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Fashion Royalty Decline Slows in 2010

Total royalties paid to licensors were down 1.9 percent, the international Licensing Industry Merchandisers’ Association reports.

North American brand owners, including those in the world of fashion, saw continued erosion of their royalties in 2010, although at a far less rapid pace than in 2009.

This story first appeared in the June 14, 2011 issue of WWD.  Subscribe Today.

According to the annual Licensing Industry Survey being released today by the international Licensing Industry Merchandisers’ Association, total royalties paid to licensors in 2010 were $5.07 billion, down 1.9 percent from the $5.17 billion paid in 2009, but a dramatic improvement over the 8.7 percent contraction of the prior year. Fashion brands took in $690 million last year, down 2.1 percent from 2009, when $705 million was collected. The 2009 decline was 9 percent.

Entertainment, television and movie brands, as usual, were by a wide margin the largest source of licensing revenues tracked by LIMA, and the category declined 1 percent last year to $2.38 billion. Trademarks and brands were the second biggest category, and they declined 3.9 percent to $845 million. Fashion brands were third, followed by sports, which were down 2.2 percent to $645 million.

“The licensing business is a subset of the overall consumer products marketplace and generally tracks pretty close to consumer spending,” said Marty Brochstein, LIMA’s senior vice president. “The business was affected by the same trends, including a general retail conservatism. Stores generally aren’t looking to go out on a limb for anything too new, and no one’s pushing the edge on fashion very much these days.”

The only category of the 10 tracked by LIMA that produced an increase was music, where royalties rose 4.5 percent to $115 million, a development that Brochstein attributed in part to changes in the music business model in recent years. With CDs no longer the revenue generator they once were in the era of MP3 downloads, “the revenue stream you can generate with merchandise when touring has become much more important. It’s one that hadn’t been tapped all that much in the past,” he said.

Brochstein said the pickup in business many stores saw in last year’s fourth quarter wasn’t reflected in the data, since royalties are generally collected months after retail sales are made. “We probably got back to about flat,” rather than the 1.9 percent decline reported. “Even so, we had the smallest decline in three years, to put a weirdly positive spin on it.”