Broadcasters go after piece of licensing pie.

As the cost of scripted programming increases and margins decrease, broadcasters are becoming more bullish on alternative revenue streams, particularly licensing.

It is a strategy that has long been part of kids' TV production since, historically, children's programming has provided narrow profit margins.

The recent trend of networks striving to own (whenever possible) part of the programs they air in order to share in licensing revenue is a direct result of this recognition, as is an increased presence at the annual Licensing Show in New York City. Charles Riotto, president of the International Licensing Industry Merchandisers' Association (LIMA) noted that, "They see it as a way to extend their brand awareness and create a new revenue stream."

At last year's Licensing Show, newly Viacom-branded Spike TV increased its visibility by offering a roster of properties that included the animated classic Ren & Stimpy. "Our male audience grew up watching Ren & Stimpy and recognize it as one of the most ground-breaking animated series of its time," network president Albie Hecht said then. "Ren & Stimpy personifies Spike TV. [The] merchandise promises to be as edgy and irreverent as the network itself."

Creating properties with licensing appeal is challenging, especially for primetime adult audiences. This field has traditionally been easier for children's producers, and in today's multichannel universe where kids spend more time on the Internet and playing video games, kids' television producers have an increased number of avenues to market their brands. But it all hinges on the quality of the content and attention to every detail of the production.

Slowly, networks are finding ways to monetize their primetime programing beyond the small screen. For example, as soon as Survivor became a hit, CBS wasted no time lining up licensing opportunities, which included selling North American licensing rights to develop and market slot machines based on the hit reality series. Now CBS drama series CSL co-produced with Canada's Alliance Atlantis, is being turned into a board game aimed at adult viewers.

But the U.S. broadcasters aren't the only ones cashing in on the licensing potential. In fact, the practice has also been very important to networks internationally.

For instance, in Argentina, where ad prices started to plunge in 2001, several of the top broadcasters have looked to licensed-product spin-offs of their programs to help increase revenue. Canal 9, for example, used the popularity of its reality series, Popstars to launch an entire licensing machine. Bandana, the music group that arose from the show, has not only released successful albums, but has had its name stamped on everything from cosmetic products to stationary. Additionally, Canal 9 and the show's Argentinian co-producer RGB were able to ink sponsorship deals with advertisers like Pepsi, wishing to link their names to a vibrant, youthful show. Telefe, the country's top-rated network, achieved comparable marketing success with a boy-band version of Popstars, also co-produced with RGB.

Mexico's TV Azteca has taken a similar path. In 1996, Azteca Music was created to produce, market and distribute various recordings, including soundtracks to some of TV Azteca's telenovelas. Taking advantage of the cross-promotional possibilities, Azteca Music now has under contract many of the music groups that have appeared in TV Azteca's programming, including UFF and Latins. New reality format La Academia, essentially a singing competition, has proven particularly lucrative. Similarly, Mexico's multimedia conglom Televisa has recently created one of Latin America's largest licensing division for its television products.

But a complication arises when broadcasters and licensors are not one and the same. Licensors can be hesitant, especially in international markets, to cut broadcasters a piece of their revenue pie, primarily because broadcasters tend not to want to make any concessions in return. Because the success of a TV-related licensing campaign relies so heavily on a good TV time slot, rights holders often ask for some kind of commitment from broadcasters regarding scheduling--but they rarely get it. Networks aren't quick to lock themselves into anything, especially as shuffling program timeslots becomes the norm.

Still, many producers feel that broadcasters, because they are essential to the success of a program, have a right to access all of its revenue streams. Joy Tashjian of Joy Tashjian Marketing Group (JTMG) said, "I don't have a problem with broadcasters participating in merchandising because they are very much a partner in the success of the license and the consumer products program. If they are motivated to promote the program properly and to broadcast it in a good timeslot, I think it's fair [to include them]."

Tashjian also mentioned that many broadcasters now have their own merchandising arms, "and they will obviously give higher priority to their own properties that they own at 100 percent. Therefore, the independent producer can easily become a back-burner item, and it's very difficult for them to maintain the attention of someone who has their own properties."

Jennifer Bennett of Alliance Atlantis expanded on this, saying, "In today's environment, where independent producers are competing with the broadcasters' internally produced content, it's difficult not to incentivize them with a piece of your merchandising revenue so that your show is given the broadcast support it needs to succeed. If you're fortunate enough to hit a home run with a merchandising program," she continued, "the upside is enormous, and if your broadcaster is sharing in that success, the independent suppliers will have some degree of leverage in securing key timeslots and broadcast support. Frankly, it's one of the few carrots left to the independents."

Licensing Show 2004 takes place at Manhattan's Jacob K. Javits Convention Center, June 8-10.