Basics of Licensing

The legal aspects of publishing fascinate me. Sure, they’re complicated and hard to understand at first, but it’s interesting to learn what you can and can’t do.

Licensing is a very lucrative aspect of publishing. I don’t really think of licensing when I think of publishing, but some companies, such as IDW Publishing, Bendon Publishing International, and Kappa Books have made a lot of money making licensed publications of Sesame Street, Disney characters, and Nickelodeon brands, to name a few. At the Building New Streams of Income An Introduction to the Basics of Licensing, I learned the basics of licensing from Peter van Raalte, a partner at Infinity and representative of LIMA, the International Licensing Industry Merchandisers’ Association.

You can download the full presentation here.

If done correctly, licensors can increase the value of their content and earn revenue for years, Raalte said.

Licensing is basically “renting” intellectual property, for a specific time, in a specific territory. There are two parties involved: licensor and licensee.

A few basic terms to know are guarantee, advance, and royalty rate. A guarantee is the minimum royalty amount you agree to generate for a licensor over the term of agreement. An advance is the down payment against the guarantee. And a royalty rate is the rate a licensee pays a licensor, based on sales. This is very similar to an author advance and royalty rate.

For licenses, royalties range from 2-15%. For books it typically falls in the 6-12% range and newspapers/magazines are in the 3-12% range. Many resources exist on the LIMA site, so I won’t get in to too much detail.

Instead I’ll highlight some current licensing trends:

1. There are many license bundles, however Raalte advised against bundling because there is a burden of multiple guarantees.

2. Guarantees on average have come down in size.

3. Contract lengths are shorter than before (1.5-2 years).

4. Digital media has a higher return rate (40-50%).

5. For book publishing, it tends to be on the younger side for adult books (college age), although interactive gaming is an exception.

6. There are a lot of opportunities in pre-school books, especially if there’s a TV series.

So, in order to be successful at licensing publishing properties, there are some things to consider.

  • Have an identity/universe built in to it
  • Have “driver” categories (TV, DVD, toys, etc.)
  • Have a “cool” factor
  • Have a point of difference
  • Have great content and characters
  • Have a retail home
  • Have resources to drive it forward (corporate initiative, book clubs, media, etc.)

It’s also important to have awareness, real numbers, a marketing plan, creative support, and dynamic leadership. Raalte also stressed the importance of a retail plan, tent pole partners, and having tenacity.

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