Licensing in Sports

What is it? An agreement which gives a company the right to use another’s brand name, patent or intellectual property for a royalty or fee. Licensor – one who gives rights NASCAR, NFL, MLB, etc Licensee – one who pays to use another’s name or property Reebok – NFL apparel EA sports –right to put real info and players etc into games

Why? This is pretty much purely a profit motive situation. If you have a hot team, consumers want product with your name on it. Can often set the price Think lead up to major sporting seasons and events . . . People buy new games, jerseys, stuff and more

Who makes the merchandise? Licensed products and merchandise cannot be made by the team or schools. Instead they are made by the company who paid for the rights. Within two hours of announcing the 3 mascots for the 2002 Salt Lake City Olympics, $75,000 of merchandise sold 1997 Super Bowl between Green Bay and New England generated a record $120 million in merchandise sales (still stands)

Protections? Copyright is a must for logos, slogans, names Trademarks might come in to play as well for logos and slogans Just do it The “Who Dat” controversy

Where can it be sold? Almost anywhere – department stores, bookstores, league events, Internet. NCAA logos make it onto everything from pillows to shoes. In 2002, NFL Players Association generated $12 Million in video game licensing fees. Soccer’s LA Galaxy sales jumped 700% after David Beckham was announced.

Collectibles Another avenue for licensing and money Counterfeit items are problems – teams and players must protect their copyright and trademarks to keep them Must sue or take legal action when they learn of this. 2000 – FBI sting operation rounded up $10 Million in counterfeit autographs and collectibles Fans snap up chewed up gum and more – often then offer for sale.

Licensee Advantages 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. May be able to charge higher prices g. Potential to lower advertising and promotional costs h. Increased possibility of success and profitability i. Connection with an athlete, sports team, or corporation

Licensee disadvantages a. Athlete, league, organization or sport may fall into disfavor b. Success depends on athlete performance c. Styles change quickly d. Royalties and licensing fees can be expensive e. Manufacturing costs and risks f. Competition can drive up costs associated with licensing fees g. Competition can have a negative impact on market share

Licensor advantages a. Expansion into new markets b. Increase its brand equity c. Minimized risk d. Enhanced company image and publicity e. Increased profit from fees and royalties f. Increased brand awareness or recognition

Licensor disadvantages a. May lose some control over the elements of the marketing mix when an outside party sells products connected to licensor’s brand b. Potential for licensee’s manufactured products to be of poor quality, potentially creating a negative perception of the licensor’s brand

Licensing Process a. Licensees pay an initial, one-time licensing fee i. In 2004, EA Sports inked an exclusive licensing agreement with the NFL and the NFL Players Association to develop and publish video games featuring NFL teams, players, stadiums and footage. Specific terms of the deal were not announced, the terms of the deal, but estimates put the price tag somewhere near $300 million. b. Licensees pay for the use of specific logos, slogans or other trademarked images for usein the creation of company products c. Licensees take on production issues and assume the risk by manufacturing product

Corporate Licensing ML licenses a manufacturer to use their corporate logo on a baseball cap. Only the company that paid this fee can make “officially licensed products”. Knock offs exist and are often inferior and usually always cheaper.