The participants

The licensing community includes a diverse group of companies from the largest entertainment studios to sole proprietors marketing single licensed products. At least for descriptive purposes the parties involved in licensing can be divided into a number of categories.

The participants (taken from Böll, 1999, p. 9)

A simple diagram of people involved in licensing; this figure may help to illustrate the organization of the licensing business and serve as a model for other communications tools that will be demonstrated in Chapter 6. This is a very simplified diagram not illustrating, for example, any of the sub-contracting of licensing processes which might be done by some of the parties. The fact that there are a number of links in the communications chain clearly complicates the process.

Each participant in licensing has certain responsibilities to fulfill. As every agreement made between the licensing parties is unique in its specifics; even these responsibilities vary to some extent.

Licensors

There are many reasons for companies to grant licenses for the use of their properties. For the license to function successfully, the licensed property must be protectable under the copyright or trademark laws or otherwise unavailable to the licensee. These intellectual property rights insure that the licensor can safely invest in promoting its property and reap the benefits of a valuable asset. Through trademark and copyright registration, licensing offers the licensors legal protection for unique features or aspects of their property (Revoyr, 1995, p. 14). Licensors create and maintain the design and image of their properties by developing a stylebook for licensees to use as a guideline on the proper use of the allowable trademarks or copyrights, which is monitored by the licensor. Once appropriate licensees have been selected, the licensor. s next responsibility is the product approval process. The licensor must approve samples of all products proposed by each licensee. This diligent approval process benefits the licensees too, since the better the overall image of the licensed product is, the more able the property will be to drive sales of the licensed product (Raugust, 1996, p. 75).

In addition to that, licensors are increasingly expected to play a role in pre-selling the property to retailers before licensees approach them to make their purchase decision. They are also expected to provide marketing support by encouraging retailers to merchandise licensed products in concept shops (in-store areas devoted to merchandise from various product categories based on one licensed property), by putting point-of-purchase materials at their disposal and by creating retailer promotions (Raugust, 1995, p. 73).

Perhaps the most common way to grant a license on the part of the licensor is the allure of adding bottom-line profit with little effort and risk. This is why more and more licensors view licensing as a risk-free and profitable way of entering a market without having to make a heavy investment in capital equipment and personnel. Brand loyalty provides predictability and security of demand and prevents other companies from entering the market easily. In this sense licensing can be seen as a powerful means to secure a competitive advantage (Raugust, 1995, p. 9). The licensor. s control lies in offering merchandising and, in particular, marketing expertise, as well as in having the option not to renew a contract if a licensee. s distribution or operations are unsatisfactory. Through licensing, the licensor avoids many of the risks associated with developing a whole new product line, because in actual fact, the risk of the venture is passed on to the licensee (Raugust, 1995, p. 15). For the licensor as well, however, the business is not devoid of all risks. One of the most significant is the licensor. s failure to exercise quality control over the ultimate licensed products, which can result in a number of damages to the licensed property. Products sold in discount stores could harm the image of a brand and licensed goods of poor quality will hurt a brand name that was previously known for its high quality standards. In an extreme case, all of this could finally lead to the loss of the underlying trademark rights (Raugust, 1995, pp. 13-14).

Licensees

Licensees lease the rights to a certain property for incorporation into their merchandise, but traditionally they do not share ownership in it. Nevertheless, licensing provides a number of important functions to them. By creating a certain image, licensed products can generate consumer interest, patronage and loyalty to a store, and most importantly, having the right license ultimately permits licensees to enter a market that they had been for unable to reach before for whatever reason (Raugust, 1995, p. 11). Faced with the prospect of spending millions or even billions of dollars in research and product development, the licensees view the royalty as a small price to pay for the jump start a license gives them. The investments in a certain property can endow the licensee. s product with unique associations and meanings that differentiate it from other products. By attaching these unique associations to their product assortment, manufacturers are able to create their own product images that finally generate higher price margins, increased sales volumes, and greater profits Raugust, 1995, p. 12).

Realization of product design pre-set in the style guide and manufacture are the licensee. s responsibilities, but they also handle sales and distribution of the licensed products. They generally sell the licensed merchandise to the same retailers that purchase their non-licensed products as well, although the property might also allow them to distribute the items through other channels (Raugust, 1995, p. 12). Responsibilities for marketing the products normally rest with both parties. Licensors advertise to the consumer to strengthen their brand image as well as advertise to the trade to let retailers know where to find the licensed merchandise. It is also the responsibility of the licensees, however, to advertise and market their products, either alone or in combination with their other product lines (Raugust, 1996, p. 57).

The risks that the licensee faces in a licensing program are fewer in number than those of the licensor, but potentially greater in magnitude. The major risk is a financial one, lying in the contractual obligations to the licensor under the licensing agreement, as for example guaranteed minimum royalty payments. In this case a licensee even might have to pay the licensor this guaranteed minimum royalty for products that actually never make it to the market. Alternately, even if the products do make it to the market, there is no certainty at all that they will do well, no matter what property a manufacturer chooses (Raugust, 1995, pp. 14-16).

Other parties

Generally it can be said that any company or person who has a financial or a consumer. s interest in a certain property or licensed products in general may be involved in the licensing effort in some way and thus can be seen as one of the participants belonging to the category . other parties. in the licensing business (Raugust, 1996, p. 53). In the following the four most important types of participants in licensing business are presented, namely, licensing agents, licensing consultants, the media, and consumers.

For licensors it is not uncommon to retain licensing agents to manage their licensing programs. These agents assume duties for their clients such as contract negotiations or the product approval processes. In return the agent receives a certain percentage of all royalty revenues. For the licensor the advantage of retaining a licensing agent lies within the expertise he offers. Particularly for a new licensor the industry contacts and experience the agent possesses are extremely valuable (Raugust, 1995, p. 20).

Manufacturers, on the other hand, may retain a licensing consultant whose duties are similar to those of the licensing agent. The licensing consultant supports manufacturers who are largely involved in licensing, but who do not have in-house employees who are specialized in licensing. It is the consultant. s responsibility to represent manufacturers in their licensing activities, including the evaluation of properties, the checking of their availability or the development and implementation of licensing strategies. The terms of how licensing consultants are paid vary extensively, but the major percentage is paid on the basis of commissions (Raugust, 1995, p. 87).

To create a long-term property, that is to say to maintain the customer. s awareness for a given property for a long time, the media are most essential. A variety of different types of media can be used to deliver the intended message to the target audiences of both licensor and licensee. Within each type of medium there are a huge number of different media vehicles which can be selected to carry the message. The way in which this message is conveyed to the target audience varies across media types is also dependent on the type of property and the goals of licensee and licensor (Raugust, 1996, p. 70). Licensed products, at particular in their development, require the use of different media so that the right message may be conveyed and understood by the intended target groups. A new product requires demonstration to communicate the product concept, which in turn has a strong influence on the choice of media mix. To sum up, one can say that media support is necessary because it helps to build consumer awareness and also drives the sales of licensed merchandise (Raugust, 1996, p. 70).

For the consumer the advantage of licensing from an economic perspective is that it lowers search costs, because they are able to recognize a licensed product easily and do not have to engage in a lot of additional thought or processing of information to make a product decision (Keller, 1998, p. 7). Nonetheless, on the part of the consumer an increasing sophistication towards licensed merchandise is detectable. The feature of being licensed does not make a product unique anymore, although consumers are still attracted to licensed merchandise based on properties they like. To make the consumers to buy the merchandise, the product itself must incorporate a qualitative or at least a fashionable value. In the end, all of these features contribute to the final purchase decision of the consumer (Raugust, 1996, p. 40).

In summary, one can say that licensing works and benefits all parties, and that is the reason why it is becoming more and more popular.

Reference List