Brand licensing
Encyclopedia
Licensing means renting or leasing of an intangible asset. Examples of intangible assets include a song (Somewhere 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 licensing agreement. A licensing agreement authorizes a company which markets a product or service (a licensee) to lease or rent a brand from a brand owner who operates a licensing program (a licensor).
A company may choose to license its brand(s) when they believe there is strong consumer acceptance for brand extensions or products. For example, when Apple
launched the iPod there was an immediate need for accessories such as headphones, charging and syncing stations and carrying cases. Apple decided not to manufacture these products and instead chose to have a licensee
make the products. By doing so, Apple could offer branded “Earbud Headphones”, “iPod docking stations” and “iPod socks.” Each is made by a separate company but together offer the consumer an elegant solution. All of these accessories are sold by licenses.
Apart from benefits to licensors, there are benefits to licensees as well. Licensees lease the rights to a brand for incorporation into their merchandise, but do not share ownership in it. Having access to major national and global brands, and the logos and trademarks associated with those brands, gives the licensee significant benefits. The most important of these is the marketing power the brand brings to the licensee’s products. When brand managers enter or extend into new product categories via licensing they create an opportunity for a licensee to grow their company. For example, Crest several years ago extended its brand from toothpaste into whitening (Crest Whitestrips). Below is an example of the licensed product process steps:
Licensees expect that the license will provide them with sales growth. This sales growth may be in the form of growth within existing market or the opportunity to enter a new market. To achieve this, licensees expect that the brand they are licensing has significant brand preference, that it will open doors and ultimately help them meet or exceed their business objectives. The licensing contract forces the licensee to achieve certain sales targets and royalties; therefore, the goal of the licensee is to quickly meet their business objectives, thereby achieving their contract obligations. Royalties
are the monies paid to a licensor by the licensee for the right to use the licensed property. It is calculated by multiplying the Royalty Rate by the Net Sales.
Brand licensing is the process of creating and managing contracts between the owner of a brand
and a company or individual who wants to use the brand in association with a product, for an agreed period of time, within an agreed territory. Licensing is used by brand owners to extend a trademark
or character onto products of a completely different nature.
Brand licensing is a well-established business, both in the area of patent
s and trademarks. Trademark licensing has a rich history in American business, largely beginning with the rise of mass entertainment such as the movies, comics and later television. Mickey Mouse
's popularity in the 1930s and 1940s resulted in an explosion of toys, books, and consumer products with the lovable rodent's likeness on them, none of which were manufactured by the Walt Disney Company.
This process accelerated as movies and later television became a staple of American business. The rise of brand licensing did not begin until much later, when corporations found that consumers would actually pay money for products with the logos of their favorite brands on them. McDonalds play food, Burger King
t-shirts and even ghastly Good Humor
Halloween costumes became commonplace. Brand extension
s later made the brand licensing marketplace much more lucrative, as companies realized they could make real dollars renting out their equity to manufacturers. Instead of spending untold millions to create a new brand, companies were willing to pay a royalty on net sales of their products to rent the product of an established brand name. Armor All auto vacuums, Breyers
yogurt, TGI Friday's frozen appetizers, and Lucite nail polish are only a handfull of the products carrying well-known brand names which are made under license by companies unrelated to the companies who own the brand.
Character Licensing is another big licensing segment of brand licensing in India. The big players in the character licensing industry in India are Walt Disney
, Viacom
, Extend Brands and Cartoon Network Enterprises. Characters licensed out by Walt Disney are evergreen children characters like Mickey Mouse
, Donald Duck
. Viacom has brought in popular characters from Nickelodeon
like Dora The Explorer
and SpongeBob SquarePants
. Extend Brands represents classic characters like Popeye the Sailorman, Betty Boop
and Baby Popeye.
started in the seventies with very few Licensing Agencies. Apart from Disney which had its own dedicated office in the market, all the other big Entertainment majors were represented by independent agencies. One of these companies named DIC 2 (Distribution International Characters), founded in 1973 by Mr. Gianfranco Mari contributed to create the licensing business in Italy and set big phenomena as He-Man
and the 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 agencies in Italy, representing different cartoon characters and famous brands.
Donald Duck
Donald Fauntleroy Duck is a cartoon character created in 1934 at Walt Disney Productions and licensed by The Walt Disney Company. Donald is an anthropomorphic white duck with a yellow-orange bill, legs, and feet. He typically wears a sailor suit with a cap and a black or red bow tie. Donald is most...
), a name (Michael Jordan
Michael Jordan
Michael Jeffrey Jordan is a former American professional basketball player, active entrepreneur, and majority owner of the Charlotte Bobcats...
) or a brand (The Ritz-Carlton
Ritz-Carlton
The Ritz-Carlton is a brand of luxury hotels and resorts with 75 properties located in major cities and resorts in 24 countries worldwide...
). An arrangement to license a brand requires a licensing agreement. A licensing agreement authorizes a company which markets a product or service (a licensee) to lease or rent a brand from a brand owner who operates a licensing program (a licensor).
A company may choose to license its brand(s) when they believe there is strong consumer acceptance for brand extensions or products. For example, when Apple
Apple
The apple is the pomaceous fruit of the apple tree, species Malus domestica in the rose family . It is one of the most widely cultivated tree fruits, and the most widely known of the many members of genus Malus that are used by humans. Apple grow on small, deciduous trees that blossom in the spring...
launched the iPod there was an immediate need for accessories such as headphones, charging and syncing stations and carrying cases. Apple decided not to manufacture these products and instead chose to have a licensee
Licensee
A licensee is someone who has been granted a licence.- Tort law :The term is used in the USA law of torts to describe a person who is on the property of another, despite the fact that the property is not open to the general public, because the owner of the property has allowed the licensee to enter...
make the products. By doing so, Apple could offer branded “Earbud Headphones”, “iPod docking stations” and “iPod socks.” Each is made by a separate company but together offer the consumer an elegant solution. All of these accessories are sold by licenses.
Apart from benefits to licensors, there are benefits to licensees as well. Licensees lease the rights to a brand for incorporation into their merchandise, but do not share ownership in it. Having access to major national and global brands, and the logos and trademarks associated with those brands, gives the licensee significant benefits. The most important of these is the marketing power the brand brings to the licensee’s products. When brand managers enter or extend into new product categories via licensing they create an opportunity for a licensee to grow their company. For example, Crest several years ago extended its brand from toothpaste into whitening (Crest Whitestrips). Below is an example of the licensed product process steps:
- Licensor chooses the product categories to be licensed
- Licensor finds and negotiates a license with the best licensees
- Licensees develop concepts, prototypes and final production samples and submit for approval
- Licensor approves licensed products for sale
- Licensees sell licensed products to authorized retailers
Licensees expect that the license will provide them with sales growth. This sales growth may be in the form of growth within existing market or the opportunity to enter a new market. To achieve this, licensees expect that the brand they are licensing has significant brand preference, that it will open doors and ultimately help them meet or exceed their business objectives. The licensing contract forces the licensee to achieve certain sales targets and royalties; therefore, the goal of the licensee is to quickly meet their business objectives, thereby achieving their contract obligations. Royalties
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
are the monies paid to a licensor by the licensee for the right to use the licensed property. It is calculated by multiplying the Royalty Rate by the Net Sales.
Brand licensing is the process of creating and managing contracts between the owner of a brand
Brand
The American Marketing Association defines a brand as a "Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers."...
and a company or individual who wants to use the brand in association with a product, for an agreed period of time, within an agreed territory. Licensing is used by brand owners to extend a trademark
Trademark
A trademark, trade mark, or trade-mark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or...
or character onto products of a completely different nature.
Brand licensing is a well-established business, both in the area of patent
Patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....
s and trademarks. Trademark licensing has a rich history in American business, largely beginning with the rise of mass entertainment such as the movies, comics and later television. Mickey Mouse
Mickey Mouse
Mickey Mouse is a cartoon character created in 1928 by Walt Disney and Ub Iwerks at The Walt Disney Studio. Mickey is an anthropomorphic black mouse and typically wears red shorts, large yellow shoes, and white gloves...
's popularity in the 1930s and 1940s resulted in an explosion of toys, books, and consumer products with the lovable rodent's likeness on them, none of which were manufactured by the Walt Disney Company.
This process accelerated as movies and later television became a staple of American business. The rise of brand licensing did not begin until much later, when corporations found that consumers would actually pay money for products with the logos of their favorite brands on them. McDonalds play food, Burger King
Burger King
Burger King, often abbreviated as BK, is a global chain of hamburger fast food restaurants headquartered in unincorporated Miami-Dade County, Florida, United States. The company began in 1953 as Insta-Burger King, a Jacksonville, Florida-based restaurant chain...
t-shirts and even ghastly Good Humor
Good Humor
Good Humor is an American brand of ice cream novelties sold from ice cream trucks as well as stores and other retail outlets. Originally, Good Humors were chocolate-coated ice cream bars on a stick, but the line was expanded over the years to include a wide range of novelties...
Halloween costumes became commonplace. Brand extension
Brand extension
Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. The new product is called a spin-off. Organizations use this strategy to increase and leverage brand equity...
s later made the brand licensing marketplace much more lucrative, as companies realized they could make real dollars renting out their equity to manufacturers. Instead of spending untold millions to create a new brand, companies were willing to pay a royalty on net sales of their products to rent the product of an established brand name. Armor All auto vacuums, Breyers
Breyers
Breyers is a brand of frozen dessert and ice cream owned by Unilever . They have a large plant in the town of Framingham, Massachusetts, outside Boston....
yogurt, TGI Friday's frozen appetizers, and Lucite nail polish are only a handfull of the products carrying well-known brand names which are made under license by companies unrelated to the companies who own the brand.
Brand licensing in India
The liberalisation of the Indian economy in 1992 brought a slew of international brands to India. Many of these brands have been licensed to Indian companies. Arvind Brands represent Wrangler, Arrow, Nautica, Jansport and Kipling. The Murjani Group is the licensee for FCUK and Tommy Hilfiger. Beverly Hills Polo Club (BHPC) is licensed to Spencers Retail. Extend Brands represent the No Rules brand in India.Character Licensing is another big licensing segment of brand licensing in India. The big players in the character licensing industry in India are Walt Disney
Walt Disney
Walter Elias "Walt" Disney was an American film producer, director, screenwriter, voice actor, animator, entrepreneur, entertainer, international icon, and philanthropist, well-known for his influence in the field of entertainment during the 20th century. Along with his brother Roy O...
, Viacom
Viacom
Viacom Inc. , short for "Video & Audio Communications", is an American media conglomerate with interests primarily in, but not limited to, cinema and cable television...
, Extend Brands and Cartoon Network Enterprises. Characters licensed out by Walt Disney are evergreen children characters like Mickey Mouse
Mickey Mouse
Mickey Mouse is a cartoon character created in 1928 by Walt Disney and Ub Iwerks at The Walt Disney Studio. Mickey is an anthropomorphic black mouse and typically wears red shorts, large yellow shoes, and white gloves...
, Donald Duck
Donald Duck
Donald Fauntleroy Duck is a cartoon character created in 1934 at Walt Disney Productions and licensed by The Walt Disney Company. Donald is an anthropomorphic white duck with a yellow-orange bill, legs, and feet. He typically wears a sailor suit with a cap and a black or red bow tie. Donald is most...
. Viacom has brought in popular characters from Nickelodeon
Nickelodeon (TV channel)
Nickelodeon, often simply called Nick and originally named Pinwheel, is an American children's channel owned by MTV Networks, a subsidiary of Viacom International. The channel is primarily aimed at children ages 7–17, with the exception of their weekday morning program block aimed at preschoolers...
like Dora The Explorer
Dora the Explorer
Dora the Explorer is an American animated television series created by Chris Gifford, Valerie Walsh, and Eric Weiner. Dora the Explorer became a regular series in 2000. The show is carried on the Nickelodeon cable television network, including the associated Nick Jr. channel. It aired on CBS until...
and SpongeBob SquarePants
SpongeBob SquarePants
SpongeBob SquarePants is an American animated television series, created by marine biologist and animator Stephen Hillenburg. Much of the series centers on the exploits and adventures of the title character and his various friends in the underwater city of "Bikini Bottom"...
. Extend Brands represents classic characters like Popeye the Sailorman, Betty Boop
Betty Boop
Betty Boop is an animated cartoon character created by Max Fleischer, with help from animators including Grim Natwick. She originally appeared in the Talkartoon and Betty Boop film series, which were produced by Fleischer Studios and released by Paramount Pictures. She has also been featured in...
and Baby Popeye.
Brand licensing in Italy
Brand Licensing in ItalyItaly
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
started in the seventies with very few Licensing Agencies. Apart from Disney which had its own dedicated office in the market, all the other big Entertainment majors were represented by independent agencies. One of these companies named DIC 2 (Distribution International Characters), founded in 1973 by Mr. Gianfranco Mari contributed to create the licensing business in Italy and set big phenomena as He-Man
He-Man
He-Man is a fictional heroic character featured in the Masters of the Universe media franchise. In most variations, he is the alter ego of Prince Adam...
and the Master of the Universe, Marvel Comics
Marvel Comics
Marvel Worldwide, Inc., commonly referred to as Marvel Comics and formerly Marvel Publishing, Inc. and Marvel Comics Group, is an American company that publishes comic books and related media...
, Star Wars
Star Wars
Star Wars is an American epic space opera film series created by George Lucas. The first film in the series was originally released on May 25, 1977, under the title Star Wars, by 20th Century Fox, and became a worldwide pop culture phenomenon, followed by two sequels, released at three-year...
, Hanna & Barbera characters, Zorro
Zorro
Zorro is a fictional character created in 1919 by New York-based pulp writer Johnston McCulley. The character has been featured in numerous books, films, television series, and other media....
, Asterix
Asterix
Asterix or The Adventures of Asterix is a series of French comic books written by René Goscinny and illustrated by Albert Uderzo . The series first appeared in French in the magazine Pilote on October 29, 1959...
and so on. DIC 2 is still one of the biggest independent agencies in Italy, representing different cartoon characters and famous brands.