Types of licensing

Licensable properties come from a variety of sources. Different types of properties have been merchandised and marketed in different ways over the years, and the various market segments of the merchandise licensing business have acquired certain unique elements and standards (Raugust, 1995, p. 21). Even so, the distinction between different property types is not always clear and they often overlap. Although every licensing program is unique, there are certain trends and similarities detectable within each property type. Figure 4.1 shows the different property types of licensed merchandise with their relative shares of estimated retail sales in 1999.

Estimated licensing revenues 1999 by property type   (taken from LIMA, 1999a, p. 7) 

The numbers of estimated licensing revenues present themselves as follows.

Estimated licensing revenues 1999 by property type in millions of dollars (taken from LIMA, 1999a, p. 7)

The purpose of the following chapter is to categorize the five most important segments of the merchandise licensing industry; corporate trademark/brand; character/entertainment; fashion; sports; and art licensing.

Character and entertainment licensing

Character and entertainment licensing has enjoyed enormous success in the past decade, generating billions of dollars in revenues each year. It is one of the most profitable types of licensing (Raugust, 1995, p. 21).  It is difficult to measure the precise revenue from character licensing accurately, however, due to two recent trends in the industry: a trend towards long-term relationship agreements between the licensor and the licensee, and a trend towards structuring of partial payment in terms of equity in licensee operations. Although the predominance of character and entertainment licensing in the merchandising industry continues to erode as a lot of other properties have emerged and are now available for licensing, there is little question that this segment still continues to dominate the market (Battersby/Grimes, 1999, p. 155). This property type is also the most concentrated with just a few large players dominating the licensing activity (Raugust, 1995, p. 21). The major players in character and entertainment licensing are the big movie studios and broadcasting companies. Names such as Disney, Warner Brothers, Nickelodeon, and Fox come to mind immediately, and these companies are launching some of the most successful licensing programs, such as the famous old (comic) book characters Peanuts, Winnie the Pooh, or Batman, TV-based properties as Looney Tunes, The Simpsons and Sesame Street or properties based on movies such as Star Wars, one of the most successful licensing programs ever. New entertainment licensing properties also stem from the videogame section such as Nintendo and Pokémon.

Corporate trademark and brand licensing

When company names, logos, or brands are licensed on products, this is referred to as corporate trademark or brand licensing, one of the fastest-growing segments of the licensing industry. Much of the growth is spurred by the fact that licensing provides enormous strategic, marketing and earning benefits. 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 increasing their brand exposure; and to generate extra revenues and profits (Raugust, 1995, p. 29). The profit appeal can be enticing as there are no accounts receivables, no inventory, and no manufacturing expenses. Thus for firms corporate trademark and brand licensing is a relatively risk-free and cost-effective way to enter a new product category.

Corporate trademark and brand licensing involves some firms with the highest brand equity, as for example Coca-Cola or Harley Davidson. As may be expected from a group that includes vast differences in experience with licensing activities, there is a wide variation in licensing programs. This most likely represents strategic concerns about brand extension and dilution of equity; it could also be partially due to the fact that the early phase of licensing activities as corporate licensing was nil 15 years ago (Battersby/Grimes, 1999, p. 184).

Fashion licensing

Fashion licensing can be defined as the licensing of the name of a kind of clothing or a product designer on a designer or apparel brand. It is one of the well-established areas in the business, which can be divided into two major groups: apparel brands such as GAP and designer names such as Calvin Klein, Tommy Hilfiger, or Donna Karan (Raugust, 1995, p. 29). Although practice in the fashion industry varies significantly between firms, the first priority of fashion licensing is brand extension, which is largely being achieved by designers through licensing products other than their main apparel lines (Raugust, 1995, p. 29). At Calvin Klein, for example, licensing income has tripled over the past three years, this is a side benefit of the fact that licensing, which accounts for more than 90 percent of sales, has driven the brand. s global retail volume from $2.1 billion in 1994 to the $5 billion range in 1997 (License, 1998, p. 47). While most firms still license their trademarks in the product segments that would be considered non-core (e.g., watches), some of them have already started to license the property even in their core business (e.g., apparel). Alternatively, some firms have purchased non-core businesses and are now manufacturing products in-house that were previously licensed. This applies to labels, such as Donna Karan, which license very view products (Raugust, 1995, p. 29). This is likely to make year-to-year comparisons in licensing revenues difficult until trends stabilize. Nearly all the major fashion players including accessories designers are positioning themselves as . lifestyle. brands, suggesting growth opportunities. However, a conjunction of countervailing forces . a generally soft apparel accessories market, and a simultaneous expansion of some large companies. licensing efforts . caused a 2% decline of retail sales of merchandise bearing fashion licenses in 1998 in the U.S. and Canada (TLL, 1999a, p. 4). Thus future revenues from licensing may depend upon strategic decisions about production and line extension.

Sports licensing

Sports licensing has been transformed from the relatively small and fragmented industry it once was and has evolved into a highly sophisticated, $13 billion-plus industry. According to The Licensing Letter data, sports licensing, with average annual gains of 27%, has been one of the fastest-growing segments in the business from 1985 to 1993 (TLL, 1998a, p. 3). From 1990 through 1994 The Wall Street Journal even reported that sports-licensed product sales rose 144 percent. In the late 1990s, however, the sports licensing segment has shown continued growth, but not at the double-digit rate of the recent years. Although retail sales of sports-licensed merchandise dropped 8% in 1998, according to The Licensing Letter. s Annual Licensing Business Survey, sports licensing continued its domination as a property type, still representing eighteen percent of total industry sales (TLL, 1999a, p. 3).

While there are many professional sports that have their respective licensing programs, professional sports licensing particularly refers to the licensing programs of the four major leagues . National Football League, National Basketball Association, National Hockey League, and major league baseball . accounting for a large proportion of the licensing revenue. A license of this property type offers a variety of rights, but primarily includes the name, and the logo, of its teams as well as other related indices (Battersby/Grimes, 1999, p. 191). Other significant licensing campaigns are successfully built around several other large properties, including NASCAR, and the World Wrestling Federation, or worldwide sports events such as the Olympics, or the World Cup. In addition about 160 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.

Although the field of sports licensing is still dominated by the four leagues, other properties are on the advance and it is sure that it is, and will remain, one of the most dominant property types in the industry.  

Art licensing

Art licensors are relatively small and very fragmented relative to the size and concentration of key players for other properties. They include museums, print houses, fine artists, and designers who create their art in order to exploit it commercially by selling their own properties for licensed art merchandise (Raugust, 1995, p. 34). Almost every museum has some unique artifacts that are suitable for licensing as replicas, so the number of individual artists, as well as the number of institutions and organizations who are actively licensing their artwork continues to increase every year (Battersby/Grimes, 1999, p. 136). By producing some badly-needed revenue, licensing is primarily a means of financing. In addition art licensing also provides a real opportunity for the artist or the museum to enhance their own reputation and to promote their licensed artifacts (Revoyr, 1995, p. 31).

Once a forgotten aspect of a huge entertainment licensing business, art licensing now comprises many different facets of the art world. Today both manufacturers and retailers readily recognize the value of art licensing as a means of reaching new and more diverse segments of the consumer buying public (Revoyr, 1995, p. 31). Manufacturers and retailers equally benefit from licensed artwork and artist-brand properties because they allow them to tap into a marketplace where consumers are purchasing products that reflect their own senses of style, color and design (Battersby/Grimes, 1999, p. 136).

Today art licensing, because of its timelessness, the ability to target specific niches, a year-round profit potential and moderate costs, is a vitally important segment of the worldwide licensing industry (Battersby/Grimes, 1999, p. 136). Industry surveys indicate that sales of art-licensed products have increased dramatically over the past few years and are commanding a greater percentage of ail sales of the licensing revenues in the U.S. and Canada.  The licensing of art properties is likely to continue to grow at a healthy pace.

Reference List