Brand licensing

Licensing means renting or leasing of an intangible as-set. It is a process of creating and managing contractsbetween the owner of a brand and a company or indi-vidual who wants to use the brand in association with aproduct, for an agreed period of time, within an agreedterritory. Licensing is used by brand owners to extenda trademark or character onto products of a completelydifferent nature.[1]

Examples of intangible assets include a song (“Some-where Over The Rainbow”), a character (Donald Duck),a name (Michael Jordan), or a brand (The Ritz-Carlton).An arrangement to license a brand requires a licensingagreement. A licensing agreement authorizes a companywhich markets a product or service (a licensee) to lease orrent a brand from a brand owner who operates a licensingprogram (a licensor).[2]

1 History

Brand licensing is a well-established business, both in thearea of patents and trademarks. Trademark licensing hasa rich history in American business, largely beginningwith the rise of mass entertainment such as the movies,comics and later television. Mickey Mouse's popularityin the 1930s and 1940s resulted in an explosion of toys,books, and consumer products with the lovable rodent’slikeness on them, none of which were manufactured bythe Walt Disney Company.This process accelerated asmovies and later television be-came a staple of American business. The rise of brandlicensing did not begin until much later, when corpo-rations found that consumers would actually pay moneyfor products with the logos of their favorite brands onthem. McDonalds play food, Burger King T-shirts andeven ghastly Good Humor Halloween costumes becamecommonplace. Brand extensions later made the brand li-censing marketplace much more lucrative, as companiesrealized they could make real dollars renting out their eq-uity to manufacturers. Instead of spending untold mil-lions to create a new brand, companies were willing topay a royalty on net sales of their products to rent theproduct of an established brand name. Armor All autovacuums, Breyers yogurt, TGI Friday’s frozen appetiz-ers, and Lucite nail polish are only a handful of the prod-ucts carrying well-known brand names which are madeunder license by companies unrelated to the companieswho own the brand.

2 Reasons for licensing

A company may choose to license its brand(s) when theybelieve there is strong consumer acceptance for brand ex-tensions or products. For example, when Apple launchedthe iPod there was an immediate need for accessoriessuch as headphones, charging and syncing stations andcarrying cases. Apple decided not to manufacture theseproducts and instead chose to have a licensee make theproducts. By doing so, Apple could offer branded “Ear-bud Headphones”, “iPod docking stations” and “iPodsocks.” Each is made by a separate company but togetheroffer the consumer an elegant solution. All of these ac-cessories are sold by licensees.Apart from benefits to licensors, there are benefits to li-censees as well. Licensees lease the rights to a brand forincorporation into their merchandise, but do not shareownership in it. Having access to major national andglobal brands, and the logos and trademarks associatedwith those brands, gives the licensee significant benefits.The most important of these is the marketing power thebrand brings to the licensee’s products. When brandman-agers enter or extend into new product categories via li-censing they create an opportunity for a licensee to growtheir company. Below is an example of the licensed prod-uct process steps:

• Licensor chooses the product categories to be li-censed

• Licensor finds and negotiates a license with the bestlicensees

• Licensees develop concepts, prototypes and finalproduction samples and submit for approval

• Licensor approves licensed products for sale

• Licensees sell licensed products to authorizedretailers[3]

Licensees expect that the license will provide them withsales growth. This sales growth may be in the form ofgrowth within existing market or the opportunity to entera new market. To achieve this, licensees expect that thebrand they are licensing has significant brand preference,that it will open doors and ultimately help them meet orexceed their business objectives. The licensing contractforces the licensee to achieve certain sales targets and roy-alties; therefore, the goal of the licensee is to quickly meettheir business objectives, thereby achieving their contract

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2 6 REFERENCES

obligations. Royalties are the monies paid to a licensor bythe licensee for the right to use the licensed property. Itis calculated by multiplying the Royalty Rate by the NetSales.[4]

3 The global brand licensing indus-try

The main international professional association for brandlicensing is the Licensing Industry Merchandiser’s As-sociation, which sponsors the annual Licensing Interna-tional Expo.The Society of Product Licensors Committed to Excel-lence (SPLiCE) is a Licensors Community of Practicewith the vision to continuously improve brand licensing.The mission of SPLiCE is to act as a community of li-censors who share best practices for protecting, promot-ing and enhancing brand integrity. The SPLiCE Licen-sors Workshop acts as its annual Board of Director’s andMember’s meeting. During SPLiCE Licensors Work-shop, benchmark findings and industry trends are high-lighted in feature panel presentations that are relevant tothe community at large. They engage a creativity philoso-phy of divergence and convergence to sustain unique ideaimplementation on best practices.The vision for SPLiCE Licensors Workshop is to providebest in practice licensing education through sharing edu-cational best practices through benchmarking initiatives,task force collaborations, committee reports, and guestindustry speakersEachMay, License! Globalmagazine publishes an annuallist of “The Top 150 Global Licensors.” For 2013, theleader was Disney Consumer Products with $39.3 billionin retail sales of licensed merchandise, followed by IconixBrand Group and PVH.[5]

4 Brand licensing in India

The liberalisation of the Indian economy in 1992 broughta slew of international brands to India. Many of thesebrands have been licensed to Indian companies. ArvindBrands representWrangler, Arrow, Nautica, Jansport andKipling. The Murjani Group is the licensee for CalvinKlein Jeans, FCUK and Tommy Hilfiger. Beverly HillsPolo Club (BHPC) is licensed to Spencers Retail.Character Licensing is another big licensing segment ofbrand licensing in India. The big players in the charac-ter licensing industry in India are Walt Disney, Viacomand Cartoon Network Enterprises. Characters licensedout by Walt Disney include Mickey Mouse and DonaldDuck. Viacom has brought in popular characters fromNickelodeon like Dora The Explorer and SpongeBobSquarePants.

5 Brand licensing in Italy

Brand Licensing in Italy started in the seventies with veryfew Licensing Agencies. Apart from Disney which hadits own dedicated office in the market, all the other bigEntertainment majors were represented by independentagencies. One of these companies named DIC 2 (Dis-tribution International Characters), founded in 1973 byMr. Gianfranco Mari contributed to create the licensingbusiness in Italy and set big phenomena as He-Man andthe Master of the Universe, Marvel Comics, Star Wars,Hanna & Barbera characters, Zorro, Asterix and so on.DIC 2 is still one of the biggest independent agenciesin Italy, representing different cartoon characters and fa-mous brands.

6 References[1] Steve Manton (2005). Integrated Intellectual Asset Man-

agement. Gower Publishing, Ltd. ISBN 0-566-08721-9.

[2] BrandLicensingExpert.com Peter Canalichio, LicensingBrands, Inc. CEO

[3] MarketingProfessors.com

[4] Atlanta Business Radio Interview

[5] Anonymous (1 May 2013). “Top 150 Global Licensors”.License! Global. Retrieved 6 April 2014.

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7 Text and image sources, contributors, and licenses

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