Toys and the law: An interview with attorney, Andrew Richmond
The law is a big part of life in the 21st century toy industry. I am frequently contacted by toy industry members looking for advice on anything from intellectual property law to liability issues. So, I decided to interview an actual lawyer who specializes in toys for today’s blog.
Andrew Richmond is an in-house attorney and, for the past 16 years, has specialized in licensing, promotions and related intellectual property matters. Since moving to L.A. in ‘98, he has been employed with/consulted for business and legal affairs departments including FOX, Hallmark, Mattel, Sony, and Stronghold Group. For the past six years, he has been President of Richmond Management Group, providing business and legal affairs services to clients. Additionally for five of those six years, he has been retained by JAKKS Pacific, where he has negotiated, drafted and contracted all licensing, promotions, inventor, talent and related agreements.
Here is my interview:
Richard:
One of the key issues that concern toy industry members is licensing. As an attorney, where do you see licensing heading in the coming year?
Andrew:
Obviously, 2009’s tough economy hurt licensors and licensees alike with fewer deals getting closed. When the economy goes south, those involved in the licensing process tend to view licensing as a luxury as opposed to a necessity and scale back on the number of licenses and/or dollars allocated to licenses.
Further, in a shaky economy, risk-averse retailers take fewer chances on products featuring newer, less familiar licensed properties which products run the risk of languishing on-shelf. Taking a conservative approach, retailers tend to stock products featuring evergreen properties with hopes that consumers will continue to purchase well-known, blue-chip licensed products. Taking their cue from the retailers, licensees gravitate to the evergreen licensed properties, knowing that there is greater likelihood of retail placement. This scenario spells serious hardship for the newer, unproven licensed properties, with a less dramatic drop-off for the tried-and-true licensors. As the economy improves, I hope there will be a more open-minded entrepreneurial approach to licensing with renewed interest in the newer, trendy, fashion-forward licenses. I’m certainly not acting as economic prognosticator, but 2010 appears to be an improvement over last year.
Richard:
Mattel and Hasbro both have made moves towards being more and more involved in the media side of business. Hasbro’s new television cable channel and Mattel’s decision to get involved in transmedia storytelling are just two examples. Can you give us your thoughts on toy manufacturers entering media?
Andrew:
Historically, a toy manufacturer participated in a successful media property (i.e., live-action or animated television property) by securing a license from the licensor network to manufacture licensed products. The licensor (network) and licensee (manufacturer) relation was clear and obvious.
Networks are under tremendous pressure to create amazing new programs that capture viewership and generate revenue. These new programs require a tremendous initial outlay of cash for research and development. Occasionally, in order to develop a new media property, networks can only green light high-cost development if a toy manufacturer secures master toy rights prior to development – let alone airing – of the media.
As a result, the network licensor needs to offset some of the tremendous development cost and minimize risk by passing a portion of the cost and risk to the toy manufacturer, who then has contractually “invested” in the property by entering a high-dollar master toy license agreement. If the media property is a success, both network licensor and master toy licensee profit handsomely, but if the property fails to generate sufficient viewership…
Richard:
Is this a cliffhanger? What happens then?
Andrew:
Now, in an effort to generate greater revenues and minimize risk, toy manufacturers are expanding into media development and creating in-house their own media properties which are supported by the manufacturer’s development of complementary toy products. As opposed to spending millions of dollars on the securing of master licensing rights to a network’s licensed property, which property the manufacturer has zero day-to-day control, the toy manufacturer reasons that it could spend similar monies developing its own media content in-house and thereby own and control all rights to the media and related licensing. For toy manufacturers, this represents a better investment of essentially the same dollars.
This two-headed monster of toy manufacturer as both media creator and product owner muddies the historic relation of network-as-licensor and toy manufacturer-as-licensee. More importantly, the toy manufacturer has now placed itself in the position of direct competitor of the network vying for the same on-air placement and revenues.
Richard:
Is all this good?
Andrew:
It all depends. It certainly raises a host of questions.
· The toy manufacturer media creator will still require the network for on-air placement. However, how is the relation defined at that point?
· Will the network have less interest in a media property that it does not own – especially if the property is owned by a licensee of the network?
· Will the network look upon the toy manufacturer with disdain for entering an entertainment field formerly dominated by the network?
· Will the network perceive the toy manufacturer as an infringer on the network’s slice of the entertainment revenue pie?
· Will the network want to air a program where day-to-day decision making rights are held by the toy manufacturer and not the network?
· Will the network want to support the toy manufacturer’s programming efforts knowing that the toy manufacturer could potentially profit THREE TIMES from the on-air exposure from: 1) media revenues; 2) in-house toy manufacture; and 3) outbound licensing of ancillary product rights, while AT THE SAME TIME, the network is retaining less revenue? Lastly, how will the toy manufacturer – network relation be affected when these same parties sit at the table to negotiate under the “historic” relation of network licensor-toy manufacturer licensee relation for network-owned content?
Richard:
So, what is the bottom line?
Andrew:
The bottom line is that, regardless of who creates the program, the network or toy manufacturer must develop a quality program. If this occurs, regardless of who is creator, both parties will profit. Likewise, if the program fails to secure a strong audience, licensed products based on the program will not sell. Therefore, it is important for the two parties to work together amicably regardless of who is assuming the role of licensor or licensee because in the end, success begets success.
Richard:
How can someone reach you if they want to know more about you and your services?
Andrew:
They can contact me at:
Andrew Richmond
Richmond Management Group, Inc.
818.713.0150
Richard:
I always try to ask at least one personal question so here goes: What, Andrew Richmond, is your favorite cartoon show?
Andrew:
My 6 year old daughter Bianca and I can recite verbatim episodes of SpongeBob SquarePants! As a kid, I liked classic “Tom and Jerry” – you can’t find gratuitous violence like that in today’s programs!
Read blogs by Richard Gottlieb, Tim Walsh, Mary Couzin, Brian Maggio and Bruce Lund at Global Toy News
www.globaltoynews.com
