MI Pro

When I suggested to Dennis Drumm, JHS’ MD, that it would be worthwhile to take a peek at the SpongeBob SquarePants phenomenon, his response was unequivocal: “A peek? I would think it’s worth a massive article.” What followed was three pages of some of the most enthusiastic pitching I have ever seen. I was intrigued.

Speaking to those involved in Nickelodeon’s licensing department (which holds the copyright for SpongeBob), I quickly realised that their enthusiasm for being involved in the musical instrument market equalled that of Drumm’s for being involved with the cartoon character. Something of a marriage made in heaven, then.

“We are really proud of this range – it is a perfect balance between the product and the image and as these are real musical instruments and not toys, it makes for a stand-out range,” explains Clare Piggott, Nickelodeon’s VP of consumer products. “Both sides recognised immediately that this could work and the combination of desire and the real enthusiasm that we both brought to the project meant that things were able to happen very quickly.

“We developed the relationship, starting in mid-07 when the deal was first negotiated, and then the first products were out in November 07 – that is a cracking pace. JHS has grabbed hold of this and taken it forward really well.

“The fact that this has culminated in the Product Innovation Award at the Licensing Awards is a nice pat on all of our backs and shows what can happen when the product and the brand work well together, as well as the teams that represent them.”

Indeed – and this indicates considerable desire to make the licence work. It turns out that it was JHS that made the first move in this particular case, but what is important here is that once the relationship and the branding had been established, the scheme took off under an energy all of its own. This very much falls in the lap of The Sponge himself, it would appear. “SpongeBob is interesting as a character as he works in areas where such brands haven’t worked before,” says Piggott. “He manages to be both eclectic and mainstream. He’s fairly unique… I know, that is a terrible way to say that – how can anything be ‘fairly unique’?

But in the case of SpongeBob, he’s a cartoon character that is able to stretch the boundaries of expected audiences. He is so optimistic and accepting. He’s just very likeable.”

Drumm concurs with this: “The demographic involved is important – and of course SpongeBob SquarePants is gender neutral, in the way that, say, Hannah Montana and Daisy Rock are not. Make a product aimed at girls, and you cut your market in half.

“Talk to girls who want to play a musical instrument, especially guitar, and you’ll discover that they want to ‘rock’ and you’ll find that a lot of them do not want to be pigeon-holed with ‘girly’ products; they want to play something they see people playing on stages and on TV. SpongeBob’s appeal transcends this whole issue, because it’s just such fun, with a truly ubiquitous appeal. Yes, the seven to ten-year-olds love it – and these are the kids who will carry on to play seriously in the future – but also he appeals to 30-year-olds and way beyond to the parents and grandparents who are buying for kids and also love the character.”

I had had experience of this, in fact, when Intent Media’s chief designer caught sight of the SpongeBob drum kit in an issue of MI Pro. To say he was excited at the prospect of getting his hands on one is something of an understatement.

“That is exactly the reaction we are getting the world over,” says Drumm. “Yes, pester power is very important. Kids see SpongeBob on the instruments and want one – all the products are priced competitively enough to be an impulse buy in their various sectors – and don’t ever forget, every one sold is still another instrument in a child’s hands – but parents love them, too, and will see a serious instrument with appeal for their children when they look at a SpongeBob guitar or drum kit.

“The response from the education sector bears this out, where we know that teachers are seeing kids coming to learn the guitar with a SpongeBob instrument, which was bought because it had SpongeBob on it”

Are you tempted yet? Find a good brand, get it plastered on your gear and away you go. Well, perhaps you ought to hold on a bit before you dive for the Cbeebies channel and google the respective licence holders. The Sponge would appear to be more standout than his simple appeal across the genders and the generations.

“This is the tenth year now of SpongeBob SquarePants in the States, and in the UK and Europe we are a few months behind, but SpongeBob has really gone from strength to strength,” says Piggott. “One third of the UK population watched him on TV last year and his popularity is still growing. We have had Johnny Depp putting his voice to one of the characters and there are a lot more well-known voices coming to the show soon – these are seen as good opportunities for the celebrities, too.”

It might seem to many as if we are looking at something approaching the iconic status of The Simpsons or even Tom and Jerry. “Well, it’s very early days to be talking about icons, but then again, who would have thought a sponge living under the sea in a pineapple would ever have been so popular?” Piggott points out. “That said, who would have thought a mouse beating up a cat would last half a century or more?
“In the end, though, licensing is not a science. Our job is to capitalise on that which is popular. The fact that SpongeBob has the magic dust – and it is syndicated in over 45 markets now – just makes our job that bit easier.”

Not a science? Some might disagree. First you need the brand, then you need to seek (or be sought for) an application for that brand, then there is the artwork, which can come either from the licensor or licensee – and in between all of that, there is the negotiation for the licence itself. This can result in a single fee or in a royalty based on unit sales (or both), before the fun of actually marketing a range of products to a public keen on parting with its money.

“The costing is a very analytical process,” Piggot explains. “We look at the range and try to work out the potential of the products in the market they are in and then we make conservative, but realistic sales projections and the licence fee depends on the results of that – I suppose this is the one bit of science we utilise, to contradict what I said before. The payments that result depend on the conclusions we come to regarding the sales projections. There is always a minimum guarantee payment, much like a deposit, but after that we tend to earn as the product sells.”

On top of that, while one can hopefully cash in on a licensing deal, there are other markets and industries all looking to use the same branding. It is something of a tightrope for anyone, but particularly for a licence holder such as Nickelodeon. “In terms of the development of a brand, we have to bear in mind that you mustn’t over-proliferate,” says Piggott. “We want a good life-cycle from our brands and SpongeBob Squarepants, like anything else, needs very specific branding and we have to have compelling product. Nickelodeon never looks to double licence – and that is not true of all licensing companies. I’m not saying that in a negative way. Some companies look to carve up categories among a number of competing licensees, but we prefer to have long-term relationships.”

But would Nickelodeon consider making musical toys with another company, which could conflict with JHS’s real instruments? After all, we in the MI trade take our instruments seriously and tend to look upon toys as a no-go area. “We might, but the John Hornby Skewes range is very aspirational, sitting firmly in the real musical instruments category and at a price point commensurate with its status. It is a standalone range that we would not replicate for the toy arena. While we would consider licensing our properties to create alternative ranges of musical toys that would be aimed at a toy price point, instruments such as guitars would not be a part of this offering.”

For JHS, however, the message is very much ‘full steam ahead’. “Our leap of faith in creating the real musical instruments category and acquiring the rights to licence SpongeBob SquarePants is turning into a massive success for JHS, domestically and in a growing number of export markets,” says Drumm. (The SpongeBob real musical instruments range is now on sale in Austria, Australia, Benelux, Canada, France, Germany, New Zealand and Switzerland, with some very serious, late-stage negotiations going on at the moment – due to come to fruition in early 2010.)
“This is quite possibly the most fun we've ever had with a range and the combined power of JHS, a truly terrific licensed character and the worldwide reach of Nickelodeon, MTVN and SpongeBob is almost irresistible.”

So, where to next for the Garforth Sponge? (That’s Bob, not Dennis, in case you were wondering, although the two are becoming almost inextricably linked.)

“This is the third season for SpongeBob with us and looking at the way the ranges have taken off, the speed with which people have taken to it, this is an exceptionally successful line with a terrific future. Of course, we wouldn’t go into these negotiations without an idea of what might be demanded of us, and we have always had a plan in place to maximise the return, globally, from our licence. The good thing is that distributors and dealers know this isn’t a ‘here today-gone tomorrow product’ and dealers recognise they can make good money here.”

Drumm also points out that, perhaps obviously, the branding is working well in the education markets. “The branding is really becoming big with education – it is starting to drive the market. We are rolling out new educational percussion products in November, so that’s going to continue, too.

“But for now we are very much in a period of consolidation. After the expansion the range has gone through over the first two years – culminating in those percussion products – any growth from here will be improving sales abroad.”

For the hardened, axe-wielding, gigging musician/retailer, however, Drumm must surely have received no end of derisive snorts of disapproval and disdain. “You would think so, wouldn’t you?” he says. “Oddly that is not the case – we have had virtually no negative reactions at all. In fact, I could go so far as to say this is the most universally accepted product we have ever had. The price points are key – as are the product specs – the reaction has been heartwarming. I’ve been in this business for 35 years, and I have never experienced acceptance like this and honestly, I just cannot think of a single reason any reseller would not want to enjoy and benefit from selling SpongeBob kit, unless maybe they’re just congenitally miserable, but I don’t know anyone like that in this industry.”

But who, then, is earning the money? The bottom line still remains the most important thing. JHS has always made much of the fact that its customers, the MI retailers, are making money from them. Is it making money from Nickelodeon?

“It really is a win/win for us and the licensees,” concludes Piggott. “We’re a royalty-led business and so for us it is great to see a product line growing as we earn more from that, but we are only earning more if the product is earning more, which means the licensee is, too. We are very careful about how we price things to ensure there is a good balance.”

For Dennis Drumm, the phrase ‘win/win’ is not far away, either. “Everything is overseen by the same designers and made by the same factories that are responsible for all of our other highly successful guitar brands and we put a lot of focus on the ‘real musical instruments’ tag because that’s what they are – and I am determined to get a great response from dealers, teachers, experienced players, the press and the first-time players who make up our audience,” he enthuses.

“We have deliberately avoided compromising on quality, which I believe is the mistake made with other licensed character musical instruments, some of which have already come and gone. Show me another product that makes everyone smile in the way this does. How much fun can you have and stay sane?”
JHS: 0113 286 5381