Copyright 1999 Prentice Hall

8-18-1

Lesson 6.3 –

The Licensing Process

Factors contributing to the appeal of licensed products

Licensing

Intangibility of sport

Support / Involvement with team

Brand awareness

LESSON 6.3

Branding & Licensing

Licensee Advantages

Licensing

a. Positive association with the sports entity

b. Greater levels of brand awareness

c. Help to build brand equity

d. Receive initial distribution with retailers

e. Expanded and improved shelf space

LESSON 6.3

Branding & Licensing

Licensee Advantages

Licensing

f. May be able to charge higher prices

g. Lower advertising and promotional costs

h. Increased possibility of success and profitability

i.Connection with an athlete, sports team, entertainer, or corporation

LESSON 6.3

Branding & Licensing

Licensee Disadvantages

Licensing

a. Athlete, league, celebrity or sport may fall into disfavorb. Success depends on athlete / celebrity performance

c. Styles change quickly

d. Royalties and licensing fees can be expensive

LESSON 6.3

Branding & Licensing

Licensing

e. Manufacturing costs and risks

f. Competition can drive up costs associated with fees and royalties

g. Competition can have a negative impact on market share

LESSON 6.3

Branding & Licensing

Licensee Disadvantages

Licensor Advantages

Licensing

a. Expansion into new markets

b. Increase its brand equity

c. Minimized risk

LESSON 6.3

Branding & Licensing

d. Enhanced company image and publicity

e. Increased profit from fees and royalties

f. Increased brand awareness or recognition

LESSON 6.3

Branding & Licensing

Licensor Advantages

Licensing

a. May lose some control over the elements of the marketing mix

b. Potential for poor quality of a licensee’s manufactured products

LESSON 6.3

Branding & Licensing

Licensing

Licensor Disadvantages

The Licensing Process

LicensingHow does licensing work?

LESSON 6.3

Branding & Licensing

a. Licensees pay a licensing fee

b. Licensees pay a royalty for the use of specific trademarks on specific products

c. Licensees taking on production issues and assuming the risk manufacturing product

The Licensing Process (Music Industry)

Licensing

LESSON 6.3

Branding & Licensing

When you hear a Taylor Swift song while watching a television advertisement for Diet Coke, the brand likely invested a significant sum of money for the rights in a licensing fee for the rights to use the song in a commercial

The rights to use music through a license are bought and sold every day

Examples of music licensing are all around us

Licensing

LESSON 6.3

Branding & Licensing

Listening to the radio

Watching a movie and hearing music during a particular scene

Listening to music on Rhapsody online

Hearing music in a restaurant or store

Watching American Idol contestants perform hit songs from

LESSON 6.3

Intro to Basic SEM Principles

Entertainment Business Financial Structure

Lionsgate, the studio that produces “Mad Men”, shelled out a reported $250,000 (about five times the typical cost of licensing a song for TV according to a Wall Street Journal blog post) for the rights to use The Beatles song, “Tomorrow Never Knows,” in the closing scene of a 2012 episode of the popular AMC series

Licensor / Licensee Relationship

Licensing

Licensing provides greater profit, promotion, and legal protection for the licensor

The licensor approves the product and collects the licensing fees and royalties

LESSON 6.3

Branding & Licensing

For Example:

Warner Brothers granted permission to Electronic Arts to use the Harry Potter character for the development of a new video game (for a fee)

=

LESSON 6.3

Branding & Licensing

Licensor / Licensee Relationship

Licensing

A sports or entertainment entity permits a licensee to use their image, name or character for a fee

A corporation permits a licensee to use the corporate image or name for a fee

LESSON 6.3

Branding & Licensing

Character vs. Corporate Licensing

Licensing

1. Increased opportunity to associate with an athlete, sports team, entertainer, or corporation

2. Increased supply of available products

3. Competition can result in lower prices, new products and better quality

LESSON 6.3

Branding & Licensing

How does licensing affect the end customer?

Licensing