6.02 Discuss Product Licensing

LicensingPermission to copy name, logo, or trademark of a league, athlete, sports team, entertainer, film, television show, or character for a fee, also called royaltiesA licensor is the rights-holder of the name, logo, or trademark

Licensing (con’t)

A licensee is company paying for permission to use the name, logo, or trademarkWell-known licensees include Nike, Reebok, Adidas, Sony, Nintendo, and Sega

Licensing (con’t)

Licensed products are manufactured by licensees under an agreement with a a licensorLicensees can have a significant impact on a licensor’s perception among consumers

Licensing (con’t)

A license issued to another company that will manufacture, market, and sell the licensed products

Licensing (con’t)

Licensing provides greater profit , promotion, and legal protection for the licensor

LicensorThe licensor approves the product and collects the licensing fees and royaltiesFor example, WB will give permission to Electronic Arts to use the Harry Potter character

Licensor (con’t)

Companies typically pay between 5 and 10 percent of wholesales in the form of royalties

Character Versus Corporate Licensing

A sports or entertainment entity permits a licensee to use their image, name or character for a fee

Character Versus Corporate Licensing(con’t)

For example, LucasArts licenses a manufacturer to use the images of the characters from Star Wars: Attack of the Clones

Character Versus Corporate Licensing(con’t)

A corporation permits a licensee to use the corporate image of name for a feeFor example, Coca-Cola licenses a manufacturer to use their corporate logo on a baseball cap

Advantages of LicensingAdvantages for Licensora. Enhanced company image and publicityb. Increased profit from royalties. c. Increased brand awareness or recognitiond. Increased opportunity for penetrating new markets

Advantages of Licensing (con’t)

e. Limited manufacturing costs or risksAdvantages for Licenseea. Existing brand awareness or recognitionb. Lower advertising and promotional costs

Advantages of Licensing (con’t)

c. Increased possibility of success and profitabilityd. Connection with an athlete, sports team, entertainer, or corporation

Disadvantages of Licensing

Disadvantage for licensora. Potential for poor quality of a licensee’s manufactured productsb. Partial relinquishment of control over the marketing mix of the brand

Disadvantages of Licensing (con’t)

Disadvantages for licensee:a. Athlete, entertainer, or corporation may lose popularity.b. Sports teams may suffer losing seasonsc. Change in styles, trends, and consumer preferences

Disdvantages of Licensing (con’t)

d. Royalties and licensing fees can be expensivee. Manufacturing costs and risksf. Competition can drive up costs associated with fees and royalties

Disadvantages of Licensing (con’t)

g. Competition can cause a negative impact on market share

Impact of Licensing on Consumers

Increased opportunity to associate with an athlete, sports team, entertainer, or corporationIncreased supply of available products

Impact of Licensing on Consumers (con’t)

Competition can result in lower prices, new products and better quality.

Bootlegging

Bootlegging is unauthorized use of a name, logo, or trademark of a league, athlete, sports team, entertainer, film, TV show or characterBootlegging reduces the profits of the licensors and legitimate licensees

Bootlegging (con’t)

Bootlegging can result in poor quality products for consumers, which will decrease brand loyalty