November 02, 2023

Licensing

Brand licensing for adults

Interview with Eduard Ayrapetyan, Managing Director of Licensing at Gazprom-Media Sales House.

According to experts, the adult licensing market is currently experiencing significant growth.

However, product manufacturers still have a lot of questions and doubts. What is the secret to successful licensing? How can products and the licensing franchise mutually benefit each other? What actions should licensors and licensees take to aid industry development?

“Vestnik” spoke with Eduard Ayrapetyan, Managing Director of Licensing at Gazprom-Media Sales House, and found out why the company is growing its licensing business, why it considers this business branch promising, and what the company’s goals are at the moment.

What was the reason for Gazprom-Media to launch the licensing branch?

Licensing of consumer goods should be seen as one of the crucial elements of the sequential building process for any brand. The same approach is applicable to popular movies and series produced by Gazprom-Media Holding companies, which have enjoyed popularity among viewers for many years. Let’s not forget about the opportunities for additional content monetization outside of the classic advertising model in media.

We made the decision to launch the licensing branch based on market analysis, among other things. By the time of launch, a very favorable situation had developed: following the withdrawal of major foreign players, the supply on the Russian adult licensing market decreased significantly. Historically, it has been challenging for domestic brands to compete in this niche, and we saw great potential in developing licenses for Russian franchises focused on teenage and adult audiences. Our experts estimate that this potential is worth about 5 billion rubles in sales revenue for licensees. This is a “window of opportunity” for the business.

As the leading seller of advertising in the media, we are seeing a steady growth in interest towards sponsorship integrations. Clearly, this is in direct response to the manufacturers’ demand for closer interaction with content and deep integration, indicating the need for action.

A vivid example of this demand is when a DIY supplies manufacturer sponsors home improvement shows to educate the design, renovation, and construction audience about their products. More and more companies want to create an association between their products and the emotions viewers feel when watching top-rated shows, movies, or series.

Licensing of consumer goods is an effective tool that helps deliver these emotions through branded packaging directly to store shelves and to the buyer at the most critical moment: when they are making a purchase decision. Emotions really do sell.

What is the current state of the adult licensing market in Russia?

Since the mid-2000s, adult licensing worldwide has demonstrated sustainable growth. More and more manufacturers choose to rent popular brands as a marketing tool. For historical reasons, the consumption of licensed goods in Russia has been lower than in other countries. This factor provides a development basis for several years ahead for those who are only beginning to pursue adult licensing. Besides, the younger generation of buyers is more brand-oriented than their parents.

The market leaves no empty seats. Niches vacated by foreign brands are actively being explored by domestic brands. In 2023, we have already seen a range of new adult licensing offers based on Russian TV series and computer games. This is a great sign for the entire market.

Among all the offers on the licensing market, we have several strengths. Gazprom-Media Holding is an whole universe of entertaining content that possesses the key characteristics of a successful franchise. Firstly, it has a multimillion-strong audience of each successful project. Secondly, it has popularity driven by the recognizability of shows, movies and series. Thirdly, it has unique stories told to audiences, along with the impressions and emotions those stories bring.

Is it possible to transfer past practices to the process of shaping the modern adult licensing market?

When we talk about shaping the modern market of adult licensing in Russia, it might seem from an outsider’s perspective that we are inventing a “licensing wheel.” This, of course, is not the case at all.

The expansion of offerings for adult audiences fueled the growth of major Western brands, allowing them to successfully compete in the Russian market for all these years.

The licensing team of Gazprom-Media Sales House consists of experts who developed this branch of business while working for such companies as The Walt Disney Company, Universal Pictures, and Warner Bros. We have time-tested practices in licensing development for both children and adult audiences. The experience we have accumulated is relevant for domestic brands as well. We actively share our expertise with the market and strive to demonstrate that rapid quality growth is possible only in a strong competitive environment.

Is it possible to further segment adult licensing? What audience are you focusing on, and why?

We offer a broad portfolio of media franchises relevant to teenagers and adults based on regularly updated original content with a focus on comedy, positivity, and trust in beloved characters and stories. We always aim to provide solutions relevant to the target audience of the product manufacturer. Our portfolio contains franchises that address the needs and motivations of the following age groups: brand-oriented Gen Z (ages 13 to 24), young, active and payment-capable millennials (ages 25 to 40), Gen X and baby boomers (41 years and older) with varying income levels.

The licensed merchandise consumption culture affects the market as well. The demand for counterfeit products still remains. How to motivate Russians to buy a quality product that might be more expensive, but is also legitimate?

Considering the possibility of consumers acquiring counterfeit goods on the Russian market and the general tendency to save money, this aspect is indeed a risk zone for modern licensing.

It becomes more challenging for manufacturers to compete solely in terms of price. Consumers no longer rely solely on the quality characteristics of a product to make a purchase decision. The manufacturer has to consider ways to address other consumer motivations. This is where licensing comes to the rescue. A well-chosen and appealing franchise can not only make the product more attractive to the consumer from an emotional standpoint, but also reinforce the motivation to purchase through expert evaluation.

Many familiar brands have withdrawn from the Russian market. How can Russian brands that take their place capture consumer attention?

It might seem that the business scheme of import substitution is very simple: the manufacturer needs to closely reproduce the composition of the products of the brands that have left the market, take up their place on the shelves, and it’s done. Then the buyer will vote with their ruble and make a purchase.

Is that really the case? Not exactly. There is no automatic switch from one brand to another. New products require either obvious additional advantages or accumulated brand loyalty, which cannot be built in a single day. Licensing becomes the solution: it can meet the buyer’s need for certain emotional bonds with the product and secure the necessary level of trust, ultimately influencing the purchase decision.

The manufacturer faces a choice: investing significant time and material resources in their product or building customer loyalty through a side brand, a franchise that has earned enough trust to not only draw attention to the product, but also serve to affirm the customer’s choice. The answer seems obvious.

What is the recipe for success in licensing?

The success formula of licensing has long been known. First, franchises conquer people’s hearts, and then licensed products secure a place in the lives of fans. This is how licenses facilitate sales growth.

In this formula, the success of the franchise itself is easy to calculate: it is measured by the number of viewers, reach metrics, ratings, and even reviews that people leave after watching. With the product, things are a bit different. When selecting a franchise, the licensee must first understand which needs of the target audience the product will satisfy, and which consumer wants it will address.

A proper franchise should not only be loved by the viewers, but also be an optimal fit for accomplishing a certain product-related task. The function of a franchise is to complement and amplify the product’s benefits. If this synergy is broken, and if the franchise and the product clash against each other, the consumer experience with the product will deviate from expectations. In such a case, neither franchise loyalty nor a low price will help. Therefore, when creating licensed products, it is necessary for the manufacturer and the rights holder to focus on the needs and motivations of the buyer.

What determines Gazprom-Media Holding’s licensing calendar during the season?

The foundation of our licensing calendar is, of course, the premieres of new seasons of shows and series airing on the holding’s channels. As a rule, projects announcements for the coming year are determined in the fall.

We know the release schedule of series and shows a year ahead, and sometimes even earlier. This lets us build strategies, develop style guides, plan licensing activities and launches of licensed products for specific programs in advance. Moreover, many projects release new seasons twice a year. This provides our partner with more flexibility to launch a product in a more relevant period.

There are also so-called “evergreen hits” that stay relevant around the year. These are, for example, “SashaTanya” series, “Comedy Club” or “Women’s Stand Up (Zhensky Stand Up)” (produced by Comedy Club Production) on TNT channel, as well as home improvement shows like “The Dacha Solution (Dachny Otvet)” and “The Housing Question (Kvartirny Vopros)” on NTV channel and other popular shows that are on air weekly and allow us to come up with activities for them year-round.

For which companies is licensing a fitting solution, and for which ones it is not? Are there industries where licensing is inherently inapplicable?

When choosing even the most utilitarian products, we always have to choose, and often the consumer attributes or composition listed on the package are not enough to make a final purchase decision. Look, for example, at the product offering for ordinary drinking water. It is obvious that all water bottles certainly contain H2O. We all know that from school. But this does not help the consumer choose the right water bottle. We need some additional confirmation of the purchase decision: a familiar brand as an indicator of trust, easy-to-use packaging, a local source, or some other additional emotion that the product will evoke.

My answer is: licensing is suitable for all companies that strive to win their market share and build long-term customer loyalty.

A licensing project has been launched in the spring. Is it already possible to evaluate its first results?

Counting from the first meeting with the licensee and to the first developed product, a single licensing cycle can take up to 9 or 18 months.{

We have launched the licensing branch of business at the start of 2023, yet we are ready to share our first successes. At the moment, fundamental agreements have been reached, and contractual term have been finalized with the largest Russian licensees.

Our licensees today include publishers and manufacturers of tabletop games, food, and beverages. We will be ready to provide more details about specific product cases very soon, after the products are launched for sale.

Gazprom-Media Sales House, NTV, TNT and Comedy Club Production are part of Gazprom-Media Holding.

Сейлз-хаус «Газпром-Медиа», НТВ, ТНТ и Comedy Club Production входят в «Газпром-Медиа Холдинг».