The decline of licenses in video games

At Codemasters, just a few year ago, most successful games contained some sort of license: MTV Music, Colin McRae Rally, LMA Manager, DTM and TOCA Racing, Micro Machines, American/Pop Idol, Pete Sampras Tennis, World Championship Snooker, Brian Lara Cricket etc etc. It was a formula and it worked but Codemasters was not building much equity in its own brands whilst it was paying a lot to build other people’s brands.

Jim Darling, the company chairman, had an interesting take on this, he thought that all these brands should have been paying us for the exposure they were receiving. And he had a point, more people worldwide probably knew of Colin McRae from the games than they did from his rallying (which is actually a niche motorsport).

So it is interesting that Codemasters (with the exception of the high risk F1 game) have moved away from these licenses. Colin McRae is morphing into Dirt and TOCA into Grid, for instance, brands that Codemasters owns/will own and can build equity in.

And it is not just Codemasters that has done this. It is a massive industry trend. Electronic Arts for instance was once license central with Harry Potter, James Bond, Lords of the Rings and a whole raft of other licenses as their bread and butter. Now they have moved to publishing their own IP and making their own brands. This is industry wide as any examination of the charts, compared with just a few years ago, will tell you.

Now some of this is the big global film companies getting into gaming and so pulling back the licenses for their own use. Some of it is conscious decisions by managers to build equity in their businesses by owning and building brands. And some of it is the fact that the game industry is big and strong enough now not to need to ride on anyones coat-tails. Especially the coat-tails of old media which is in rapid decline.

The big problem for the industry is that this switch really is a different business model and there is much to learn about building and managing brands. So marketing becomes a lot more sophisticated with the need to communicate core brand values to the consuming public. This business model transition has caught some publishers out, which is one of the main reasons we are seeing publisher losses at the peak of the cycle. But in the long term it confers massive advantages to the whole industry. We are growing up.