All you need to know about standard terms in a license agreement – Part 2
Other important terms in a license agreement include:
DISTRIBUTION CHANNELS
Most licensing agreements will list approved distribution channels that the licensed product can be sold through. This can tend to be fairly rote and a bit of an overreach on the part of the licensor, but what is generally important and legitimate is for the licensor to have reasonable control over the positioning of its brand in the market. If the licensor wants its brand to be in mid-tier and up, then it shouldn’t license the brand to a company that specializes in hypermarket distribution.
Also, there is remarkable variance from market to market around the world as to the retail landscape, and devising a ‘go to retail’ plan for each market requires a high level of local market expertise – which any given licensor may not have for all markets around the world. Some markets are dominated by one key retailer – such as the Philippines and Mexico – which have turned the market into a virtual Direct To Retail (DTR) market and the licensing business conforms accordingly. The US and other western markets have been hallowed out by retailers like Walmart and as such the whole business is basically a mass market business. In growing Asia, where the trajectory is towards aspirational spending and a growing middle class, there is an expanding and accessible department store business where most licensees want to be.
The point is, as a licensor, you’ll want to have one standardized global positioning for your brand, but you will need to rely on your agents and local licensees to help you interpret how to best make that happen, given the varied retail landscapes around the world. Suffice it to say, it is problematic to have a brand at mass market in the US, then try to place it at high end department store in Asia. The world is too small now, with consumers travelling all over the world – the disconnect in positioning will out and turn off consumers (particularly, in this example, in Asia).
To be continued!