How Much Competition is There for Licensing Products? (Podcast)

Question: How much competition is there for licensing products? Are the big players in the industry locking up all rights across all product categories, or is there still room for the little guy to license well-known properties? Also, can you briefly discuss if upfront fees are usually required? If so, are there any ballpark figures?

Answer: Let’s start with the first one, competition for licensed product. The answer is there’s always competition in licensing because of the breadth and depth of the different types of properties that are out there – you have entertainment,  brands, art, video game based technology and more. You’ve got a variety of licensed products out there. There’s quite a bit of competition out there.

One of the keys for licensing any product especially if it’s a consumer product is getting to retail. That’s probably where there is more of a competitive issue with finding shelf space or distribution outlets for licensing products, but with that said, the good news is there is demand for licensed products.

That leads us nicely to the second part of the question about the big players locking up the rights across all product categories. Let me comment on this in a couple of ways. You really have to look at the type of licenses in terms of the categories.

If you want to talk about entertainment, some of these big movie properties, yes, you’ve got all the major companies in there – the toys and the apparel companies and companies like that. They can lock up all those rights, but  while they do get rights to a broad spectrum of products within the product categories, they can’t take everything because these companies can’t produce everything.

It’s an interesting question. When I was in the studio side, we put together big deals with the major toy manufacturers and as large as they were, they did not control the toy category. They got a significant amount of toys, but there was still plenty of room for a lot of the second and third tier companies, even entrepreneurs who were able to come in with either proprietary products or special niches.

One thing to understand about licensing is if you’ve got a proprietary product, such as an invention or a product that you have acquired through an inventor. If it’s proprietary, that is an opportunity to look at going after rights for some of these significant entertainment brands or retail brands or consumer brands out there.

So, although the big players do lock up significant rights, they don’t get them all, and there is an opportunity for even the small guy to get in there.

That leads into the third part of the question, can the small guy to license the well-known properties? The answer is yes. Both the retailers and especially the licensors are always looking for innovative products. So, if you are a small buy and you have a new innovative product, absolutely, I urge you. Pick up the phone. Give them a call. Look to acquire that license because that’s what they’re looking for.

As far as upfront fees, it’s an interesting question. The fees run such a scale that there is no one set licensing fee. Now, one of the things that I coach my clients on is licensing is about a partnership, and what you really want to do is open the door.

If you initially go into these deals, and you want all of these product categories upfront, it could be a very expensive license, but if you go in with an understanding of saying, “Look, if we can open the door, go in with our one or two key items, and basically just take a small bite,” you can get in at a very low figure. These licensing deals, whether it’s for entertainment property, TV property, a consumer brand, a retail brand, or artwork. can run you anywhere from nothing down to literally hundreds of thousands of dollars in terms of upfront fees.

The trick is how you’re making your presentation and what you’re going after. I’ve done many deals for clients at the studio level, where we’ve negotiated these deals for as little as $2,500 and $5,000 down.

I’ve also negotiated licenses with some of the major sports licensing franchises that are six figure deals. So it all depends.  Keep in mind too, when you’re dealing with the larger, more advanced organizations,  such as the big studios, sports franchises, or major brands, they may have set fees in place.  In that case, there isn’t much to negotiate, because they have certain minimums they require across the board regardless of the company.

In other cases, there are opportunities to find these licensing opportunities for little, or in some cases nothing down. I haven’t given you a lot of numbers on this because it’s hard to pinpoint something like that.

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