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Monday, 12 November, 2001, 05:40 GMT
How films make money
by BBC News Online's Emma Clark
Toy Story aficionados will no doubt remember a scene in the sequel where the Barbie dolls are showing Woody and his friends around Al's Toy Barn.
The joke neatly parodies a film that spawned a mini industry in Buzz Lightyear merchandise.
It also makes a serious point about how merchandising has become an integrated part of the whole film experience, says Andy Milligan, a director at the branding consultancy Interbrand.
Harry Potter craze
Today, few could fail to notice the rush to cash in on the ubiquitous Harry Potter.
And because of the universal popularity of the Harry Potter phenomenom, consumers seem only too happy to lap up the memorabilia.
As a result, global sales of Harry Potter merchandising are expected to generate the sizeable sum of £1.4bn next year, according to industry estimates.
In the big league of blockbuster merchandising, similar fortunes have been made.
Famously, George Lucas, the creator of Star Wars, was said to have earned close to $1bn from merchandising and sequel rights to the Star Wars films.
"He benefited from Fox's lack of belief in the value of merchandising," says Steven Gaydos, executive editor of industry publication Variety in London.
In the beginning...
As Mr Gaydos points out, spin-offs have been around since the beginning of film.
Charlie Chaplin led to the sale of "Little Tramp" confectionary, while Walt Disney capitalised on the US nation's affection for Mickey Mouse.
"Before, merchandising was seen opportunistically, as creating value," says Interbrand's Mr Milligan.
"But George Lucas showed how you could make a fortune."
"It switched from useful, but not essential, to being a major contributor to the business plan."
A successful Hollywood film can make about $120m from the box office, explains Mr Gaydos.
On top of that, it can generate about $60m from ancillary products, such as videos, DVDs and pay-per-view.
Strong merchandising, however, can then add another $50-200m, depending on how exploitable the film is.
Blockbuster films that appeal to children tend to be the most obvious vehicles for merchandising.
"Children are fad mad and can't get enough of things," says Mr Milligan.
However, adult films like James Bond also provide opportunities for more sophisticated merchandising, such as CDs of the film's soundtrack.
"In James Bond, there are Nokia phones and BMW cars. They choose brands that sit appropriately with the James Bond image," says Mr Milligan.
In another example, the release of The English Patient coincided with a new book run of the novel, which carried actor Ralph Fiennes on the front cover.
Nevertheless, there is always the danger that excess merchandising will backfire.
At the beginning of last year, publisher Dorling Kindersley saw its profits slide after over-investing in Star Wars books during the release of Phantom Menace.
The company said it sold just three million of the 13 million books it had printed.
The unsold books caused a £3m loss on operations and a £14m write-off against the unsold stock.
"With Star Wars, people just assumed it was a banker," says Mr Milligan.
"If you assume consumers will buy anything, you will fail."
In the case of another children's film, Godzilla, the flood of merchandise highlighted the failure of the film, critically.
After all the hype, the film was unable to live up to expectations, says Variety's Mr Gaydos.
The search for marketable toys and characters, such as a "good" opponent for Godzilla, even influenced the development of the film.
"Godzilla showed how early merchandising kicks in and how it even helped create the script," says Mr Gaydos.
"It's really unbelievable how really integrally entwined the different arms [of the film] are - the merchandising, the promotion, the production of DVDs," he adds.
What's for Xmas?
As Christmas approaches, there will be no shortage of kids clamouring for the latest Harry Potter must-have.
Unlike Fox, Time Warner is carefully coordinating the Harry Potter spin-offs under the watchful eye of JK Rowling.
So far the film premiere seems to have lived up to expectations and there appears to be a healthy appetite for the merchandise.
Perhaps Harry's magic touch has warded off the evils of over-supply and excessive marketing.
But one thing is for certain - if Harry Potter was a real human being, he would be on the verge of becoming very rich indeed.
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