Types of Licensing
Licensable properties come from a variety of sources. The definitions of various property types are not always clear and they often overlap. Although every licensing program is unique, different areas of the licensing business have specific patterns in terms of how they are organized and how business is done.
The chart below shows the different property types of licensed merchandise with their relative shares of estimated overall licensing industry revenues generated in 2016. The chart is followed by a brief description of key industry segments.
Estimated Global Licensing Revenues – 2016*
Character and entertainment licensing is one of the largest segments of the licensing business, and is probably the part most recognized by the general public. Although the predominance of character and entertainment licensing in the merchandising industry lessens somewhat as other types of licensing emerge and flourish, this is still one of the most prominent. This category of licensing encompasses properties springing primarily from feature films, television shows, videogames and online entertainment. (Characters and franchises that are created via books are also a popular licensing category, but are generally classified as “publishing” properties for the purpose of LIMA’s numbers.) While at one point the business was dominated by a handful of large entertainment organizations and publishers (mostly U.S.-based), the world has changed somewhat, with popular characters being produced by companies from around the globe.
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, videogames 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.
The licensing of company names, logos, or brands (referred to as corporate trademark/brand licnsing) is one of the fastest-growing segments of the licensing business. Much of the growth is spurred by the fact that licensing provides enormous strategic, marketing and earning benefits to both licensor and licensee.
An ever-increasing number of major corporations in the trademark/brand sector 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. For a brand owner, licensing offers a way to achieve any or all of those goals without making a large upfront investment in internal product development and manufacturing.
The realm of brand licensing stretches from the rather mundane of featuring a corporate logo on a t-shirt to much more sophisticated integrated marketing and product development efforts in which a brand is extended into new product areas in ways that are seamless to consumers.
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 some cases a fashion label may exist only as a license – even the main “core” apparel categories are licensed to third parties for manufacturing, marketing and distribution. The designer or brand owner is responsible for creating the design direction and the marketing umbrella that defines the brand’s appeal. In most other cases, however, the designer or brand owner creates, markets and manufactures specific core categories, and uses licensing as a way of extending the brand into tangential areas such as 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.
Fashion licensing is meant to be invisible to the consumer, who is not to even consider that a third party licensee is making the products that carry the designer’s name. Of course, in a well-executed, tightly run licensing program, the brand owner maintains strict control over design and quality, and the licensee manufactures and the agreed upon specifications, so the brand image is seamlessly maintained.
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. Each of those leagues runs the licensing business on behalf of its teams out of a centralized league office.
Other significant licensing campaigns surround smaller professional sports leagues (i.e. Major League Soccer, Minor League Baseball), organizations such as the U.S. Olympic Committee and the National Collegiate Athletic Association (NCAA), and major sports events such as the Olympics and soccer’s World Cup. In addition more than 300 colleges and universities in the U.S. are involved in collegiate licensing, marketing their rights primarily to the apparel market with sometimes very respectable revenues, depending on the performance of their sports teams and the size of the university or college.
The art licensing community is relatively small and fragmented compared to the other major categories of licensed properties. 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. Today art licensing, because of its timelessness, the ability to target specific niches, year-round profit potential and moderate costs, is a vitally important segment of the worldwide licensing industry.
*Latest figures available; source – LIMA Global Licensing Industry Survey