Nets Not Betting the Store

Sep 1, 2003  •  Post A Comment

After a train-wreck series of failed attempts at chain-store retailing, networks are downshifting their brick-and-mortar pursuits, having learned to leave risky storefront experiments to the experts.
Fox, CNBC, Turner Classic Movies and Nickelodeon are among the networks currently finding success by launching partnerships with experienced retailers instead.
“It’s all about your appetite for risk,” said Leigh Anne Brodsky, senior VP of consumer products at Nickelodeon. “We have strong retail ties with people who are in that business, but we prefer to partner with people who have been doing the retail thing for years and years and who get all the intricacies involved.”
On the surface, Nickelodeon would seem an ideal candidate for a retail business-a built-in enormous young audience, plenty of beloved characters and a claimed $2 billion annual merchandise sales. SpongeBob products are sold everywhere, from Pep Boys to Hot Topic.
But after opening-then quickly closing-about a dozen Nickelodeon stores in the late 1990s, Ms. Brodsky said the network has no urge to attempt another retail experiment.
“It was something we quickly got out of,” she said. “We’re not in the retail business, we’re brand builders.”
Observers note that such experiences can be difficult for a company because the true commodity of a store is not the merchandise at all.
“The commerce you’re dealing in first is the image of your parent company,” said network consultant Ray Solley. “It’s another way of repurposing content. But they still need to follow the rules of retail. This isn’t like NBC setting up a gift shop in their lobby.”
But for a while, it seemed as if network gift shops were everywhere. The mid to-late-1990s saw a surge of network-themed concepts invading shopping centers across the country, most of which are now defunct.
“Retail was booming; you could be bad at retail and still succeed in those days,” said George Whalin, president and CEO of Retail Management Consultants.
And the temptation to expand a brand while potentially creating ancillary income was irresistible for many networks and their parent companies.
For instance:
* The PBS-sponsored Store of Knowledge wasn’t knowledgeable enough to overcome the economic downturn. It lasted from 1994 to 2001.
* The “Viacom Entertainment Store” opened to considerable fanfare in 1997 in a 30,000-square-foot behemoth in Chicago, followed by several others. The stores were divided into sections themed by various Viacom brands-an MTV section, a Star Trek section, etc. All shut down in little more than a year.
* The Disney Store and Warner Bros. Studio Store, though not directly originating from their namesake networks, nonetheless typify the arc of a network venture-gobs of programming-themed merchandise and rapid expansion, followed by struggle and decline. Disney’s North American stores have dropped from 522 to 387, and the company has said it is looking to sell the chain.
According to Mr. Whalin, a network establishing a retail identity is a fine idea, the more specific the brand the better. Niche cable networks are particularly well-suited to the task. Turner Classic Movies, for instance, recently partnered with Pottery Barn to sell vintage movie posters. But Mr. Whalin stressed that networks should never overestimate their brand appeal.
“Any time you have a brand and a presence, you have an opportunity to sell that brand and presence in a retail environment,” Mr. Whalin said. “The question is always going to be, `How much can you do?’ I don’t think any of the [networks] have an opportunity to grow into humongous retail ventures.”
Which is why Fox and CNBC are suddenly in airports. The nets are taking a unique approach to brick-and-mortar ventures by licensing their brand to already successful business models that previously lacked a strong identity of their own.
For Fox, that meant replacing dull airport sports bars with Fox Sports Skyboxes.
For CNBC, that meant converting newsstands to CNBC News stores.
Both concepts were executed through license agreements rather than directly owned-and-operated pacts.
“The only risk for us is only an execution risk-we want to make sure the store represents our brand, and it does that very well,” said Bob Meyers, general manager of CNBC Enterprises. CNBC’s partner, Paradies, has quietly opened or rebranded 20 newsstands in one year, with 13 more to come. Fox, which partners with Host Marriott, will have 13 Skyboxes by the end of this year.
“We’re the only sports bar at these airports, so I don’t need to bring you there-you’re already there,” said Larry Jones, CEO of Fox Sports. “We have never tried, or intend to try, doing a straight-up retail outlet. That doesn’t make sense, and Disney and Warner Bros. are learning that.”
While not very sexy or glamorous, the airport ventures have nonetheless been an effective way to grow a brand extension during a harsh economic climate without risking enormous capital.
Not that all network-owned shopkeeping attempts have failed.
The Discovery Channel Store chain, for instance, has remained a decent performer in 140 mall-based locations, despite losing a few stores in recent years.
Like the Viacom stores, the Discovery outlets offer sections devoted to the various networks under its umbrella. Unlike Viacom, however, Discovery has put a premium on offering exclusive merchandise that’s frequently developed in-house.
“First and foremost is the uniqueness of the products,” said Jane Saltzman, the network’s executive VP of merchandising. “Viacom logoed everything; they had to put one of their logos all over the products. But even though I carry a whole line of Animal Planet products, they’re unique. If you buy a bone, it’s not just like a bone you’d find anywhere else but with an Animal Planet logo on it.”
Another quasi-network-owned survivor is ESPN Zone, a mixture of sports bar, arcade, restaurant and merchandise retailer that has expanded to eight locations. The chain is owned and operated by Disney Regional Entertainment, a division of the net’s parent company. Though ESPN has no current plans to open more units, the existing stores have proved to be a popular draw.
“We didn’t just slap our logo on a sports bar; we created an ESPN experience,” said Rick Alessandri, senior VP and general manager of ESPN Enterprises. “It’s about drawing people in because they want to be there. It’s not just so I can sell another tricket.”
ESPN initially opted for the trinket-selling route, with a short-lived venture called ESPN-The Store. But its three Southern California locations closed in 1999.
“A pure retail environment didn’t work for us,” Mr. Alessandri said.
Truth be told, it hardly worked for anybody.