Contents:

Scope and Themes - What you need to know - Definition - Data sources - Sales data - Consumer survey data - Advertising creative Abbreviations and terms - Abbreviations Executive Summary - Sales decline rapidly as consumers become more frugal - Population growth among kids aged 1-11 offsets some losses - Case studies - Insights and opportunities - SpongeBob SquarePants and iCarly among the most popular characters - Sesame Street viewed as good influence by most adults - Most adults report that character merchandise is not a good value - Adults most likely to report purchasing food and personal care products - Fast food and t-shirts especially popular with parents - Young adults more likely to report increased spending - Most kids cite media as part of their favorite activities but feel school is important - Character Merchandising Case Studies - Case Study 1: Largest film franchise ever rolls out museum exhibit and theme park - Harry Potter: The Exhibition - Harry Potter: The Theme Park - Case study 2: Fast food chains remain a prime target for licensing opportunities - Self-regulation doesn’t work - Case Study 3: Higher-end apparel tie-ins making waves - SpongeBob gets precious with 12-carat diamond jewelry - Disney and Warner Bros. wooing designer crowd - Case Study 4: Video game tie-ins drive growth in a struggling category - Electronic Arts tops 1 million units with Harry Potter - Case Study 5: Mobile gaming tie-ins are heavy on film adaptations Market Size and Forecast - Key points - Retail sales and forecast of entertainment/character merchandise - Sales and forecast - Figure 1: Retail sales of licensed entertainment/character merchandise, at current prices, 2004-10 - Figure 2: Retail sales of licensed entertainment/character merchandise, at inflation-adjusted prices, 2004-10 Segmentation and Distribution - Key points - Entertainment/character merchandise segments - Figure 3: Retail sales of licensed entertainment/character merchandise, by product category, 2006 and 2008 - Distribution of licensed entertainment/character merchandise - Figure 4: Distribution of licensed entertainment/character merchandise, by retailer type, U.S. and Canada, 2006 and 2008 - Competitive Context - Agelessness trend increases threats from celebrities, sports and trademarks/brands - Figure 5: Sales of licensed goods, by property types, 2006 and 2008 - Market Drivers - Increasing number of children bodes well for market growth - Figure 6: Population, by relevant age groups, 2004-14 - Minority populations key to market growth - Figure 7: Population, by race and Hispanic origin, 2004-14 - Figure 8: Households, by presence of children—Hispanics vs. non-Hispanics, 2006 - Recession boosts movie admissions - Figure 9: Sales of movie tickets at box office, 2004-14 - Rise of the Screenager: Online and gaming platforms beg customization, interaction - Figure 10: Hours of filmed entertainment consumption per person per year, 2003-07 - Figure 11: Activision’s Transformers: Revenge of the Fallen (video game) television ad, July 2009 - Figure 12: Hours of game play—kids, by age and age/gender, October 2007-December 2008 - Figure 13: Incidence of game play while connected to the web—kids/teens, by age and gender/age, October 2007-December 2008 Most Popular Characters and Role Models - Key points - Kids’ favorite characters - Figure 14: Hasbro’s Connect 4 SpongeBob SquarePants Edition television ad, July 2009 - Figure 15: Kids’ favorite characters/shows, by age, April 2009 - Characters viewed as good role models - Figure 16: Cartoon and movie characters seen as good role models, by age, May 2009 - Cartoon characters designed for adults most likely to be seen as a bad influence on children - Figure 17: Perceptions cartoon and movie characters as good role models or not appropriate for children, May 2009 Attitudes Towards Character Merchandising - Key points - Products with characters not seen as good value - Figure 18: Value perceptions of character merchandise, by age, May-June 2009 - Social influence does not drive sales among adults; many concerned about potentially negative impact in children - Figure 19: Influence of character merchandise on purchasing behavior, by age, May-June 2009 - Characters lead to pestering - Figure 20: Attitudes towards character merchandise; pester power, and childhood memories, by age, May-June 2009 - Ambivalence about using characters to educate children - Figure 21: Attitudes towards using characters to educate kids, by age, May-June 2009 - Most parents, especially men, unsure about how characters motivate child’s behavior - Figure 22: Influence of character merchandise on children’s product preferences, parents by gender, May-June 2009 - Impact of income on influence of characters on children’s product preferences - Figure 23: Influence of character merchandise on children’s product preferences, by household income, May-June 2009 Purchase of Character-linked Products - Key points - Food, clothing and personal care top the list - Figure 24: Purchase of character-linked products, by type of product and nature of purchase, May-June 2009 Products Parents Buy for Their Kids - Key points - Characters drive food purchases; moms generally more likely to be purchasers - Figure 25: Character merchandise purchased for child/children in the last 12 months, by gender, May-June 2009 - Lower-income households more likely to buy character merchandise - Figure 26: Character merchandise purchased for child/children in the last 12 months, by household income, May-June 2009 How Parental Attitudes are Evolving in Recession - Key points - About one in three report buying fewer character products than last year but nearly half are buying the same amount - Figure 27: Purchase of character merchandise relative to last year, by age of parent, May-June 2009 Children’s Attitudes Toward Media, School, Friends and Self - Key points - Television is a favorite pastime of most respondents under 12 - Figure 28: Kids’ attitudes towards TV, movies and video games, by gender and age, October 2007-December 2008 - Most enjoy school and think academic work is important - Figure 29: Children’s attitudes towards school, by gender and age, October 2007-December 2008 - Most kids report being quite social; demand for social networking likely to continue growing as kids become teens and adults - Figure 30: Children’s attitudes towards friends, by gender and age, October 2007-December 2008 - Most feel confident, curious and distinct from parents - Figure 31: Children’s personal preferences and attitudes about self, by gender and age, October 2007-December 2008 The Impact of Race and Hispanic Origin - Key points - Child’s favorite cartoon or movie character - Figure 32: Hannah Montana’s The Hannah Montona Light-up Dance Lounge television ad, July 2009 - Figure 33: Child’s favorite cartoon or movie character, by race/Hispanic origin, May-June 2009 - Character merchandise purchased in the last 12 months - Figure 34: Character merchandise purchased in the last 12 months, by race/Hispanic origin, May-June 2009 Appendix: Additional Consumer Tables - Demographic comparisons of parents - Figure 46: Use of character merchandise relative to last year, by gender, May-June 2009 - Figure 47: Influence of character merchandise on children’s preferences, by age, May-June 2009 - Figure 48: Influence of character merchandise on children’s preferences, by race/Hispanic origin, May-June 2009 - Figure 49: Perception of child’s favorite cartoon or movie character, by gender, May-June 2009 - Figure 50: Perception of child’s favorite cartoon or movie character, by age of parent, May-June 2009 - Figure 51: Perception of child’s favorite cartoon or movie character, by household income, May-June 2009 - Favorite programs of boys and girls aged 6-17 - Figure 52: Kids’ favorite characters/shows, by gender, April 2009 - Additional demographic comparisons of adults who are not parents - Figure 53: Attitudes towards price and quality of character merchandise, by household income, May-June 2009 - Figure 54: Influence of character merchandise on purchasing behavior, by household income, May-June 2009 - Figure 55: Attitudes towards character merchandise, by household income, May-June 2009 - Figure 56: Attitudes towards price and quality of character merchandise, by race/ethnicity, May-June 2009 - Figure 57: Influence of character merchandise on purchasing behavior, by race/Hispanic origin, May-June 2009 - Figure 58: Attitudes towards character merchandise, by race/Hispanic origin, May-June 2009 - Figure 59: Good role models, by household income, May 2009 - Figure 60: Good role models, by race/Hispanic origin, May 2009 - Figure 61: Inappropriate role models, by age, May 2009 - Figure 62: Inappropriate role models, by household income, May 2009 - Figure 63: Inappropriate role models, by race/Hispanic origin, May 2009 - Figure 64: Classic characters, by age, May 2009 - Figure 65: Classic characters, by household income, May 2009

Companies Mentioned

- Blockbuster USA - Burger King Corporation - CBS Corporation - Dolce & Gabbana - Electronic Arts, Inc - Entertainment Software Association - Facebook, Inc. - Federal Trade Commission - Flickr - Fox Entertainment Group Inc. - Gameloft (USA) - Glu Mobile Inc. - Greenfield Online - Hasbro Inc - J. Choo Limited - Kashi Co. Inc. - Kellogg Company - LG Electronics Inc (USA) - Manolo Blahnik USA, Ltd. - Marc Ecko Enterprises - McDonald's U.S.A. - MGA Entertainment, Inc. - Microsoft USA - Motion Picture Association of America - MTV Networks - MySpace.com - National Football League Inc. - Nestlé USA - Nickelodeon Networks - Nike - Nintendo of America Inc. - Papa John's International, Inc. - Pizza Hut Inc - Pokémon USA Inc. - Public Broadcasting Service - Safeway Inc - Sony Corporation of America - The Cartoon Network - The New York Times Company - Twentieth Century Fox Film Corporation - U.S. Bureau of Labor Statistics - U.S. Bureau of the Census - Universal Studios Inc. - USA Today - Walt Disney Company, The - Warner Bros. Entertainment Inc. - YouTube, Inc.