Warner, Disney suffer from lack of merchandising hits.

As the holidays are approaching, Warner Bros. and the Walt Disney Co. are without a megahit toy or characters, say experts who see a tough time ahead for the two studios and others trying to cash in with their merchandising and licensing efforts.

"There aren't any big hits out there, but it doesn't mean something won't catch on," said Charles Riotto, executive director for the International Licensing Industry Merchandisers Association.

But even Riotto admitted the lack of a breakout toy or videogame from the big Hollywood studios likely means another down holiday period for studio merchandisers.

Disney is unveiling a number of new toys and games featuring characters from its new animated film "Brother Bear." The film itself has gained some positive response from critics, but its merchandise has yet to catch the attention of children or their parents.

"I don't see much buzz about 'Brother Bear,' so that's not a good sign if you're Disney," said Sheri Welch, a Los Angeles-based merchandising and licensing consultant.

"You need a blockbuster toy to get the crowds in and it helps a lot of the other merchandise that's there."

Sean McGowan, managing director at Harris Nesbitt Gerard, said the lack of a dominant brand is putting the entire holiday season into question for merchandisers.

"It just looks like a slow holiday season at this point," he said.

Disney's efforts with Brother Bear will likely bear little fruit since the characters are bears which are standard merchandise in most toy stores, McGowan said.

Moreover, the film itself lacks the appeal of similar fare like "The Teenage Mutant Ninja Turtles" and "Harry Potter."

"There are properties that have wide appeal and they sell a lot of toys, but I don't see one coming to the plate right now," Welch said.

Some properties like "The Hulk," and "Care Bears" are likely to do well, but they won't be anywhere near blockbuster levels of last year's Harry Potter brand or Nemo from the film "Finding Nemo," Welch added.

Chance for Improvement

For Disney, 2003 means a chance to improve on last year's reduced numbers for its Consumer Products division which handles licensing and merchandising.

That unit, whose revenue has been steadily dropping in recent years, reported $2.4 billion in revenue in 2002, compared to $2.6 billion in 2001.

Warner Bros. does not separate its licensing and merchandising revenue.

Toy-making giants like Mattel and Hasbro have done well with their licensed products like "The Simpsons" and "Star Wars," but they're not the ones to watch when looking for the next blockbuster.

"You have to look at the little guys because they're willing to take chances and go away from the norm," said Doug Warr, vice president of Burbank-based Headstart Entertainment, a production house that also specializes in merchandising and licensing children's products.

Concerns over keeping shareholders happy and taking fewer financial chances have kept the big toy companies from taking on unproven licensing brands, Warr said.

In a merchandising turnabout, many toymakers have gone on to develop cartoons and videos for their toys in order to improve sales, such as Mattel with its "Barbie" series of direct-to-video programs.

While the Barbie videos have been selling well, it's unclear just how much it has helped Barbie sales for Mattel, Welch said.

Holiday Promises

The holiday period generally means increased sales for many brand mainstays like Barbie, "The Simpsons," "Spongebob Squarepants," and others, but it also could mean the reinvigoration of Warner Bros. veteran Looney Tunes characters.

The studios' "Looney Tunes: Back in Action," film starring Brendan Fraser, is being rolled out simultaneously with toys from Mattel, video games, comic books and apparel based on the film characters.

But judging by the lackluster showing of Looney Tunes' merchandise based on its last film, 1996's "Space Jam," the new batch of merchandise may have another tough showing.

"It all really depends on the movie and how it does and so far it doesn't look like it's going be to be a runaway hit," Welch said.

Likewise, DreamWorks SKG is rolling out its "Cat in the Hat" licensed merchandise based on Mike Myers film set for release this month. But so far, merchandising experts are not jumping on the bandwagon for the Dr. Seuss characters just yet.

Although the holiday season is a chance for Disney and Warner Bros. to build on their brands, it's unclear whether either one will do any better than last year.

"There's just not much buzz about anything they're putting out," Welch said.

Overall, the licensing market grew by $225 million or 4 percent in 2002, to $2.8 billion over the previous year, according toe the International Licensing Industry Merchandisers Association.

This year, the market is also expected to grow as more product continues to fill store shelves, the organization said.