Under the Influence with Terry O'Reilly - S5E08 - Movie Merchandising

Episode Date: February 26, 2016

In this episode, we explore the marketing of movie merchandise. From the earliest days of merchandising book characters, to the true beginning of movie merchandising with the birth of Mickey Mouse and the Disney Studio, the marketing of toys and games became a critical strategy for movie and television studios. We chart the milestones in entertainment merchandising, how those milestones became a marketing strategy to build loyal audiences, and how the biggest merchandising breakthrough in a galaxy far, far away changed everything.  Hosted on Acast. See acast.com/privacy for more information.

Hi, it's Terry O'Reilly. As you may know, we've been producing a lot of bonus episodes while under the influences on hiatus. They're called the Beatleology Interviews, where I talk to people who knew the Beatles, work with them, love them, and the authors who write about them. Well, the Beatleology Interviews have become a hit, so we are spinning it out to be a standalone podcast series. You've already heard conversations with people like actors Mark Hamill, Malcolm McDowell, and Beatles confidant Astrid Kershaw. But coming up, I talk to May Pang, who dated John Lennon in the mid-70s. I talk to double fantasy guitarist Earl Slick, Apple Records creative director John Kosh. I'll be talking to Jan Hayworth,

who designed the Sgt. Pepper album cover. Very cool. And I'll talk to singer Dion, who is one of only five people still alive who were on the Sgt. Pepper cover. And two of those people were Beatles. The stories they tell are amazing. So thank you for making this series such a success. And please, do me a favor, follow the Beatleology interviews on your podcast app. You don't even have to be a huge Beatles fan, you just have to love storytelling. Subscribe now and don't miss a single beat. We'll see you next time. new locations. What matters is that you have something there to adapt with you, whether you need a challenge or rest. And Peloton has everything you need, whenever you need it. Find your push. Find your power. Peloton. Visit Peloton at onepeloton.ca. BetMGM is an official sports betting partner of the National Hockey League and has your back

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iGaming Ontario. From the Under the Influence digital box set, this episode is from Season 5 2016. you're not you when you're hungry you're a good hand with all things you're under the influence with terry o'reilly Lassie Come Home Lassie is the story of a dog and a boy.

Oh, it isn't a pretentious picture or an epic. It is too real, too human, too beautiful for high-sounding adjectives. In 1938, a short story appeared in the Saturday Evening Post. It was titled Lassie Come Home. The story of the faithful collie proved so popular, author Eric Knight expanded it to a full-length novel in 1940. That book was the inspiration for the 1943 movie Lassie Come Home, starring a young Elizabeth Taylor.

Lassie was paid $250 per week. Taylor got $100. So popular was Lassie that the Collie breed saw a 40% jump in registrations. MGM would go on to make seven popular Lassie movies from 1943 to 1951. When the MGM contract ended, Lassie's owner was owed $40,000 in back pay,

but negotiated to secure the Lassie name and trademark in lieu of the money. Three years later, as the new medium of television began, a series was developed around Lassie. Lassie. Lassie! Lassie! Starring June Lockhart. The Lassie TV series aired on CBS every Sunday night at 7 p.m.

and attracted a huge loyal audience. Lassie would go on to run for 19 years, win two Emmys, and become the fourth longest running primetime television show in history, behind The Simpsons, Gunsmoke, and Law & Order. For its entire run, the show only had one sponsor. Brought to you by Campbell Soup Company, makers of Campbell Soups, Franco-American spaghettis. In an early example of product placement, Campbell soup products were often used as props. When viewers sent in five Campbell soup labels, they received a wallet with Lassie's picture on it,

made of, quote, rich brown plastic. Over 1.3 million viewers responded, meaning the promotion triggered sales of over 6.5 million cans of Campbell's soup. The TV series also created a lot of Lassie merchandise, from friendship rings to clothing, toys, books, and lunchboxes. Lassie even endorsed a Campbell's product called Recipe Dog Food, which generated $40 million in revenue by its third year. There was no doubt Lassie was a bona fide star. But when the TV show eventually ended in 1973,

Lassie's star faded quickly. Which is why it was interesting that DreamWorks acquired the rights to the 78-year-old Lassie brand in 2012. Here's what's interesting about the Lassie purchase. There are absolutely no plans for a Lassie movie or TV series. DreamWorks knows that a story about a faithful dog is just too tame in this era of superheroes, technology, and explosions. So why buy the rights to Lassie? Strictly

for the merchandising. The Lassie brand name still has over 80% awareness. With that kind of recognition as a foundation, DreamWorks wants to turn Lassie into a merchandising cash cow. Or cash canine.

There are plans for Lassie dog food, Lassie grooming kits, Lassie beds, and endless Lassie accessories. You've heard of Straight to Video. This is Straight to Merchandising is marketing. It's a carefully constructed strategy in the world of entertainment designed to create deep connections between fans and their favorite movies and television shows. Merchandise has, in fact, become so important in Hollywood,

it often determines which movies get made. The selling of toys and dolls and t-shirts is no longer Mickey Mouse money. It's a billion dollar industry. But it all began with Mickey Mouse.

You're under the influence. Long before there was television, there was radio. Long before radio, there were movies. Long before movies, there were books. And that's where the story of modern merchandising begins. When Beatrix Potter was in her mid-twenties, she loved to travel and would write letters to friends while away. One of those letters contained a story about a rabbit named Peter. Seven years later, Potter wrote a short book

based on the story and printed it at her own expense for family and friends. One of those friends showed it to a London book editor who published The Tale of Peter Rabbit in 1902. The book was an enormous success.

In 1903, Beatrix Potter created a soft toy version of Peter Rabbit and sold it through her publisher, making it, possibly, the oldest licensing character. Potter would go on to design many merchandising spin-offs of her characters, including board games, children's toys, blankets, and tea sets. Meanwhile, across the ocean,

a popular comic strip called Buster Brown was appearing in the New York Herald. It was created by Richard Outcalt and followed the hijinks of a rich kid named Buster Brown with a pageboy haircut and a little Lord Fauntleroy suit. In 1904, Outcalt traveled to the St. Louis World's Fair and sold over 200 licenses to companies giving them permission to use Buster Brown to advertise their wares.

One of those was the Brown Shoe Company, who loved the coincidence of the name and believed they could leverage the fame of the comic strip with a Buster Brown line of shoes. They were correct, and Buster Brown shoes can still be purchased today. In the mid-1920s, Alan Alexander Milne, or A.A. Milne as he was known, wrote a story about a bear called Winnie the Pooh for his son, Christopher Robin. Inspired by one of his son's stuffed toys, Milne named the bear Winnie, after a Canadian black bear in the London Zoo,

who had been named after its original owner's hometown of Winnipeg. In 1930, Milne sold the Winnie the Pooh merchandising rights to a man named Stephen Schlesinger for $1,000 and 66% of the revenues from any products Schlesinger developed. By 1931, Pooh was a $50 million a year enterprise. Many called it the birth of modern merchandising. But the real king of merchandising was betting the house on a mouse. Walt Disney was born in Chicago in 1901 to Flora and Elias Disney. Flora hailed from Ohio, and Father Elias was a Canadian from Bluevale, Ontario.

As a young man, Walt became a cartoonist for his school's newspaper, then later got a job creating commercials at an advertising company in Kansas City. While there, Walt became enamored with the emerging world of animation. Eventually, Walt and his brother Roy pooled their money, moved to Hollywood, and opened the Disney Brothers Studio in 1923. Six years later, Walt and illustrator Ub Iwerks created an animated short

based on a new character they had developed called Mickey Mouse. Actually, he was originally called Mortimer Mouse, but Disney's wife didn't think the name was appealing and suggested Mickey instead. When Disney produced the first Mickey Mouse cartoon with sound, titled Steamboat Willie, it was an instant success.

One day in a hotel lobby, Disney was approached by a man who offered him $300 for the rights to put Mickey Mouse's image on children's notebooks. The Disneys were always short of money, so Walt took the offer. It was the start of Mickey Mouse merchandising. Sensing the potential, Walt later signed a bigger contract with a merchandising firm.

But the royalties were small and the quality of the merchandise shoddy. Walt wanted out. That's when Herman Kamen entered as he was known, owned a Kansas City advertising firm that created displays and campaigns for department stores. When one of those displays, for a store in Los Angeles, caught Walt Disney's eye in 1932, he wired Kamen to ask if he was interested in promoting Mickey Mouse.

Kamen wired back to say he was very interested. Then he went to the bank, cashed in his life savings, sewed all the money into the lining of his jacket, and boarded a train for California the same day. Kamen was so worried somebody would steal his jacket that he stayed awake for the entire two-day trip. When he finally arrived at Walt's office, Kamen presented his plans for merchandising Mickey Mouse,

then took all the money out of his jacket and spread it dramatically across the desk, saying, If you hire me, all this money is yours. I don't know how much business you're doing right now, but I guarantee you that much plus 50% of everything I do over that amount. Walt pulled his brother Roy over to the window to quietly discuss the offer. When they turned back to shake hands with Kamen, they discovered he had fallen asleep in his chair,

exhausted from his wide-eyed 48-hour trip from Kansas City. Kay Kamen would completely transform Disney's merchandising, turning it into a streamlined, quality-controlled, revenue-producing division that would eventually make Mickey Mouse the brand more popular than Mickey Mouse the movie star. Within a year, there were 40 licenses for Mickey Mouse products. Within two years, Kamen orchestrated $35 million worth of sales in Disney merchandise.

You have to put Kamen's achievement in its proper perspective. These were the Depression years. In spite of being the darkest business days in history, he even persuaded General Foods to pay a million dollars for the right to put Mickey on cereal boxes. From that point on, the image of Mickey Mouse was everywhere. There was Mickey Mouse soap, candy, playing cards, hairbrushes, caps, socks, shoes, underwear, footballs, baseballs, plush toys, and of course, watches.

By 1934, Walt was claiming he made more money from Mickey's merchandising than from Mickey's cartoons. That was important for three reasons. The Walt Disney Company now had money in the bank to finance its films, every Mickey Mouse product was a walking advertisement for the company, and when people took a piece of Mickey Mouse home, they stored him in their hearts.

By 1949, Kay Kamen was selling $100 million in Disney goods every year. One night, he celebrated that milestone over a dinner with Walt and Roy in Paris. The very next day, while flying home, Kamen and his wife died in a plane crash. The Disney brothers were shattered. But Kay Kamen had built the foundation of an empire. And Disney became the first studio to recognize what would become a standard business practice in Hollywood 40 years later. That merchandise was powerful marketing. And we'll be right back. If you're looking for flexible workouts, Peloton's got you covered.

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Peloton. Visit Peloton at onepeloton.ca. If you're enjoying this episode, why not dip into our archives? Available wherever you download your pods. Go to terryoreilly.ca for a master episode list. Other movie studios followed Kay Kamen's playbook. Shirley Temple merchandise kept the Fox studio afloat. Gone with the Wind sold everything from draperies and furniture to dresses and jewelry. Then came actor William Boyd.

He was first offered the starring role in the Hopalong Cassidy movies in 1935 and would go on to make an astonishing 66 Hopalong Westerns. But in 1948, the popularity of B-Westerns was fading fast. That's when Boyd sold his home and his car, moved into a small apartment, withdrew his life savings,

and scraped together $350,000. That's $3.5 million in today's money to buy all the rights and film archive to the Hopalong Cassidy character. Why would William Boyd put his life savings into a dying movie franchise? Because he saw television coming. Here he comes, here he comes. There's the trumpets, there's he comes, here he comes. There's the trumpets, there's the drums. Here he comes, Hopalong Cassidy.

Here he comes. In 1949, the brand new NBC television network ran the Hopalong Cassidy films while paying Boyd to produce 52 original Hopalong TV programs between 1952 and 1954. At the same time, Boyd licensed 73 manufacturers

to produce over 2,400 items, from Hopalong Cassidy sheets and pajamas to lamps and games. All told, Boyd earned the equivalent of $7.7 million in today's dollars from Hopalong merchandise in 1950 alone. By 1954, William Boyd retired a wealthy man. Not only did he launch the era of westerns on television,

he had introduced the medium to the world of merchandising. For a while, television produced more merchandise than movies. From Howdy Doody, Gunsmoke and the Flintstones to shows like the Beverly Hillbillies, Star Trek and The Six Million Dollar Man, nearly every television series now produced a long line

of toys and products to draw their audiences in closer. Television ruled the merchandising galaxy until May 27, 1977. Star Wars was the movie no studio really wanted. Universal had passed on it

and 20th Century Fox took it on against the wishes of its board of directors. When negotiating his director's fee with the studio, George Lucas took a $500,000 pay cut in return for retaining all the merchandising and sequel rights. The studio couldn't agree fast enough.

Galactic mistake. When the movie was finally ready, the studio had to practically force theaters into taking it. But at the premiere, the crowds went crazy for Star Wars, applauding eight times during the movie and for a full ten minutes after the credits rolled. No one left, they just sat there stunned by what they had just seen. Finally, the theater manager came out and told everyone to leave because the next audience was lined up outside.

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And the rest is Star Wars history. No one was expecting the initial merchandising onslaught. Lucas had sold the toy rights to Kenner for a flat $100,000 fee. But Kenner was completely unprepared to meet the crushing demand by Christmas. So, he came up with the idea of issuing Early Bird Certificate Packages, which were IOUs that could be mailed in later for Star Wars action figures. It was the most coveted empty box in retail history. Kenner eventually mailed out four original Star Wars action figures in February

and by 1978 had sold 40 million, grossing more than $100 million. By the way, Lucas had originally offered the merchandising contract to a company named Mago, the leading action figure toy company at the time. Mago turned him down. I find your lack of faith disturbing. So did Lucas.

Mago declared bankruptcy five years later. George Lucas has gone on record saying Star Wars was created for toys. As he wrote the film, he thought of T-shirts, models, kits, and dolls. The unprecedented merchandising success of Star Wars not only created millions of connections between fans and the film, but the cash cow would eventually allow Lucas to make the rest of his movies

outside the Hollywood studio system. Never again would he have to beg for more time or more money. The merchandising also delivered another important strategy. It kept fans involved during the years between movies, a critical aspect of the ongoing Star Wars marketing phenomenon. According to The Hollywood Reporter, the Star Wars franchise has sold over $20 billion worth of merchandise and counting. When Lucas sold his company to Disney in 2012 for $4 billion, it was a full-circle moment in the history of motion pictures.

The original merchandising studio now owned the biggest merchandising franchise in history. It's estimated that the seventh Star Wars film, The Force Awakens, will sell about $5 billion in merchandise, add another $2 billion in ticket sales and $1.5 billion in video games, DVDs, and TV licensing, and the latest installment is headed for an estimated total return of just under $10 billion in video games, DVDs, and TV licensing, and the latest installment is headed for an estimated total return of just under $10 billion.

Suddenly, the $4 billion price tag seems like a bargain. Without question, Star Wars is the most successful merchandising movie of all time. But can you name the second movie on that list? It has sold $10 billion of merch, it's from Pixar, and if you guessed Toy Story 3, you'd be wrong. The answer is Cars. Number three on that list would be the Harry Potter series, with over $7 billion in toys and goodies.

When we move over to television, the program with the biggest merchandising sales also happens to be the longest-running sitcom in TV history. Over 500 companies have licensed the use of the Simpsons characters, resulting in close to $5 billion in royalties. Number two on the TV merch list? Sesame Street. Licensing fees provide 40% of the program's funding.

Actors also benefit greatly from merchandising. Sean Connery took a piece of the merchandising action from his years as James Bond. Sir Alec Guinness scored best from the original cast of Star Wars, with Obi-Wan pocketing 2. one quarter percent back-end profit points, including merchandise. Jack Nicholson cut his fee from $10 million to $6 million to play the Joker in the 1989 Batman film,

taking profit points and merchandising revenues instead and pocketing over $50 million. The highest paid actor today who earned $80 million last year from acting fees and merchandising? Iron Man Robert Downey Jr. Bet you can't guess who sits in the number two slot at $50 million. Answer? Jackie Chan. His merchandise includes toys, action figures, car accessories,

home and kitchen products, and Jackie Chan organic skin care products. Jackie's got great skin. He does. But not all actors got a slice of the merch pie. Five cast members from Happy Days sued CBS and Paramount for unpaid revenues from merchandising. Apparently, one of the stars saw a Happy Days-themed slot machine in Las Vegas and that triggered the suit.

It's an interesting case, because the clauses written into the contracts back in the 70s never accounted for popularity echoing into the 21st century. But a judge eventually ruled in favor of the cast. Interestingly, Henry Winkler wasn't a part of the lawsuit. Turns out he had personally negotiated a clause for merchandising back in the day. Of course he did. He was the Fonz. Merchandising is marketing.

It's easy to look at toys and action figures and think they are just quick buck spin-offs. But toys and dolls and model kits are not just big revenue generators, they're plastic cement. 40 million Star Wars toys in 1977 kept kids glued to the franchise in the years

between films. Merchandising is so important to Hollywood today that merchandise now determines which films get made. For the big studios, a film is rarely just a film anymore,

but a setup for a franchise. Think Iron Man, Batman, Harry Potter, Jurassic Park, Pirates of the Caribbean, and Toy Story. The list is as endless as the merchandise.

In fiscal 2014, Disney sold $45.2 billion worth of licensed products around the world from its properties that include Star Wars, Marvel, Pixar, and Winnie the Pooh. Mickey truly was the mouse that roared. But merchandising is not just for the big concept blockbusters. Downton Abbey has merchandise, and even The Good Wife has a line of home furnishings. It's all meant to keep you connected to the franchise,

one movie ticket, one Ewok, and one Good Wife throw pillow at a time. When you're under the influence. I'm Terry O'Reilly. This episode brought to you by... Buckley's. It's finger licking good. Under the Influence was recorded at Pirate Toronto. Series producer, Debbie O'Reilly.

Sound engineer, Keith Ullman. Theme music by Ari Posner and Ian Lefevre. Research, James Gangle. Hey, I like your style. I'd like your style even more if you were wearing an Under the Influence t-shirt. Just saying. You'll find them on our shop page at

terryoreilly.ca slash shop. See you next week. In case nobody's told you, weight loss goes beyond the old just eat less and move more narrative. And that's where Felix comes in. Felix is redefining weight loss for Canadians with a smarter, more personalized approach to help you crush your health goals this year. Losing weight is about more than diet and exercise.

It can also be about our genetics, hormones, metabolism. Felix connects you with online licensed healthcare practitioners who understand that everybody is different and can pair your healthy lifestyle with the right support to reach your goals. Start your visit today at Felix.ca. That's F-E-L-I-X.ca. Whether you're in your running era, Pilates era, or yoga era, dive into Peloton workouts that work with you.