5 Lies Licensees Tell IP Owners

 

Finding the right partner helps ensure your best chance of market success. But finding out if a partner is right for your IP is challenging, especially if you’re new to licensing. So to help guide you in your research efforts, here are five things to watch out for when evaluating licensing partners.

1. We’ll make you the most money

The right partner is not necessarily the one offering the most money. The right partner is the one who can nurture your IP, build your licensing program, and create long-term cash flow and profitability, not the one who promises a lot of money upfront. In many cases, that kind of partner will only get you a quick in and out of the market. Remember, there is a life cycle to everything. If your IP has long-term potential, small initial gains could result in the most profitable licensing deal.

2. We’re ready to go today.

Don’t jump at the first offer that comes along. You must do your homework to ensure they have that get your IP into the market. When I was at the studios, they had a policy of not licensing startups. The reason is startups often didn’t have the resources (primarily financial) to support the product, especially if the property took off at retail. If a licensee couldn’t fill the retail orders, it would hurt the brand and potentially cause the retailer to back away from the property.

3. We know these types of IP

You’ll want to find out about a partner’s experience with licensing. Their experience means they are more likely to succeed with your IP because they know what works and the best way to get your IP into the market. However, remember that experience with licensing should not necessarily be required. Often licensing is a new strategy for a company, which means your IP would be the only fish in the pond.

4. We’re big enough to handle your IP

During my time licensing the kid’s entertainment properties, many early licensees were small companies willing to take a risk. Nobody knew if the property would be hit with the kids. Retail orders initially were small. When the property got hot, orders skyrocketed to meet the surge in demand. It overwhelmed the many small licensees, who tried to ramp up production quickly. Some could meet the demand, and a few didn’t have the resources to fill the orders. Although a smaller company may fit in every other area, you have a choice to make –  a good working relationship for access to a larger market. If your IP requires national distribution, then it’s better to find a bigger licensing partner with access to that marketplace.

5. We’ll keep you updated on our progress

Once the deal is done, don’t rely on your licensee to keep you updated. They’re focused on getting your IP to the market. If you’re not communicating and checking on them, you won’t know what’s happening, especially if they fail to support your IP as promised and miss deadlines. If you’ve got one or two licensing partners, a simple spreadsheet with the agreement terms and key dates is the best way to monitor your partners. For a more extensive licensing program with dozens of partners (such as movies or brands), a computer system is the best (and only) way to stay on top of your partners.

Finding the right partner is one of the essential parts of licensing. Not only can it reduce the risk, but it also makes it more likely that the potential partner will be successful with your IP. Before signing an agreement with any potential partner, always research to see if they have the right capabilities. The more you and your potential licensing partner know about each other, the better you can determine if the partnership makes sense. A little due diligence goes a long way in making sure your potential partner is for real or just telling you a bunch of lies.

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