6.02 Discuss Product Licensing

1. 6.02 Discuss Product Licensing

2. Licensing • Permission to copy name, logo, or trademark of a league, athlete, sports team, entertainer, film, television show, or character for a fee, also called royalties • A licensor is the rights-holder of the name, logo, or trademark

3. Licensing (con’t) • A licensee is company paying for permission to use the name, logo, or trademark • Well-known licensees include Nike, Reebok, Adidas, Sony, Nintendo, and Sega

4. Licensing (con’t) • Licensed products are manufactured by licensees under an agreement with a a licensor • Licensees can have a significant impact on a licensor’s perception among consumers

5. Licensing (con’t) • A license is issued to another company that will manufacture, market, and sell the licensed products

6. Licensing (con’t) • Licensing provides • greater profit • promotion, and • legal protection for the licensor

7. Licensor • Approves the product and collects the licensing fees and royalties • For example, WB will give permission to Electronic Arts to use the Harry Potter character

8. Licensor (con’t) • Companies typically pay between 5 and 10 percent of wholesale in the form of royalties

9. Character Versus Corporate Licensing • A sports or entertainment entity permits a licensee to use their image, name or character for a fee

10. 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

11. Character Versus Corporate Licensing (con’t) • A corporation permits a licensee to use the corporate image of name for a fee • For example, Coca-Cola licenses a manufacturer to use their corporate logo on a baseball cap

12. Advantages of Licensing • Advantages for Licensor a. Enhanced company image and publicity b. Increased profit from royalties c. Increased brand awareness or recognition d. Increased opportunity for penetrating new markets

13. Advantages of Licensing (con’t) e. Limited manufacturing costs or risks • Advantages for Licensee a. Existing brand awareness or recognition b. Lower advertising and promotional costs

14. Advantages of Licensing (con’t) c. Increased possibility of success and profitability d. Connection with an athlete, sports team, entertainer, or corporation

15. Disadvantages of Licensing • Disadvantages for licensor a. Potential for poor quality of a licensee’s manufactured products b. Partial relinquishment of control over the marketing mix of the brand

16. Disadvantages of Licensing (con’t) • Disadvantages for licensee: a. Athlete, entertainer, or corporation may lose popularity b. Sports teams may suffer losing seasons c. Change in styles, trends, and consumer preferences

17. Disdvantages of Licensing (con’t) d. Royalties and licensing fees can be expensive e. Manufacturing costs and risks f. Competition can drive up costs associated with fees and royalties

18. Disadvantages of Licensing (con’t) g. Competition can cause a negative impact on market share

19. Impact of Licensing on Consumers • Increased opportunity to associate with an athlete, sports team, entertainer, or corporation • Increased supply of available products

20. Impact of Licensing on Consumers (con’t) • Competition can result in lower prices, new products and better quality.

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

22. Bootlegging (con’t) • Bootlegging can result in poor quality products for consumers, which will decrease brand loyalty