Brands grow fast but face piracy woes
Mainland licensing booms to hold 2 per cent of world market as rising middle class offers huge prospects, but challenges lie ahead
The mainland is the world's fastest-growing brand licensing market and exports of branded products are rising rapidly. But the industry faces severe problems of piracy, said speakers at a recent licensing conference.
Licensing refers to leasing an intangible asset, such as Walt Disney's Mickey Mouse cartoon character, and using it in products including toys, clothes, stationery and online games.
Warner Brothers, which owns the rights to popular characters such as Superman, Harry Potter and Bugs Bunny, does not own any store on the mainland and all the outlets selling the US firm's products are under licence, said Jeffrey Whalen, a senior vice-president at Warner Brothers.
The mainland is the world's fastest-growing market for licensing products, having grown from US$1.1 billion in 2005 to US$4.7 billion in 2011, said Charles Riotto, the president of the International Licensing Industry Merchandisers' Association. "That points to the tremendous growth potential for this market."
"We create superheroes," said Vincent Hsieh, a general manager at Guangdong Alpha Animation and Culture, a Shenzhen-listed animation firm. "China needs its superheroes. With our superheroes, we create our brand value. Branding is crucial to animation companies in China."
Guangdong Alpha's superheroes are licensed for use in books, toys and online media. It is the first Chinese animation company to go public, and revenue grew 19.3 per cent to 9.72 billion yuan (HK$12.1 billion) in 2011. The value of the mainland's cultural exports, including film, television, animation, performing arts and online games, rose to US$1.45 billion in 2011 from US$970 million in 2009, achieving a compound annual growth rate of more than 20 per cent, said Xie Fei, a deputy director general of the office of cultural affairs for Hong Kong, Macau and Taiwan under the Ministry of Culture.
"The ministry has made great efforts to expand the licensing industry through policies and by supporting various projects. We hope Hong Kong will play a role as a hub in the trade in cultural products between the mainland and the world, and in promoting the development of mainland cultural enterprises," Xie said.
China accounts for only about 2 per cent of the world's licensing market, said Riotto.
The global market is valued at US$189 billion, of which US$109 billion or 58 per cent is in the US, Riotto said. But the US market had remained flat in the past few years while Asian markets showed potential for growth.
Mainland China's licensing market would grow quickly, driven by the growth of its middle class, which would reach 600 million people by 2020, he said. "There is a greater awareness of global brands, trends and cultural phenomena in China."
Saban Brands, a US brand management firm, plans to increase its number of Paul Frank fashion stores on the mainland from 50 to more than 100 by the end of this year, said Elie Dekel, the president of the group.
"China's market is huge but has lots of problems. Its animation licensing market faces a huge challenge, which is trust," said Sun Jian, the president of the China Shanghai Character License Administration.
Many pirated DVDs are sold on the mainland, he said, but opportunities in the market outweighed the challenges.