What is Brand Licensing?
The Manchester United supporter scarf. The Prada sunglasses. The Paris Hilton perfume. The George Foreman grill. The Harvard University sweatshirt. The Spider-Man toy action figure. The Tommy Hilfiger travel luggage. The Ferrari audio headphones. The Linda McCartney vegetarian meals. The Ralph Lauren wristwatch. The Harley-Davidson boot. The NBA video game, the Jurassic Park theme park attraction and the Disney Store. What all these products have in common is that they are all licensed products. The world of consumer product licensing is, to many, a giant hidden industry worth over several hundred billion dollars in sales. This is the business of IMG Licensing.
Trademark Brand Licensing is a commercial transaction whereby the owner of intellectual property ("the Licensor") allows a 3rd party ("the Licensee") to use that intellectual property as the "brand" for a specific product or range of products under contracted commercial conditions within a license agreement that govern its use – for example the duration of the relationship, the geography where the products may be sold, the distribution channels, the price positioning and other considerations. The Licensor is remunerated for these arrangements in the form of fees - usually calculated as a percentage of the licensed product's sales volume ("royalty").
Brand licensing therefore produces financial income for the Licensor. It is a way to monetize one's brand or other IP with minimal cost and, if professionally managed, limited risk. However there are many other additional reasons companies license their brands.
Entertainment companies license their movies and animated characters in areas such as clothing and toys for promotion and marketing purposes amongst other reasons. Fashion companies often license their labels for perfume, watches and eyewear because specialist companies have superior expertise, resources and knowledge to exploit these products areas than they do. A company might also license its IP in a core business area within a specific geography that they do not have the organization, experience or knowledge to execute in themselves. Still other companies may choose licensing simply as a preferred business model – focusing their efforts only on building a brand and leaving to 3rd parties the task of commercializing the brand in different product areas.
Corporate Brand Licensing will often find that the brand reputation and attributes they have built over many years can be credibly "migrated" to entirely different product universes where consumers seek and trust the same sort of attributes. The Goodyear Tire & Rubber Company, for instance, has been one of the world's leading tire companies for over 100 years. Along the way they have built a reputation for durability, toughness, innovation and safety. The brand is also associated with travel, mobility and weather-proof qualities. It is easy to see then that such a brand, with its winged foot trademark, might also be credible for hiking boots and outdoor gear to take only one example.
Licensing one's trademark in product areas where brand migration is meaningful and credible can generate significant incremental business income while also positively reinforcing core brand attributes, promoting brand exposure and reaching new consumers. It can be a highly beneficial virtuous cycle.
Brand Licensing therefore can be undertaken for many reasons and create many benefits of which financial income is only one.