On Top Down Under

As Gaffney International celebrates 30 years in business, License! Global profiles the man behind one of Australia's most successful licensing companies, founder Fred Gaffney.

For those fond of Trivial Pursuit, here's a question: What do Lara Croft, Mr. Bean, and the Teletubbies all have in common? The answer, in Australia at least, is Fred Gaffney, about whom there is absolutely nothing trivial.

Gaffney is now an iconic figure in the Australian licensing business, overseeing a company employing 30 people and which, in 2005-06, turned over AUS$16 million and currently, in its 30th year, boasts a roster of properties that includes (in addition to the aforementioned Tomb Raider, Mr. Bean, and the Teletubbies) Strawberry Shortcake, Yu-Gi-Oh!, "Desperate Housewives," "Lost," "CSI," Teenage Mutant Ninja Turtles, Thunderbirds, and hundreds more. Describing his approach to the business of licensing, Gaffney says, "I think it is very important to keep an open mind," adding, "I also think it is very important to keep up with what people are doing, which I do by traveling a lot to meet them. I spend approximately six months a year on the road, and also paying attention to the media and such publications as Newsweek, The International Herald Tribune, and USA Today, as well, of course, as reading the trades."

It doesn't sound especially tough, but it's clearly effective. It is an approach that has taken Gaffney from a 16-year-old school dropout sweeping the floors at Woolworth's to his present, preeminent position in Australian licensing.

During his time at Woolworth's it became quickly apparent that not a lot of training of this young man was required as he became, at age 19, the chain's youngest-ever sales manager. Two years later, in 1969, Gaffney moved on to be a sales rep for TolToys, finishing his time with the company as national sales manager. By 1973, Gaffney's ambitions were widening in their scope, and he teamed up with the Hunter brothers, as general manager of Croner Trading. This was also the year he met Michael Edgeley, as Croner was handling Disney On Parade in Australia. In 1977, both the Hunters and Edgeley backed Gaffney in founding his new company, IFG Licensing, which changed its name three years later to Gaffney International when Gaffney bought out his original partners.

Hooking a Big Fish

The venture was initially launched with just one client—but what a client. In September 1976, while still with Croner, Gaffney was in New York, where he picked up a JCPenney catalog. He was taken aback to find that it featured no fewer then 30 pages of advertising for Sesame Street products. Intrigued, Gaffney telephoned what was then known as CTW, the forerunner of today's Sesame Workshop, and spoke with Frank Leuci, then vice president, international licensing. As a result of that call and the meeting in New York with Leuci which followed it, a "very nervous" (by his own admission) Fred Gaffney found himself shepherding Leuci, and the then-president of CTW, Bill Whaley, around Sydney and Melbourne, before finally persuading the pair to entrust the licensing of Sesame Street to him.

"In 1977," Gaffney recalls, "there was very little licensing in Australia, and most of it was Disney. Everybody watched the 'Mickey Mouse Club,' which had been launched during the Melbourne Olympics of 1956, and with which the entire population of Australia at that time had grown up. Also central to the Disney licensing presence in Australia at that time was the wide range of comics the company published and which supported their other characters such as Donald Duck and Goofy." This embryonic situation, however, did not stop Gaffney from racking up AUS$20 million in his first year with Sesame Street.

And these really were the early days of Australian licensing. "Back then," recalls Gaffney, "royalty rates were between 5 and 7 percent and advances were typically around AUS$500, with reporting only once every three or six months." He contrasts this with today's climate, which, he says, "is seeing royalties heading north of 10 percent with street talk of figures around 20, 30, or even 40 percent and guarantees said to be as high as US$100 million for Hasbro's deal for Spider-Man, and the US$800 million they paid for Star Wars.

"Although," he adds, "these figures are just talk, and are further complicated by rumors that they involve stock options and other share deals."

Illustrating the difference between the two eras, Gaffney reveals that the first-ever deal he did for Sesame Street was a T-shirt deal with the then fledgling Maryborough, now named Bond's and one of Australia's largest apparel companies, and it gave an advance of AUS$1,000, against a royalty of 7.5 percent.

Today's Challenges

But the differences between the early days and today are not just about numbers. "Now," insists Gaffney, "it is very difficult to launch new brands," observing, "80 percent of the brands on shelves today, are, essentially, yesterday's brands such as Star Wars, Strawberry Shortcake, Teenage Mutant Ninja Turtles, the Cabbage Patch Kids, and Care Bears. And, of the new brands that fill the remaining 20 percent of shelf space, only about one in 10 will succeed. I think that people need to understand that even the mega retailers such as Wal-Mart and Tesco only have room for between five and 10 brands on their shelves, and each year they are offered literally thousands.

"So," he concludes, "I think new ways have to be found, such as direct to retail, which is being pioneered by Disney, or possibly creative use of specialist shops and department stores."

Despite these observations, Gaffney insists that he is "optimistic about the future of licensing," adding, "it is already a US$100 billion business worldwide, and it is only growing." And the man who once swept the floors in Woolworth's before going on to sweep all before him in the licensing industry is also optimistic about the future of the company he founded.

"If there is one word," says Gaffney, "that sums up the past 30 years of Gaffney International, I like to think that word is 'pioneering.' And I would like to think that it will continue to encapsulate the ethos of the company over the next 30 years. We already have in place a 10-year plan to establish key alliances in Europe, Latin America, India, China, and Canada, and as we train the next generation of enthusiastic and talented executives to be our ambassadors to this new network of alliances, I hope that spirit of pioneering enterprises will continue to enthuse all we do."