensed merchandise is a product that benefits film companies, licensed merchandise merchants, and internet platforms. For film companies, the authorization of movie copyrights is not just a business to earn licensing fees but also a way to achieve cross-industry integration through different authorization methods, attract more traffic, extend the film industry chain, and expand the dissemination and influence of movies. For merchants, the integration of movies and products is not just about increasing product sales but also about creating products with stories and content to gain emotional recognition from consumers and subsequently impact the sales of other products in the store. The internet provides crowdfunding and other online platforms for movie licensed merchandise, attracting upstream copyright holders and downstream merchants to participate together, allowing for early understanding of consumers’ movie preferences and product purchase intentions. This facilitates product strategy adjustments under low or no inventory conditions, achieving efficient product conversion, thus influencing and driving the joint development of related enterprises.
During the summer of 2015, the movie “Monkey King: Hero Is Back” ignited discussions on social media platforms like Weibo, Tieba, and Douban. With almost no prior publicity and unfavorable theater scheduling, it successfully achieved a reversal through the so-called “internet water army” word-of-mouth marketing, reaching a box office of 956 million yuan, breaking the box office record for Chinese animated films. As the film gained popularity, fans’ demand for surrounding merchandise for “Monkey King: Hero Is Back” soared. The filmmakers, in cooperation with Alibaba, launched a series of peripheral projects on Taobao Crowdfunding, including dolls, resin figure pendants, umbrellas, themed notebooks, home textiles, etc. The brand partners included Paradise, Morning Light, Mengjie, Great Leopard, Manzong, etc. “14 crowdfunding projects, originally scheduled for a crowdfunding period of one month with a target amount of 996,000 yuan, actually raised 11,816,000 yuan in just one day, with an achievement rate of 1,186%.”
This emerging business model has since attracted industry attention. “Not only are more and more film and television companies paying attention to the development and operation of licensed merchandise, but internet companies and brand merchants are also joining the authorization, design, development, production, and sales of movie merchandise. Moreover, financial enterprises are involved in financing, building service platforms, and operating systems with the characteristics of China’s market economy.” The participation of multiple parties has made this nascent market full of confidence and vitality, allowing movies to leverage the momentum of the internet to find possibilities for cross-border integration.
The introduction of the internet has lightened the assets of the film industry, relying on optimizing structures, improving quality, and enhancing resource utilization and market competitiveness to achieve the intrinsic growth of movies. Traffic is the “new driving force” for the development of movie licensed merchandise, amplifying and strengthening its service function, with the role and significance lying in promoting the circulation and recycling of movie products and establishing a new concept of movie consumption.
III. Development Dilemmas in the Industrial Chain of Chinese Movie Licensed Merchandise
The development of Chinese movies has faced numerous obstacles due to the impact of the COVID-19 pandemic. Film and television companies have had to make deep adjustments, focusing on core businesses and reducing unnecessary expenses. Compared to the box office, movie licensed merchandise does not create immediate business performance for enterprises, so many film and television companies suspended related businesses during the pandemic. This shows that Chinese movie licensed merchandise can only “add the icing on the cake” to the film industry but cannot “offer help in time of need.”
In-depth interviews with film companies revealed that the operation of movie licensed merchandise is restricted by various links in the industry chain, and any problem in one link can have a chain reaction on the entire industry chain.
Production Stage: In recent years, major film and television companies have begun to focus on the development of licensed merchandise. Many projects even start before scriptwriting begins. However, some companies still do not have a development plan for merchandise, waiting until the movie becomes popular or piracy is rampant before considering developing licensed merchandise. A lack of early project planning can cause the film to miss the merchandise market. For example, the 2016 annual box office champion “Monster Hunt” saw its little demon king “Huba” become beloved by audiences after the film was released, but the producers initially had no plans for character development. The absence of authentic toys resulted in numerous knock-offs, ugly and poorly made, flooding the market.
Distribution Stage: In recent years, changes in the release schedules of Chinese movies have been frequent, with temporary adjustments disrupting the market rhythm and making the development of movie licensed merchandise difficult. For example, the movie “Youth” was temporarily rescheduled one week before its release during the National Day period. Before the rescheduling, over 30 merchants had launched “Youth”-related movie merchandise on Taobao Crowdfunding and even secured a splash ad on Taobao Crowdfunding. According to industry insiders, this crowdfunding campaign generated tens of millions of exposures for the movie. However, the temporary change of the release date caused huge losses to the merchants. The film shifted from the National Day slot to Christmas, rendering seasonal movie merchandise such as clothing almost unsellable, and sales of movie merchandise related to National Day elements also fell short of expectations. “Traffic” became the merchant’s “stock.”
Merchandise Development: For film and television companies, uncertainty in scheduling and content adjustments makes it difficult to plan the development of merchandise in advance. A very critical step in the development process is gallery design. Generally, film companies outsource this business to professional design companies or IP service providers. Gallery design is akin to the “secondary creation” of movie characters, requiring a long cycle and high technical difficulty and serving as a strategic core link in the movie licensed merchandise industry chain. However, due to various uncertainties in practice, the time left for gallery design is often very short. It is noteworthy that since celebrity images cannot be included in the licensing scope by film companies, in realistic-themed films, what can usually be developed as licensed merchandise is the extended design of the film title. Many movie merchandise for “Youth” only featured products printed with the text “Youth” or “Youth.” These types of merchandise may generate some traffic in the short term but will soon be replaced by similar or pirated products in the market.
Sales Stage: The distribution channels for Chinese movie licensed merchandise are mainly divided into online and offline categories. Online platforms develop quickly and have a broad reach, generally divided into five models: (1) Comprehensive e-commerce platforms like Taobao (Tmall), JD, etc. Increasingly, merchants add movie licensed merchandise to their regular products to expand categories and increase exposure, thereby boosting the sales of other products; (2) Enterprise-built licensed merchandise sales systems, such as online movie merchandise stores in Universal Studios, theme parks, and movie museums; (3) Movie ticketing websites, such as Maoyan, Taopiaopiao, Xingmei Tickets, etc., where viewers can buy their favorite movie licensed merchandise when purchasing movie tickets; (4) Video and music platforms, such as iQiyi, Tencent Video, NetEase Cloud Music, etc., with their merchandise stores; (5) New media content platforms and social e-commerce platforms, including WeChat public accounts, Weibo, Xiaohongshu, Douyin, Huoqiu Buy Hands, Modian, etc. The “content + social + e-commerce” model is currently the most common business model for Chinese movie licensed merchandise. At the same time, offline channels for Chinese movie licensed merchandise include movie merchandise stores in cinemas, movie merchandise specialty stores, comprehensive retail stores, theme parks, and cultural tourism real estate. It can be said that Chinese movie licensed merchandise does not lack sales channels but lacks products that can genuinely attract consumers for the long term.
IV. Prerequisites and Basic Methods for Constructing Symbiotic Marketing Strategies
Symbiotic marketing was initially applied to business relationships between enterprises and was proposed by Lee Adler in the Harvard Business Review in 1966. It refers to “an alliance of resources or plans between two or more independent organizations, aimed at increasing the market potential of each organization.” This definition has two key components: First, the establishment of a symbiotic relationship is to allow each party to gain synergistic benefits; second, this relationship is formed by independent organizations. This foundational framework focuses on potential symbiotic models between contemporary enterprises and is used to identify and evaluate symbiotic opportunities.
Disney is a “pathfinder” in achieving symbiotic marketing by combining movies with other industries. As early as when Disney was just a small animation company, Walt Disney had already started earning licensing fees from the franchise rights of “Mickey Mouse” and looking for channels that could coexist with movies, such as watchmakers, publishers, and clothing industries. Over several decades of strategic deployment, Disney has continuously launched new animated characters to expand new channels, while also building its sales channels through consumer scenarios such as theme parks and retail stores, directly targeting consumers to obtain massive revenues.
Hollywood studios initially only imitated Disney in doing some simple licensing businesses and did not “diligently manage” the licensing market. In 1977, 20th Century Fox released “Star Wars,” offering character copyrights to manufacturers for free, only requiring them to promise to advertise the movie on their products. As a result, “Star Wars” related products sold over four billion dollars. If calculated at six percent of wholesale prices, the royalties alone were at least 120 million dollars.” The first “tie-ins” strategy missed out on licensing revenue, but it revealed a huge business opportunity to Hollywood studios. In subsequent movie strategies, Hollywood studios maximized the potential of bundling toys, T-shirts, and other products with movies.
Symbiotic marketing is a movie marketing strategy, but not all movies can form a symbiotic relationship with other products. Many factors influence the development of movie licensed merchandise. In the past, Chinese film and television companies highly valued factors such as box office, word-of-mouth, genre, star cast, and creative team when evaluating the value of developing licensed merchandise for movies. However, there has been little research on the correlations between these factors and licensed merchandise.
To find suitable movies, it is still necessary to match the degree of association between movies and products and make further judgments on the symbiotic value by evaluating the “symbiotic degree” between movies and products. The stronger the association between movies and products, the higher the degree of differentiation of movie licensed merchandise, and the more vitality it has. Conversely, the weaker the association between movies and products, the more homogeneous the movie licensed merchandise, and the less competitive it is.
The most common licensed merchandise in the Chinese movie market are “fast-moving consumer goods” like phone cases, keychains, cushions, bookmarks, and T-shirts. These products have a low degree of association with movies and a high degree of substitutability. For example, the shape of a phone case is fixed, and movie elements are merely filler content for the phone case without adding attractive value to the phone. In terms of categories, most of the super “IPs” build core barriers in one or several specific fields. For example, the strongest associated product for the “Transformers” series of movies is Transformers toys; for the “Harry Potter” series, it is props from the film; for the “Spider-Man” series, it is clothing, etc. Therefore, finding strong associations between movies and products can enable empowerment between the two, creating market value beyond expectations.
Therefore, before establishing cooperative relationships, film companies, licensed merchandise merchants, and platforms need to conduct a detailed analysis of the matching degree between movies and products. This involves signing licensing contracts, gallery design, product positioning, organization, coordination, and a series of tasks. This intermediary role is crucial in the symbiotic relationship among the parties. Currently, some domestic film companies have set up wholly-owned subsidiaries to operate movie licensed merchandise, such as China Film’s establishment of Beijing China Film Marketing Co., Ltd., to promote movie IP licensing business and development projects. Some film companies outsource this business to movie IP service providers to reduce operating costs. From a certain perspective, finding professional movie IP service providers is more beneficial to the development of the entire industry because the motives of symbiotic partners are not always aligned: Film companies aim to earn copyright revenue, expand movie publicity, and influence by creating licensed merchandise; while merchants aim to increase product content, radiate, and drive the sales of other products in their stores. Thus, both parties will maximize their profits, even if some practices negatively affect the development of the entire industry; movie IP service providers can play a relatively neutral role in coordinating the relationship between all parties and reaching a certain level of consensus.
Conclusion
Movie licensed merchandise is a typical product of the era of spiritual economy. It integrates the spiritual core of movies into traditional industries, allowing ordinary products to become unique, emotional, and personalized because of new stories, symbols, elements, and creativity. These off-screen spiritual products provide new satisfaction for audiences, thereby creating new consumption needs and experiences. “Movies+” is an inevitable path for the movie industry to gradually mature and is a development model for movies to continue generating social and economic benefits after going offline. Chinese movie licensed merchandise reflects the development potential of licensed merchandise in the context of the internet traffic economy but also exposes the various problems and constraints in the industry chain. The symbiotic marketing strategy is a potential development model for Chinese movie licensed merchandise in the future, but whether movie elements can successfully integrate with other industries depends on the movie’s own “symbiotic conditions” and the “symbiotic degree” between movies and products. The formation of these symbiotic relationships requires long-term content accumulation and market cultivation.
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