Chapter 12
Licensing
McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
12-1
Introduction to Licensing
• Third Special Case of Sponsorship
• Licensing is a Value-Adding Process that
Provides Revenue-Generating
Opportunities Via the Conveyance of the
Right to Use Another Organization’s
Intellectual Properties for Commercial
Purposes
12-2
Intellectual Properties
• Intellectual Properties – Intangible Assets for
Which an Organization Can Claim Ownership
• Trademarks – Registered Identifiers Which Can
Be Protected Using Existing Laws
• Examples:
– Brand Names - Nike
– Slogans – “Just Do It”
– Logos – the Nike “swoosh”
12-3
Brief Historical Perspective
• 1930s - Walt Disney Characters
• 1950s – Television Personalities
• 1960s – Professional Sports in USA
• 1970s – Collegiate Sports in USA
12-4
Key Concepts - Participants
• Licensor – Owner of the Intellectual
Property Who Conveys the Right to Use
Select Intellectual Properties to the
Licensee
• Licensee – Entity that Is Given Permission
to Use the Intellectual Properties for
Specified Marketing Activities
12-5
Financial Perspective (2006)
• Sales of Officially Licensed Merchandise
Were Estimated at $187.4 Billion
• These Sales Resulted in Total Payments
of Some $10 Billion to the Licensors
• Payments to the Licensors Generally
Involve a Percentage of the Licensee’s
Sales Revenue - Royalties
12-6
Top 5 Licensing Categories
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•
•
•
•
•
Categories
Royalties
Characters from Entertainment $2,680
Trademarks/Brands
1,090
Fashion
830
Sports
825
Collegiate
203
– 2006 Royalties in Millions – US Dollars
12-7
Establishing and
Maintaining Ownership
• Drop in Box 12.1 Here
12-8
Agreement Terms
• Eligible Products
• Scope of Exclusivity
• Geographic Scope
12-9
Eligible Products
• Product Item – One Specific Product
– i.e. – Rival brand crock pots
• Product Line
– i.e. – Rival brand food preparation items
• Product Assortment
– i.e. – All products produced by Rival
12-10
Scope of Exclusivity
• Exclusive – Rights for Specific Product(s)
Granted to a Single Licensee
• Nonexclusive – Granting Rights to Use
Intellectual Properties on Same Product(s)
to Two or More Competing Companies
12-11
Geographic Scope
• Regional
– Small local region
– Larger region but not national in scope
– National
– Multinational region
• Global
12-12
Example of Actual Agreement
• Drop in Box 12.2 Here
12-13
Compensation
• Fixed Fee
• Royalty
• Minimum Guarantee
http://www.clc.com/clcweb/publishing.nsf/Content/institutions.html
12-14
Compliance Reviews
• “Underpayments May Represent as Much
as 50% of the Amount Due to the
Licensor”
• Verify that All Payments Due to the
Licensor Have Been Made
• Should be Performed Periodically
12-15
Benefits for the Licensor (Owner)
• Revenue Stream
• No Significant Investment Required
• Broader Product Assortment for Consumer
12-16
More Benefits for the Licensor
• Create Consumer Awareness & Interest
• Control Standards of Quality
• Control Array of Products Available
• Protect Image
12-17
Benefits for the Licensee (User)
• Capitalize on Licensor’s Brand Equity
• Capitalize on Short-Term Phenomena
• Capitalize on Economies of Scale
• Reach New (Higher) Price Points
12-18
Example of Selection Criteria
• Drop in Box 12.4 Here
12-19
Infringement
• Unauthorized Use of an Organization’s
Trademarks and Logos
• Counterfeit Issues
– Lost Revenues
– Lower Quality
12-20
Market Surveillance
• Policing the Marketplace in an Effort to:
– Locate counterfeit merchandise;
– Locate other trademark infringements;
– Take appropriate measures to end the
infringement;
– Remove any illegal products, and
– Discourage such efforts in the future
12-21
Remedies for Infringement
• Legal Restraints (Cease-and-Desist)
• Confiscate and Destroy Counterfeits
• Possible Time in Jail for Offenders
12-22
Performance Review
• Evaluate Licensee’s Financial
Performance
• Evaluate Licensee’s Production and
Marketing
12-23
Developing Licensing Plan
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•
•
•
•
•
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Identify Licensable Intellectual Properties
Establish Fee Structure
Establish Selection Criteria
Establish (Type) Terms of Agreement
Engage in Compliance Review
Market Surveillance
Performance Review
12-24
Examples of Licensing Contracts
• Drop in Table 12.3 Here
12-25
Growth Strategies
• New Target Markets
• New Up-Market Products
• More Traditional Advertising (Leveraging)
12-26
Top American Universities
• Drop in Box 12.8 Here
12-27
Closing Capsule
• Licensing Is a Special Case of
Sponsorship that Features a Win-Win
Relationship for the Licensor and the
Licensee
• Global Sales of Licensed Products
Continue Steady Growth
12-28
Closing Capsule
• Major Infringement Issues in Many
Countries across the World
• Manufacturers and Retailers Are Being
Encouraged to Produce and Sell Officially
Licensed Merchandise
12-29
Closing Capsule
• Insert Figure 12.3 Here
12-30