The concept of a market “bubble” is actually hundreds of years old, but over time it has proved to be a recurring phenomenon that is now generally accepted as a part of the business cycle. Bubbles occur across a wide variety of categories – look at the dot.com companies of the last decade, the real estate investment frenzy that collapsed in 2006 (one of many), various commodities such as nickel or uranium, even exotic livestock – it’s a long and sometimes odd list. Should we add Art Licensing?

In early economic theory, bubbles were referred to as “manias”, which is probably a better term for what we have going on in this category. Bubbles are often characterized by people making decisions based on emotion and supported by limited information, and they generally occur when there are more funds available than the assets to be purchased. Let’s apply this concept to art licensing: instead of funds and assets we have excess numbers of licensors chasing a limited number of licenses.

There is something very bubble-like going on right now – social groups based on art licensing are everywhere, people with little or no experience are touting themselves as experts in order to sell the dream, and a frenzied rush of people are hoping to jump into art licensing even though 1) they don’t understand the business and 2) the economic fundamentals don’t support the career change. Manufacturers are playing it safe, retailers are buying less and royalties are shrinking – yet artist competition is increasing? Certainly there is money being made in the business – art licensors collected about 136 million in royalties in 2009 – but those numbers are not going up, they are going down. Note that the 2007 figure was 175 million and 2008 was 154 million, meaning that art revenues decreased almost 12% two years running. They could easily be down again this year since we know 2010 retail sales of licensed art products are down compared to 2009. And the payday shrinks even faster when you start peeling off the amounts collected by those few big names selling tens of millions at retail, and then you divide the remainder among thousands of licensed artists.

In the dot-com days the loudest voices were those freshly minted paper millionaires proclaiming that business has a new model, the old rules no longer apply and a new era is upon us. Then pop! went the bubble, their millions vaporized and business, albeit slightly changed, went back to basics. Right now, the loudest voices promoting art licensing are twofold: those people trying to make money by funneling new artists into the business (regardless of the fact most do not have the skills to succeed at it), and those new artists who have bought into the program and now want to promote the new “club”.

Is this bubble going to pop? And what happens then?

This morning we were going through a stack of decorated kitchen calendar towels that we rescued from my parent’s house – apparently my mother had been saving them for years.  What was striking about these little gems was how often you could recognize the era by the design and color palettes – no chance of confusing a very colorful (and groovy…) 1972 look with a stylized retro from 1963. But as we looked more closely and laid them out side by side, the similarity becomes quite evident. The icons really don’t vary much – utensils, spices, coffee and tea, birds – these are what typically made kitchen towels… kitchen… back then, and these are what make up kitchen towels now.

The lesson here is that, in our business, while the style and palettes change over the years most of the products are still remarkably similar. Obviously this isn’t going to hold true for every category, particularly where there are technological advances, but if you think about it those are the exceptions. Boys like dinosaurs and rockets, girls like princesses, kitchen towels have veggies and fruit, curtain fabrics are stripes or floral – is it 1930, 1950, or 2011? How about all of the above?

Sorry to have gone missing, but we have given new definition to the phrase “crazy busy” over the last few weeks. We have moved the contents of an office, a house and also dealt with the passing of my father and everything that goes along with that – all in the last month or so – and of course the Two Town biz has continued to cruise merrily along as well. Every once in a while we have had to remind ourselves to stop and breathe… thankfully life is starting to settle down a little bit.

Another excellent post from Seth Godin today called “Bring Me The Stuff That’s Dead”, you can read it here. He points out that the first of the early adopters rarely do anything of consequence with the new…whatever…and the real quality work comes later. In our world, this meshes rather well with our advice of not chasing trends – it’s good to be aware of them but the effort of trying to be the first at everything will generally exclude you from any possibility of doing quality work. A quote from the post:

“I love to hear about the next big thing, but I’m far more interested in what you’re doing with the old big thing.”

Maybe not as much fun but far more likely to be a viable effort in a “product driven” business like ours.

A new report from research company The NPD Group (called Kids Leisure Time IV) states that face to face communication is dropping among kids as they get older. Face time drops from 17.5 hours per week for 2 to 4 year olds down to 10.8 hours per week for 9 to 12 year olds. Per week. Am I the only one that finds that to be a scary number, not to mention a scary trend? It has been no secret that person to person socialization among kids is being replaced by online networks, cell phones and video chats, but they go on to report that kids still have the same amount of leisure time, about 68 hours a week. Meaning they still have the time but significantly less of it is being spent in the company of their siblings and peers. So here’s something to ponder: what will that mean for the gift industry, or partyware, or crafts, etc. a few years down the road as these kids become our principal consumers?