Before my days of updating forums, answering questions and working to improve the time you spend as members of the Edison Nation community, my professional life revolved around licensing. I handled everything from music and footage used within MTV programming to branded slot machines and most everything in between!
I know what you’re thinking…
“We know what licensing is, that’s why we’re here… to license our product ideas!”
And, you’re right. The goal of the Edison Nation Licensing Team is to license the intellectual property for your ideas to partners who would then manufacture and distribute your product. But that’s just one small piece of the licensing puzzle.
- Want to create a product that features a Marvel superhero?
- Want to have a product play a Beatles song?
- Want to create an outdoor product that features a professional sports logo?
These examples are all types of licenses that would need to be secured BEFORE your product goes to market, and they all have added costs, approvals and time associated with them. So, what are some things you need to know to navigate the world of brand licensing? Let’s start at the beginning…
What is licensing?
According to the Licensing Industry Merchandisers Association (LIMA), the leading trade organization for the global licensing industry, licensing is defined as follows:
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.
A 2012 LIMA Licensing Survey outlined the Estimated Revenues in just the US and Canada for different types of licensing:
As you can see, it is quite a business, and an expensive one at that. Let’s take a closer look at how LIMA defines the top categories of licensing:
Character and entertainment licensing:
This category encompasses properties primarily from feature films, television shows, video games and online entertainment.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, video games 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.
Example: Marvel superhero watches:
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. An ever-increasing number of major corporations 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.
Example: Reese’s brand baking mix by Betty Crocker
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 many cases, the designer or brand owner creates, markets and manufactures specific core categories, and uses licensing as a way of extending the brand into 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.
Example: Tory Burch for Fitbit
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.
Example: Carolina Panthers branded hat
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.
Example: Wyland branded wine
A few additional factors to keep in mind…
Beyond paying for the intellectual property license for your product, the partner company will be taking on an additional financial obligation to pay for that brand, which could have an affect on the overall royalties you receive.
The partner will also be required to adhere to agreements in such areas as submitting products for all necessary approvals, creating a product to agreed-upon standards and marketing the product. This could have an effect on the product release timeline.
Taking those factors into consideration, there are four main advantages of including licensed elements on a product/product line:
Gaining the consumer awareness and marketing benefit of a well-known brand, character, logo, design, etc. The most obvious benefit to a manufacturer or service provider that licenses a brand, character, design or other piece of intellectual property is the marketing power it brings to the product. For example, a child in a toy store doesn’t seek “an action figure.” He’s generally looking for a particular character he’s fond of. Faced with a choice among several cleaning implements, a shopper might be drawn by one that bears the brand of a well known cleaning fluid, rather than a more generic label.
Moving into new distribution channels. Taking on a license might help a manufacturer whose brand has been marketed in, for example, mass merchandise outlets to market a more upscale, high quality line in specialty stores or department stores that wouldn’t carry the lower end products.
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 staff that would otherwise need to be maintained.
Enhancing authenticity and credibility. The publisher of a car-racing video game might license several well-known automotive brands and car models to lend legitimacy and authenticity to the game. Similarly, a maker of automotive parts or accessories will license the car brand to establish in the consumer’s mind that its products will work seamlessly with the cars of the parent brand. Think about it – which would you rather play?
One of the most common suggestions we provide to our innovators who are looking to incorporate one or more licensed elements to their concepts is to create a product that has the ability to be produced with AND without that element. Ultimately, whether or not a product will be branded or incorporate licensed elements will be the decision of the manufacturer who licenses your intellectual property. Giving them the option is always a benefit. Requiring it as a part of the product could be a challenge.
While this post has only touched the tip of the licensing iceberg, these are things to take into consideration the next time you are thinking of reaching out to Lucasfilms to make a Star Wars themed item. Take it from someone who knows…
To learn more, here are some additional references on licensing:
Have you ever thought, “wouldn’t it be cool if…”?
We exist to get product ideas out of your head and onto retail shelves, all at no risk to you.