14-1 Chapter 14 Licensing McGraw-Hill/Irwin©2007 The McGraw-Hill Companies, All Rights Reserved

14-2 Introduction to Licensing Third Special Case of Sponsorship Licensing Is a Value-Adding Process that Provides Revenue-Generating Opportunities Via the Conveyance of the Right to Use Another Organization’s Intellectual Properties for Commercial Purposes

14-3 Intellectual Properties Intellectual Properties – Intangible Assets for Which an Organization Can Claim Ownership Trademarks – Registered Identifiers Which Can Be Protected Using Existing Laws Examples: –Brand Names - Nike –Slogans – Just Do It –Logos – the Nike “swoosh”

14-4 Brief Historical Perspective 1930s - Walt Disney Characters 1950s – Television Personalities 1960s – Professional Sports in USA 1970s – Collegiate Sports in USA

14-5 Key Concepts - Participants Licensor – Owner of the Intellectual Property Who Conveys the Right to Use Select Intellectual Properties to the Licensee Licensee – Entity that Is Given Permission to Use the Intellectual Properties for Specified Marketing Activities

14-6 Financial Perspective (in the United States 2003) Sales of Officially Licensed Merchandise Was Estimated at $110 Billion These Sales Resulted in Total Payments of Some $5.8 Billion to the Licensors Payments to the Licensors Generally Involve a Percentage of the Licensee’s Sales Revenue - Royalties

14-7 Top 5 Licensing Categories Categories Royalties Characters from Entertainment$2,502 Trademarks/Brands 1,060 Fashion 848 Sports 807 Collegiate 203 –2003 Royalties in Millions – US $

14-8 Establishing and Maintaining Ownership

14-9 Agreement Terms Eligible Products Scope of Exclusivity Geographic Scope

14-10 Eligible Products Product Item – One Specific Product –i.e. - Rival brand crock pots Product Line –i.e. – Rival brand food preparation items Product Assortment –i.e. – All products produced by Rival

14-11 Scope of Exclusivity Exclusive – Rights for Specific Product(s) Granted to a Single Licensee Nonexclusive – Granting Rights to Market Same Product(s) to Two or More Competing Companies

14-12 Geographic Scope Regional –Small local region –Larger region but not national in scope –National –Multinational region Global

14-13Compensation Fixed Fee Royalty Minimum Guarantee

14-14 Compliance Reviews “Underpayments May Represent as Much as 50% of the Amount Due to the Licensor” Verify that All Payments Due to the Licensee Have Been Made Should be Performed Periodically

14-15 Benefits for the Licensor Revenue Stream No Significant Investment Required Broader Product Assortment for Consumers

14-16 Benefits for the Licensor Create Consumer Awareness & Interest Control Standards of Quality Control Array of Products Available Protect Image

14-17 Benefits for the Licensee Capitalize on Licensor’s Brand Equity Capitalize on Short-Term Phenomena Capitalize on Economies of Scale Reach New (Higher) Price Points

14-18 Example of Selection Criteria

14-19Infringement Unauthorized Use of an Organization’s Trademarks and Logos Counterfeit Issues –Lost Revenues –Lower Quality

14-20 Market Surveillance Policing the Marketplace in an Effort to: –Locate counterfeit merchandise; –Locate other trademark infringements; –Take appropriate measures to end the infringement; –Remove any illegal products, and –Discourage such efforts in the future

14-21 Remedies for Infringement Legal Restraints (Cease-and-Desist) Confiscate and Destroy Counterfeits Possible Time in Jail for Offenders

14-22 Developing Licensing Plan Identify Licensable Intellectual Properties Establish Fee Structure Establish Selection Criteria Establish (Type) Terms of Agreement Engage in Compliance Review Market Surveillance Performance Review

14-23 Performance Review Evaluate Licensee’s Financial Performance Evaluate Licensee’s Production and Marketing

14-24 Examples of Licensing Contracts

14-25 Growth Strategies New Target Markets New Up-Market Products More Traditional Advertising (Leveraging)

14-26 Top American Universities

14-27 Closing Capsule Licensing Is a Special Case of Sponsorship that Features a Win-Win Relationship for the Licensor and the Licensee Global Sales of Licensed Products Continue to Grow

14-28 Closing Capsule Major Infringement Issues in Many Countries across the World Manufacturers and Retailers Are Being Encouraged to Produce and Sell Officially Licensed Merchandise

14-29 Closing Capsule