Thursday, June 21, 2007

How An Artist Drew A Bunny... That Made Over $200 Million.

It's Happy Bunny, in true rabbit fashion, has multiplied quickly.

Thousands of products feature the rude cartoon. His quips have slipped onto socks ("I just realized I don't care"), wafted onto air fresheners ("Let's focus on me"), and slid onto key rings ("It's cute how stupid you are"). The bunny -- and his creator -- have hippity-hopped into licensing lore.

Jim Benton, a 46-year-old writer and artist, created the It's Happy Bunny franchise more than 10 years ago as one of many designs he hoped would get him a licensing contract. It took a few years for the bunny to catch on, but once it did, he started racking up sales in the hundreds of millions of dollars.

Mr. Benton's intellectual properties, including the rabbit and a cluster of other characters, have made him stand out in an industry dominated by big entertainment companies. It's Happy Bunny alone is licensed to more than 100 companies world-wide. Last year, retail sales for the rabbit reached nearly $200 million. This fall, Kohl's Corp. discount stores will display It's Happy Bunny apparel, such as underwear for teen girls, alongside merchandise featuring the likes of licensing heavyweight Walt Disney Co.'s "Pirates of the Caribbean" and "High School Musical." Thanks to licensing, Mr. Benton says, "a twerp like me can go shoulder to shoulder with a company like Disney."

But it's not that easy. The licensing industry is a massively profitable tangled web of artists, agents and merchandisers. It's a dance helping products sell and characters get noticed. If it works, both sides win.

In 2006, manufacturers paid more than $6 billion in royalties in the U.S. to people who hold copyrights to a character or brand, according to the International Licensing Industry Merchandisers' Association. Entertainment properties and characters are by far the leaders, accounting for nearly a third of those royalty payments.

Many of the deals -- or contacts for future deals -- are consummated at the Licensing International, a speed-dating event of sorts for people with characters to license, manufacturers with products to sell and retailers looking for the next big thing. The three-day get-together in New York, which begins today, draws more than 25,000 people to see the 500 exhibitors and their over-the-top displays.

"Everyone wants to have the next It's Happy Bunny," says Cindy Levitt, a former vice president of licensing at teen retailer Hot Topic Inc., based in City of Industry, Calif.

Mr. Benton, who lives in Bloomfield, Mich., first attended the licensing show in 1989 with "The Misters," a series of individual drawings that pokes fun at the habits of men. His 10-by-10-foot booth had only a card table. "With my dumb little suit and my alert little brief case," he says, "I masqueraded as an intellectual-property owner."

While the licensing of intellectual property has been around for decades, sophisticated marketing and merchandising plans are a fairly recent development. Rather than licensing a T-shirt here and a lunch box there, entertainment companies now plan their merchandising strategy with as much care as the entertainment vehicle behind it, says Charles Riotto, president of the International Licensing Industry Merchandisers' Association, a New York-based trade group.

The first modern merchandising effort came after the release of "Star Wars" in 1977. The creators responded to heavy demand from fans. "We just started cranking it out," said Howard Roffman, president of Lucas Licensing. It remains a hot property. It has hit $13.5 billion in retail sales, according to Lucasfilm Ltd.

Through licensing, creators can make money without the financial risk and hassle of manufacturing, storing or shipping products. The vast majority of licensing contracts, some 90%, pay royalties of between 6% and 12% of the wholesale price out of which middlemen, such as licensing agents, are often paid, says Mr. Riotto. High-profile properties can bring in significantly more. Mr. Benton averages around 10%.

Entertainment companies -- with heavily marketed properties, such as movies or TV shows -- are the major force behind licensing. Retail sales of licensed Disney merchandise (think Hannah Montana and Disney Princess) reached $23 billion in 2006, according to License Magazine. Warner Bros. Consumer Products, which licenses Harry Potter goods, had $6 billion and Nickelodeon-Viacom Consumer Products, which lays claim to Dora the Explorer, had $5.3 billion.

But there's a healthy slice of independent licensors like Mr. Benton who have built a following in what's called the art category. Several artists, such as Thomas Kinkade and Mary Engelbreit, have found success licensing their work to home décor manufacturers. Art licensing saw the biggest increase in royalty revenues, rising to $182 million in 2006 from $175 million in 2005.

It's Happy Bunny and other art that is aimed at teens and so-called 'tweens on the cusp of adolescence are a much tougher sell. The consumer has to like what he or she sees almost immediately in an unknown property, because there's no automatic affiliation. "Without a buzz behind it or groundswell coming up ahead of it, it's hard to throw a new character out there," says Ms. Levitt, the former Hot Topic executive.

And timing is everything. Mr. Benton paired his drawings with snarky sayings before so-called attitude art started appearing en masse. Nobody got the joke when he first created It's Happy Bunny, says Mr. Benton, so he tucked the character away in his portfolio.

He dabbled with licensing it but didn't get serious interest until 2001, when he hired licensing agent Carole Postal, president of New York-based CopCorp Licensing. She knew executives at Hot Topic and introduced them to both Mr. Benton and his bunny. They loved the attitude of both (Mr. Benton is as animated as his character), and Ms. Postal brokered a licensing deal between Mr. Benton and some manufacturers who supplied T-shirts, buttons, magnets and key chains to Hot Topic. By September 2001, It's Happy Bunny was in several hundred stores. Hot Topic had the character exclusively for nearly two years.

"You have to be real careful about how you manage a property," says Mr. Benton. "The temptation is to sell it to anyone as fast as you can."

The disciplined strategy worked, says Marty Brochstein, executive editor of the Licensing Letter, a trade publication. Customers sought out the merchandise at Hot Topic stores, displayed in a boutique-type setting. "We treated it like it was our property," says Ms. Levitt. At one time, Hot Topic sold around 150 different It's Happy Bunny products.

It's Happy Bunny has since expanded to the mass market. Mr. Riotto says the product has done well because it lends itself to so many categories. Target carries greeting cards, Claire's accessory stores sell purses, Wal-Mart has posters. Globally, the brand is just as widespread: Customers can buy It's Happy Bunny pajamas in Peru, stickers in Canada, toothbrushes in Japan.

Within the industry, a property's success is judged typically by retail sales. It's Happy Bunny will reach about $225 million in retail sales this year, according to projections from CopCorp. In 2006, It's Happy Bunny sales brought in about $5.25 million in licensing revenue. This year, CopCorp projects a 27% increase to about $6.65 million.

That's not to say it's easy to turn a drawing into a million-dollar brand -- although that's the perception. In January 2005, the New York Post compiled a list of "10 Ways to Make it to the Top." Mr. Benton and It's Happy Bunny got mentioned at No. 6, under the headline "Make a Pile of Money for Doing Very Little." Ms. Postal still bristles: "If it were that easy, everyone would do it." Keeping track of the character -- especially the quality of production -- is a huge undertaking, says Ms. Postal. It's not slapping the bunny wherever it fits.

Every product is closely developed and produced. For example, when Mr. Benton and Ms. Postal were working with a beverage manufacturer on an energy drink, Mr. Benton suggested calling it "Spaz Juice."

Of course, franchises like It's Happy Bunny don't come along very often. Jay Foreman, who runs Play Along, a toy-making division of the consumer-products company JAKKS Pacific Inc., says the likelihood that an artist can create and capitalize on several different characters is slim. "Many of these guys will never ever have another property like the one they created," says Mr. Foreman.

Mr. Benton believes he has a few more rabbits in his hat. It's Happy Bunny remains his top-licensed property, but other characters continue to make their mark. Meany Doodles, a cartoon of a little girl in a bad mood, has several licensed products, including a T-shirt that says "Obey me, you'll be happier."

His line called Just Jimmy, of cartoon animals, runs the gamut of properties from buttons to hooded sweatshirts. Mr. Benton has also licensed merchandise off of a series of "Franny K. Stein" books he wrote for 'tweens, about a little girl who is a mad scientist. And he has ventured into the entertainment industry, with a movie in the works for Franny.

Aware of the fickle nature of his target audience, Mr. Benton continues to revise his work, striving to make it age-appropriate and funny at the same time. As one of his ubiquitous bunny's slogan's points out on a T-shirt: "I'm not saying I'm cool. That's your job."

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