A license is an agreement through which a licensee leases the rights to a legally protected piece of intellectual property from a licensor – the entity which owns or represents the property — for use in conjunction with a product or service.
Licensing is defined as the process of leasing a trademarked or copyrighted entity (known as a “property”) for use in conjunction with a product, service or promotion. The property could be a name, likeness, logo, graphic, saying, signature, character or a combination of several of these elements.
1.Varied Genres of Licensing
Character and entertainment licensing
Character and entertainment licensing is one of the largest segments of the licensing business, and is probably the part most recognized by the general public. Although the predominance of character and entertainment licensing in the merchandising industry lessens somewhat as other types of licensing emerge and flourish, this is still one of the most prominent. This category of licensing encompasses properties springing primarily from feature films, television shows, videogames, and online entertainment. (Characters and franchises that are created via book publishing books are also a popular licensing category, but are generally classified as “publishing” properties for the purpose of LIMA’s numbers.) While at one point the business was dominated by a handful of large entertainment organizations and publishers (mostly U.S.-based), the world has changed somewhat, with popular characters being produced by companies from around the globe.
The largest portion of the entertainment and character licensing business is aimed at children, through a broad range of merchandise categories such as toys, apparel, publishing, food and beverages, videogames and electronics, among many others. Child-targeted entertainment and character properties also often play a large role in promotional licensing But the category also features adult-targeted classic characters whose appeal is centered on a nostalgia factor, and even some child-oriented properties are marketed secondarily to adult audiences by creating a “cool” factor around them.
Corporate trademark and brand licensing
The licensing of company names, logos, or brands (referred to as corporate trademark/brand licensing) is one of the fastest-growing segments of the licensing business. Much of the growth is spurred by the fact that licensing provides enormous strategic, marketing and earning benefits to both licensor and licensee.
An ever-increasing number of major corporations in the trademark/brand sector are using their corporate trademarks and brands to build marketing visibility for a core brand by licensing its use in non-core businesses; to protect the company’s trademarks; to enhance their brand images; to increase their brand exposure; and to generate extra revenues and profits. For a brand owner, licensing offers a way to achieve any or all of those goals without making a large upfront investment in internal product development and manufacturing.
The realm of brand licensing stretches from the rather mundane is of featuring a corporate logo on a t-shirt too much more sophisticated integrated marketing and product development efforts in which a brand is extended into new product areas in ways that are seamless to consumers.
The licensing of designer fashion names and brands into such categories as apparel, fashion accessories, health & beauty aids, and home goods is one of the best-known facets of the business.
In some cases a fashion label may exist only as a license – even the main “core” apparel categories are licensed to third parties for manufacturing, marketing, and distribution. The designer or brand owner is responsible for creating the design direction and the marketing umbrella that defines the brand’s appeal. In most other cases, however, the designer or brand owner creates, markets and manufactures specific core categories, and uses licensing as a way of extending the brand into tangential areas such as other apparel areas (i.e. outerwear or intimate apparel), accessories (i.e. belts, headwear, watches, luggage and footwear), fragrances and beauty products, or home fashions.
Fashion licensing is meant to be invisible to the consumer, who is not to even consider that a third party licensee is making the products that carry the designer’s name. Of course, in a well-executed, tightly run licensing program, the brand owner maintains strict control over design and quality, and the licensee manufactures and the agreed-upon specifications, so the brand image is seamlessly maintained.
Sports licensing has grown in scope and sophistication over the past decade and is one of the top four revenue producers in the licensing world. In the U.S., the business is dominated by the four major sports leagues – National Football League, Major League Baseball, National Basketball Association, and the National Hockey League – along with NASCAR. Each of those leagues runs the licensing business on behalf of its teams out of a centralized league office.
Other significant licensing campaigns surround smaller professional sports leagues (i.e. Major League Soccer, Minor League Baseball), organizations such as the U.S. Olympic Committee and the National Collegiate Athletic Association (NCAA), and major sports events such as the Olympics and soccer’s World Cup. In addition, more than 300 colleges and universities in the U.S. are involved in collegiate licensing, marketing their rights primarily to the apparel market with sometimes very respectable revenues, depending on the performance of their sports teams and the size of the university or college.
The art licensing community is relatively small and fragmented compared to the other major categories of licensed properties. Art licensing encompasses everything from individual artists who support their artistic endeavors via licensing to well-established businesses that create art and design specifically to decorate a wide range of products, including prints, home décor, housewares, home textiles, publishing, giftware, apparel – literally any product whose appeal can be enhanced via an attractive or evocative image, design or pattern. Today art licensing, because of its timelessness, the ability to target specific niches, year-round profit potential, and moderate costs, is a vitally important segment of the worldwide licensing industry.
There are many reasons for intellectual property (IP) owner to grant a license. The most obvious one is to generate revenue from the guarantee and royalty payments. But licensing also can serve a number of other purposes.
- Marketing support for the core business – For a television show, movie, children’s book or sports franchise, the retail display and proliferation of licensed products doesn’t only generate product sales, but it also promotes the core property.
- Extending a corporate brand into new categories, areas of a store, or into new stores overall – Licensing represents a way to move a brand into new businesses without making a major investment in new manufacturing processes, machinery or facilities.
- Trying out potential new businesses or geographical markets with relatively small upfront risk – By licensing its brand to a third-party manufacturer, a property owner can try new businesses, or move into new countries with a smaller upfront investment than by building and staffing its own operations.
- Maintaining control over an original creation – Licensing represents a way for artists and designers to profit from their creative efforts while maintaining control over how they are used.
The most obvious benefit to a manufacturer or service provider the licenses a brand, character, design or other pieces of intellectual property is the marketing power it brings to the product. It can take hundreds of thousands or millions of dollars to build a brand from scratch, and licensing represents a way for a manufacturer to take advantage of all the brand building and image building that has gone on before.
- Moving into new distribution channels – A manufacturer who licenses artwork or designs to be applied to home textiles, wall coverings, housewares, or on apparel has less reliance on in-house art staffs that would otherwise need to be maintained.
- Reducing in-house costs – A manufacturer who licenses artwork or designs to be applied to home textiles, wall coverings, housewares, or on apparel has less reliance on in-house art staffs that would otherwise need to be maintained.
- Enhancing authenticity and credibility – The publisher of a car-racing videogame might license a host of well-known automotive brands and car models to lend legitimacy and authenticity to the game.