Strategies for Maximizing Campaigns for Movie Merchandise

The Star Wars franchise has earned about two-thirds of its estimated $20 billion on merchandising. George Lucas' franchise, now the gold standard in terms of movie merchandising, has come a long way from the days when the rights to a Star Wars Halloween costume were sold for $500, just days before the release of the film. For blockbusters, the success of the movie's merchandising campaign can be more financially significant than critical acclaim. Studios strive to whet the public's appetite in anticipation of a movie featuring a certain character or story through toys and other product merchandise. With the right merchandising campaign, combined with word of mouth and hype, studios can create a marketing phenomenon among moviegoers and a buzz leading up to the release of a film.

However, consideration must also be given to the subject matter of the film. Titanic, the highest grossing film of all time, lacked easily adaptable subject matter for mass-product merchandising, although its soundtrack enjoyed considerable success. In contrast, many top grossing films, including the Spider-Man, Batman, Harry Potter and Transformers series, had extensive licensing deals for merchandise in virtually every imaginable product category. Those films all had readily identifiable and popular fictional characters.

The Road to Merchandising

The billions of dollars in movie merchandising profits reflect the incredible value of intellectual property. If a film is, for example, adapted from a book, or ' more commonly for merchandising in recent years ' a comic book or graphic novel, a movie studio must first obtain rights, either through assignment or more commonly licensing, from the literary work's author or owner. However, that does not mean the studio can begin production of action figures the next day.

Once the rights to a story are secured, in order to merchandise characters, the studio must also acquire the publicity rights from the actors to use their names and likenesses in connection with a merchandising campaign. This is critical because a toy figure of the Harry Potter character is unquestionably more appealing to the public if it depicts the actual actor Daniel Radcliffe, who plays Harry Potter in the movies, instead of a “generic” young male wizard with distinctive Harry Potter accessories, such as glasses and a lightning bolt on his forehead.

Once terms are agreed upon, the movie studio, or any other entity that has been granted the bundle of intellectual property rights, including trademarks and copyrights for the characters and plot, is free to pursue manufacturing companies to produce the merchandise.

Historic Merchandise

With known characters or subject matter that has been available for years, there is also the issue of distinguishing the current merchandise from the historical merchandise. For example, Transformers, Spider-Man, Batman and G.I Joe: The Rise of Cobra are all based on fictional characters that have existed for decades. The merchandise affiliated with these films has been sold in a variety of different styles and by a variety of different manufacturers.

Once a studio decides to start a merchandising campaign for a new film about one of these characters, the studio must address how to draw a distinction between the historically existing merchandise and the new film-related merchandise. Common methods for distinction include a distinctive element or coloring scheme that is uniquely identifiable with the new film. In situations where the same manufacturer is involved in both the existing market and new film-related market ' i.e., Hasbro and both Transformers and G.I. Joe ' the manufacturer will commonly include some distinction either on the packaging or merchandise itself, indicating the merchandise is affiliated with the film.

Merchandising is not limited to large toy manufacturers, such as Hasbro and Marvel Toys (formerly Toy Biz). Some films and television shows develop such a dedicated following that small cottage industries arise selling products desired by fans of those franchises. In many cases, the sellers are rabid fans who merely wish to pay tribute to a franchise, without considering the potential pitfalls when they actually sell their work to others. This practice is wrought with legal issues, the most common being potential copyright or trademark infringement.

Perhaps not surprisingly, Lucasfilm recently won a lawsuit against High-Tech Magic, a small company that manufactured and sold lightsaber replicas. A lightsaber, which is a registered trademark of Lucasfilm, is an energy beam sword that is used in all six Star Wars films. High-Tech Magic advertised the sale of lightsaber replicas on its Web site and allegedly claimed the replicas looked just as good as the ones used in the films. These actions resulted in Lucasfilm winning a $250,000 judgment in a court-approved settlement.

Interestingly, during the lightsaber case, the president of Lucas Licensing emphasized that Lucasfilm will only diligently pursue companies trying to make a profit by infringing its intellectual property rights. This statement was most likely made in response to the risk of backlash among passionate fans against a perceived overzealous protection policy. With any lawsuit involving fan-generated material, companies run the risk of damaging their image among dedicated fan communities and the general public when pursuing potential infringers, particularly those that are small in size and do not appear to be a significant threat to the film maker's merchandising empire.

Specifically with Star Wars, it was important for Lucas Licensing to underscore it was not going to sue fans who are simply expressing their passion for Star Wars. This stance is undeniably comforting news for the hordes of fans, particularly science fiction and comic book fans, who attend conventions in costumes representing their favorite characters. While this position tends to support an individual's rights to dress up and imitate characters, the question of how to address an individual who profits from this practice is complicated.

Costumes and Fan Works

Issues with blockbuster film intellectual property are not limited to the sale of products. As recently documented in the film Confessions of a Superhero, many individuals make a living by dressing up as superheroes outside Grauman's Chinese Theatre in Los Angeles. The practice has become a popular tourist attraction, but these costumed “superheroes” are likely infringing on a number of the owners' intellectual property rights.

Further, infringement issues are not limited to direct imitation of the original work. The Hunt for Gollum, a fan film released in May, is a companion film to the Lord of the Rings trilogy, which depicts the story of Aragorn, a central character from the film trilogy, attempting to locate Gollum, a deceitful, primarily computer-generated character from the trilogy, before he divulges information about the ring. The film cost about $5,000 and enlisted about 160 volunteers to create and was released free on the Web.

While the effort is impressive, there is, however, a rather significant problem: No one affiliated with the Tolkien Estate (managers of author J.R.R. Tolkien's intellectual property) or New Line Cinema (producer of the Lord of the Rings trilogy) ever authorized the film or the use of any characters from the Lord of the Rings. The creators have maintained the film was not made for profit and is intended to be freely viewed by fans of the Lord of the Rings series, and in these cases, there is often a claim of fair use. Although the high production value and potential for advertising revenue through the Internet initially raised some intellectual property concerns, the Tolkien Estate has maintained no lawsuits will be filed so long as the film remains a nonprofit venture.

Merchandising Tops Box Office

The potential for lawsuits is not surprising considering the staggering amounts of money generated by merchandising agreements. Transformers: Revenge of the Fallen is a notable example of how lucrative these deals can be. Following the nearly half-a-billion dollars in revenue from the first film, Hasbro is expecting the sequel to generate about $600 million in merchandise sales by the end of the year. While this number seems impressive, in a testament to Lucas Licensing's deftness in handling the Star Wars brand, experts believe it will still fall short of topping Star Wars in merchandising revenue for the year despite the most recent live-action Star Wars film's release in 2005.

Although Transformers: Revenge of the Fallen received less than stellar critical reviews, the $600 million in merchandising will likely be achieved thanks to Wal-Mart's calculated decision to target the film for an intense merchandising blitz more than a year ago. Wal-Mart recently established an entertainment council, consisting of marketing experts, which uses a ranking system for evaluating whether merchandise is family friendly and the potential marketability of the merchandise.

Box office earnings now routinely account for less than half of the entire earnings for many blockbuster movies. The process of generating a film-related action figure for mass production in preparation for a film's release requires multiple steps, including securing property rights and distinguishing from an existing market. Further, movie studios must always be aware and diligent when policing fan-created products and merchandise, which are a creative way for enthusiasts to show their appreciation. At a time when fans can create a movie that resembles, in story and even in quality, the original movie, a delicate balance must be struck between enforcing valuable rights and alienating the very fans who make those rights so valuable.