 Copyright 1999 Prentice Hall 8-1 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 disfavor b. 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 Licensing How 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 commercialDiet Coke  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