Are you looking for a license? Navigating the licensing world can be daunting, especially when understanding upfront fees.
Licensing agreements often come with some associated costs; however, most are usually based on future sales or market conditions.
In this blog post, we’ll explore upfront fees typically required for licensing. I’ll explain how understanding these payments can help you make informed decisions about potential licensing opportunities in the marketplace.
Let’s start with the short answer to the question of paying upfront fees. It depends on the IP. If it’s well known, such as a movie or TV show, most likely, there will be an upfront fee. For less or unknown IPs, usually no.
Most upfront fees are an advance on royalties. How much depends on the IP and what’s negotiated. Entertainment, consumer brands, video games, technology, and other popular IP can run from nothing to six-figure advances.
For example, it will be expensive if you are trying to get rights to several product categories for a popular character. But it doesn’t have to be.
A better way is to take a small bite and negotiate for one or two products in a category to establish a relationship with the licensor. The upfront payment will be much less. Then once the door is open and you’ve established your partnership, you can negotiate for additional products, usually at a lower (and even no) advance.
The trick is how you negotiate the rights you’re going after. I’ve done many deals for clients at the studio level, where we’ve negotiated for as little as $2,500 and $5,000 upfront. On the other hand, I’ve negotiated deals with some of the significant sports licensing franchises that required five and six figures up front.
Remember, it also depends on the licensors you’re dealing with. The larger ones, such as major movie studios, sports franchises, and big consumer brands, often require a minimum advance payment or sometimes even the entire royalty guarantee upfront. In those cases, you aren’t likely to negotiate around it because they require upfront fees regardless of the company size or product categories.
In other cases, such as a little-known character, or new technology, there are opportunities to acquire a license for little or, in some cases, no upfront payments. It depends on the IP, the licensor, and how you negotiate the payment terms.
To learn more about how to get the best possible terms as part of an agreement, sign up for our newsletter today! With our inside tips, strategies, and information, you’ll be prepared to negotiate upfront licensing fees like a pro in no time!