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Licensing 101: Marketplace for Licensing Part 2

19 November 2014

Carrying on with what makes a ‘marketplace’ for licensing, it can be considered likewise from the licensee’s side: The licensor is ‘renting’ the awareness & popularity that a certain mark or brand has to help it sell products.  Building a brand, and building consumer awareness around a brand, is a very costly, risky and time-consuming undertaking.

If you’ve got a factory, or a distribution company, it might make more sense to use an existing brand/mark with existing awareness, to make sure your product has the edge on the retailer’s shelf, and also sells through to consumers who appreciate a certain brand or character’s value & positioning.

So the above two motivations – from the licensor side and licensee side, is what creates the ‘marketplace’ for the licensing business to happen.  Of course, it isn’t as simple as this, and has evolved into a highly complex business, but this dual, mutually beneficial motivation remains the framework for the licensing business.

As a final comment, it is important to remember the link between a brand or a mark and awareness.  If a character or brand has no awareness in a particular market, then it really doesn’t serve the licensee’s purposes and the marketplace falls apart.  Also, today, with so many brands/characters being offered, it is a licensee/retailers’ market (or a renter’s market, to carry on the earlier analogy) and today licensors have to work much harder now to attract licensee interest.

Next time, more on additional terms of a standard licensing agreement.