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Lesson 6.3 – The Licensing Process

Discover the factors influencing licensed products, advantages for licensees, and considerations for licensors in the dynamic world of branding and licensing.

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Lesson 6.3 – The Licensing Process

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  1. Lesson 6.3 – The Licensing Process

  2. Branding & Licensing LESSON 6.3 Licensing Factors contributing to the appeal of licensed products • Intangibility of sport • Support / Involvement with team • Brand awareness

  3. Branding & Licensing LESSON 6.3 Licensing Licensee Advantages Positive association with the sports entity Greater levels of brand awareness Help to build brand equity Receive initial distribution with retailers Expanded and improved shelf space

  4. Branding & Licensing LESSON 6.3 Licensing Licensee Advantages • f. May be able to charge higher prices • g. Lower advertising and promotional costs • h. Increased possibility of success and profitability • Connection with an athlete, sports team, • entertainer, or corporation

  5. Branding & Licensing LESSON 6.3 Licensing Licensee Disadvantages • Athlete, league, celebrity or sport may fall into • disfavor • Success depends on athlete / celebrity • performance • c. Styles change quickly • d. Royalties and licensing fees can be expensive

  6. Branding & Licensing LESSON 6.3 Licensing Licensee Disadvantages 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

  7. Branding & Licensing LESSON 6.3 Licensing Licensor Advantages a. Expansion into new markets b. Increase its brand equity c. Minimized risk

  8. Branding & Licensing LESSON 6.3 Licensing Licensor Advantages d. Enhanced company image and publicity e. Increased profit from fees and royalties f. Increased brand awareness or recognition

  9. Branding & Licensing LESSON 6.3 Licensing Licensor Disadvantages a. May lose some control over the elements of the marketing mix b. Potential for poor quality of a licensee’s manufactured products

  10. Branding & Licensing LESSON 6.3 Licensing How does licensing work? The Licensing Process 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

  11. Branding & Licensing LESSON 6.3 Licensing The Licensing Process (Music Industry) • 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 commercial • The rights to use music through a license are bought and sold every day

  12. Branding & Licensing LESSON 6.3 Licensing • Examples of music licensing are all around us • 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

  13. Intro to Basic SEM Principles LESSON 6.3 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

  14. Branding & Licensing LESSON 6.3 Licensing Licensor / Licensee Relationship • Licensing provides greater profit, promotion, and legal protection for the licensor • The licensor approves the product and collects the licensing fees and royalties

  15. Branding & Licensing LESSON 6.3 Licensing Licensor / Licensee Relationship 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)  =

  16. Branding & Licensing LESSON 6.3 Licensing Character vs. Corporate 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

  17. Branding & Licensing LESSON 6.3 Licensing How does licensing affect the end customer? Increased opportunity to associate with an athlete, sports team, entertainer, or corporation Increased supply of available products Competition can result in lower prices, new products and better quality

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