Scaling up the business Series - Licensing programs - Part I
Category expansion strategy, business models, movie merchandising, brand licensing, product licensing
Before I start, I would encourage you to browse the earlier posts of thinking category to get the sense of what you are doing here.
And than don’t shy away from subscribing, sharing with your colleagues, and commenting.
Few weeks back, we discussed about 2 category creators - Smart O’ bite and Stance. A reader quizzed me about how to scale up the category, and that’s a long discussion. Different businesses applies different strategies to expand the business at different growth stage of their journey. Hence, I thought to start “Scaling the business series”. One by one, we will talk about these business strategy.
Today, under this series, we are going to talk about Licensing programs.
But First, let’s hear the story of talking bus.
My name is “Talking B” and I was created in 1994. The same year when Levi Jeans came to India. I became a rave within 5 years of my creation. I used to take Kids on scientific journey and will introduce them to all kind of experiments from photosynthesis to space programs. I was on the show that had the highest TRP ever.
Every cool kid wants to wear the T-shirt with my face on it.
Kids wanted talking B DIY experiments at home. and many more.
Hence, my creator decided to do a licensing deal with a manufacturer to bring my characters directly to the kids in the form of toys, t-shirts, DIY games, puzzles, all of it.
Since then, I am available at all retail chains. And my creator is enjoying the royalty from the sale of the products. END OF THE STORY.
So that’s how licensing helps to expand the business.
The way I see it, Licensing programs can be categorized into 2 segments.
Product licensing - You invent a unique product. But you don’t have capability to take it to the market so you do agreement with other brands / Manufacturers who take it to the market. That’s what product licensing deal is.
Watch Shark tank (many deals were licensing deals i.e. sports licensing market, toys market etc.).
If you binge watch Grace and Frankie like I did last weekend!! , you might have seen Frankie doing a deal with Say Grace, a beauty company for her product invention. (and the drama that goes with the deal).
Brand Licensing - You are already a brand. Well-known. You want to leverage your existing assets - tangible or intangible such as your name, logo, characters, celebrity status. You work with other companies, let them use their assets and you earned from the royalty. Another revenue stream. That’s brand licensing. Licensing is common in the entertainment business.
HISTORY OF LICENSING
Licensing has been happening since Roman Catholic pope time, but we will not go that back. Some worth-mentioning licensing deals:
Peter rabbit : The oldest licensed character was Peter Rabbit doll by Beatrix potter in 19031.
The doll was followed by other "spin-off" merchandise over the years, including painting books, board games, wall-paper, figurines, baby blankets and china tea-sets. (licensed by Frederick Warne & Co)
Teddy bear (Named after President Theodore "Teddy" Roosevelt)
Mickey mouse : the most famous licensing character of all time. Read the story of Kay Kamen.
NFL properties was formed in 1963 as licensing division of National football league. (Sport licensing)
Elvis Presley - Celebrity licensing program
And many more from Superman, batman to Winne the pooh.
WHAT IS LICENSING
Wikipedia:
A license or license is an official permission or permit to do, use, or own something. A license is granted by a party to another party as an element of an agreement between those parties.
Licensing = Leasing your intangible assets (Invention, brand, name, intellectual property, trademark) to other party/parties.
It involves two parties: a licensor and a licensee. The licensor owns the rights to certain intellectual property (IP). The licensee manufactures products using the IP granted by the licensor via a license agreement for the time period defined in the agreement. 2
WHY LICENSING
Revenue streams - You created something unique, you want it to explore all the revenue options. In 2020, the Walt Disney company made $54.7B from licensing business. 3
Scale the business - Licensing helps the business to scale quickly. (https://yourstory.com/2019/10/gurugram-startup-brand-licensing-licenseworks)
HOW LICENSING WORKS : STEP-BY-STEP PROCESS
Identify opportunity in the market
Who could you partner with? What can you sell? Go as creative as you want. For example - Disney has done licensing deal with Satya Paul to develop Mickey mouse Saree.
Make the plan and pitch
Draft the agreement
Negotiate the agreement (Term sheet - commercial terms of the proposed licensed agreement) and finalize royalty / liability etc.
Execute the agreement and manage the relationship
We will discuss other models such as Franchise model, marketing strategies such as product flanking, Product lifecycle, brand extension strategy in future posts of this series so stay tuned. Lot more is coming up.
So stay subscribed, stay informed :)
https://en.wikipedia.org/wiki/Beatrix_Potter#cite_note-56
https://greenlightrights.com/blog/2019-01-31-what-is-product-licensing-merchandise-licensing-and-product-licensing-explained/
https://www.globenewswire.com/news-release/2020/08/20/2081399/0/en/The-Top-150-Global-Licensors-of-2020-Announced-by-License-Global.html
You can read more on this here:
About Product licensing