License deals for IP turn into big biz, riding demand for original ideas

Move over Tom, Jerry, Donald Duck, Mickey Mouse and the lot, Luo Bao Bei is here.

The cartoon character merchandising tide may be turning in China's favor after decades of Western dominance.

China's cartoon character Luo Bao Bei, a 7-year-old Beijing girl, is going global and raking in the moolah through intellectual property or IP deals worth billions of yuan.

Its producer Hangzhou MagicMall Animation Production Co Ltd has signed 10-to 15-year copyright agreements with many overseas broadcasters, including the Australian Broadcasting Corp, according to Tian Jia, its general manager.

Luo Bao Bei, the 52-episode animation serial from which the character is drawn, has already earned more than 1 billion yuan ($156.8 million) in gross income from overseas IP licensing deals.

Its IP license buyers are from countries such as France, Italy and the United States, Tian said.

That's a dramatic shift from the scene until recently.

For decades, Western comic characters and some from Japan, captured Chinese minds and hearts, spinning big bucks for those who held IP rights to them.

Back in the 2000s, companies such as Walt Disney, Warner Bros and Doraemon ruled the roost with their copyright-protected characters, according to a report from Dezan Shira and Associates, an Asia-focused investment adviser for businesses.

Huhu Studios, New Zealand's second-largest 3D animation producer, has recently sold copyrights of several old cartoon characters to Chinese companies, according to Trevor Yaxley, its CEO.

Amid all this, the number of Chinese cartoon characters with IP protection has grown dramatically, thanks to a government campaign to develop the animation industry and make it more profitable, the Dezan Shira report said.

IP licensing deals allow buyers to use images of copyright-protected original characters on their products like TV and video content, electronics, toys, books, magazines, apparel, accessories, foods and beverages.

Yet, even as recently as five years back, an IP license to use a Chinese cartoon character would cost no more than 20,000 yuan.

Now, a similar IP license for a popular Chinese cartoon character could generate up to 2 million yuan in revenue, said Yaxley of Huhu, which is working on an elephant's adventure story called Beast of Burden.

The first co-production of China and New Zealand, 3D cartoon film Beast of Burden is expected to release this year.

Luo Bao Bei tells stories of a Beijing girl and her bonds with her neighborhood, friends and family.

Luo Bao Bei, the girl character is popular abroad because she is not the usual stereotypical cartoon who wears a red dress and waves a magic stick, Tian said, referring to her chats with foreign partners of MagicMall Animation.

"By showing details of her life, real life-like scenes of Chinese community and family in modern times can be displayed, which surprisingly won popularity from the Western world."

The company has already sold Luo Bao Bei IP licenses to book publishers and indoor theme park operators. It will authorize commodity producers and toymakers next, Tian said.

Beijing Zhiyou Culture Communication Co Ltd invested over 10 million yuan to build Luo Bao Bei Land, an indoor theme park in Beijing inspired by the cartoon character. It opened for business in July last year.

Chen Yifan, the park's director of operations, declined to share financial details but said the company is quite satisfied with the revenue level achieved so far.

Parents pay 228 yuan for a visit so they and their kids could enjoy the slides, make paper cuttings or play other games together in the 1,500-square-meter Luo Bao Bei-themed park that has decorations and toys transplanted from the animation serial.

The park offers different activities like making red lanterns and lucky bags, in line with the animation serial's philosophy of spreading Chinese culture, Chen said.

Luo Bao Bei's success could make IP licensing of Chinese cartoon characters even more popular, making China the biggest such market in Asia by 2020, industry insiders said.

Their view is based on Chinese parents' search for authentic cartoons and related merchandise for their children, as well as the world's growing interest in China, experts said.

Retail sales of IP license-based products and services exceeded $260 billion globally in 2017. About 3 percent of them were contributed by China, according to License Global data.

From 2008 to 2013, Chinese IP licensing deals grew by 90 percent annually. Related retail sales reached $7.22 billion in 2015. Last year, they generated about $7.8 billion in sales, according to the International Licensing Industry Merchandisers' Association.

About 45 percent of global retail sales related to IP licenses can be traced to entertainment and cartoon characters, it said.

"Since creative cultural products represent a long-term investment, IP licensing can help accelerate the pace of creating assets. This will encourage producers to create more original IPs," said Li Qin, brand-licensing leader of Zhejiang Versatile Media Co Ltd, producer of Axel 2: Adventures of the Spacekids, a home-grown animation film which raked in 50 million yuan at the box office after its release in October last year.

Dong Minna, an analyst with market consultancy Analysys in Beijing, said though Chinese are craving for good cartoon IP deals, top-quality characters are relatively few and far between.

High demand and inadequate supply have pushed up prices of licenses for IPs with good quality to unrealistically high levels, Dong said.

Still, they are nowhere near the levels of some mature markets such as the United States, where IP licenses may be worth billions of dollars, according to Yaxley of Huhu Studios.