Entering the Licensing Business? Keep These Key Factors in Mind, Always!

Brand licensing brings along multiple responsibilities for both the licensee & licensor

By
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Brand Licensing can unlock a universe of opportunities for companies. The option doesn’t only provide brand owners with the ability to enter new categories practically overnight but gain them an immediate brand presence on store shelves and often in the media. The agreement brings significant benefits for both the licensee and the licensor.

Shutterstock

Irrespective of the remunerations, both parties should be well aware of the responsibilities that come along with a licensing agreement. Here’s what they need to keep in mind before entering the partnership:

Understanding Value-chain

Building a brand from scratch can take years, millions of dollars and a lot of luck. The licensing agreement grants immediate access to all of the positive name and image licensor has built over the years to the licensee, who in return, works to satisfy consumer needs in categories that do not fall under the core of the business.

Sharing an important instance, author of Brand Licensing 101, The Basics Every Licensor Should Know, Pete Canalichio, also the Managing Partner with Licensing Brands, Inc., said that when Apple launched the iPod a number of years ago, they revolutionized the way in which people listen to their music, creating an immediate need for accessories such as armbands, adapters and auto chargers.

While Apple could have manufactured and distributed these accessories themselves, it chose to satisfy the need through licensing. Why? Because these accessories were not cored to Apple’s business expertise. “By licensing the iPod brand, Apple enabled a tremendous number of companies to produce all kinds of terrific products to make the iPod user-friendlier and to enhance the listening experience.”

Despite wanting to reach diversified customers, the brand needs to keep its core value-chain in mind, hence paving the route for licensing opportunities. For a licensee, such breakthroughs work wonders as they are able to leverage the reputation of the licensor against the promise of royalty payments and minimum guarantee. Canalichio clarified that it is customer interest that licensees value.

“Prospective licensees want to license brands with the strongest reputation, as these are the brand's consumers demand and retailers prefer most,” Canalichio concluded.

Power of IP

Brand Licensing essentially is the use of IP on a product or promotion to drive incremental sales for the Licensee.  An IP should resonate with the key target demographics of the parties involved, from kids to tweens/teens or adults and parents. License empowers the individuals to encash the Intellectual property developed another brand over the years.

Understanding what the parties involved are gaining out of the partnership should be the topmost priority while entering a licensing deal. Resonating similar thoughts, Dan Frugtniet, the Managing Director of Big Picture Licensing believes, “For people or companies looking to enter the Licensing industry, it is important to fully understand each touch-point of the value chain.”

“Where are the best opportunities to generate revenue, is it as a Licensee and to use someone’s brand property (IP) on your product to target a new demographic?  Is it to become a Licensor and develop a new vibrant and exciting new Indian brand that can be licensed in India as well as overseas?” he asked. Licensing offers a huge opportunity for individuals who are looking to explore the field.

One can play the field as a specialist Licensing Agent or represent foreign Licensors in India, either across all product categories or focus on specific areas (for example FMCG promotions), they can also become a new distributor for specific products or create a new enhanced retail destination where brands will chase you in order to be on the shelf. The scope is immense; all one needs is the right perception.  

Frugtniet concluded with advising for license enthusiasts: Whatever you do, be passionate about it, do it differently than the competition, box smart and never lose that drive to succeed.

Lack of Awareness

Licensing is poised for significant growth in the coming years, both in India and the rest of the world. The penetration of smartphones and increasing data usage is expected to offer new opportunities in varied space, furthering the know-how around the space. Despite the current licensing market in India is pretty small, it is one of the fastest growing licensing markets in the world.

According to Simo Hämäläinen, Senior Vice President, Brand Licensing, Rovio Entertainment Corporation, success factors in licensing business are Awareness, Affinity and Reach of a brand. Angry Birds, which is one of the many IPs Rovio deals with, is well set against those factors. It has 97 per cent awareness globally and reaches audiences through multiple channels, he boasted.  

“Before entering into licensing, companies should decide what they are trying to achieve. Is it money, brand building or something else? If done right, licensing can be a great way to boost sales by utilizing the demand of the licensed property. However, slapping someone else's brand to your product without any relevance to the product and audience can backfire,” he suggested.

The licensing market in India is still underdeveloped and there are lots of piracy products in the market which creates challenges for Licensors. On the positive side, e-commerce is growing and the likes of Amazon and Walmart, through Flipkart acquisition, are investing here. A strong local content market with Bollywood also creates local licensing opportunities.

For beginners, Hämäläinen recommended to contact experts for help, as the licensing business and related agreements can be quite complicated. Licensing agents can help, he concluded.

For more insight into the world of licensing, the third edition of country's largest brand licensing platform - India Licensing Expo 2019 is all set to make a return on July 8-9,2019 at Bombay Convention & Exhibition Centre, Mumbai.

Register for the event here.

Aastha Singal

Written By

Entrepreneur Staff

A business journalist looking to find happiness in the world of startups, investments, MSMEs and more. Officially started her career as a news reporter for News World India, Aastha had short stints with NDTV and NewsX. A true optimist seeking to make a difference, she is a comic junkie who'd rather watch a typical Bollywood masala than a Hollywood blockbuster.