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Brand licensing means renting or leasing of an
intangible asset An intangible asset is an asset that lacks physical substance. Examples are patents, copyright, exclusive franchises, Goodwill (accounting), goodwill, trademarks, and trade names, reputation, Research and development, R&D, Procedural knowledge, ...
. It is a process of creating and managing
contracts A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...
between the owner of a
brand A brand is a name, term, design, symbol or any other feature that distinguishes one seller's goods or service from those of other sellers. Brands are used in business, marketing, and advertising for recognition and, importantly, to create and ...
and a company or individual who wants to use the brand in association with a product, for an agreed period of time, within an agreed territory. Licensing is used by brand owners to extend a
trademark A trademark (also written trade mark or trade-mark) is a form of intellectual property that consists of a word, phrase, symbol, design, or a combination that identifies a Good (economics and accounting), product or Service (economics), service f ...
or character onto products of a completely different nature. Examples of intangible assets include a song (" Over the Rainbow"), a character (
Donald Duck Donald Fauntleroy Duck is a cartoon character created by the Walt Disney Company. Donald is an Anthropomorphism, anthropomorphic white duck with a yellow-orange bill, legs, and feet. He typically wears a sailor suit, sailor shirt and cap with ...
), a name (
David Beckham Sir David Robert Joseph Beckham ( ; born 2 May 1975) is an English former professional footballer, the president and co-owner of Inter Miami CF and co-owner of Salford City. Primarily a right winger and known for his range of passing, cross ...
), or a brand (
Rolls-Royce Rolls-Royce (always hyphenated) may refer to: * Rolls-Royce Limited, a British manufacturer of cars and later aero engines, founded in 1906, now defunct Automobiles * Rolls-Royce Motor Cars, the current car manufacturing company incorporated in ...
). An arrangement to license a brand requires a licensing agreement. A licensing agreement authorizes a company which markets a product or service (a licensee) to lease or rent a brand from a brand owner who operates a licensing program (a licensor).


History

Brand licensing is a well-established business, in both
patent A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an sufficiency of disclosure, enabling discl ...
s and
trademark A trademark (also written trade mark or trade-mark) is a form of intellectual property that consists of a word, phrase, symbol, design, or a combination that identifies a Good (economics and accounting), product or Service (economics), service f ...
s. A concept established in British business, the world's first licensed character was a soft toy of
Peter Rabbit Peter Rabbit is a fictional animal character in various children's stories by English author Beatrix Potter. A mischievous, adventurous young rabbit who wears a blue jacket, he first appeared in ''The Tale of Peter Rabbit'' in 1902, and subseq ...
, a fictional character created by
Beatrix Potter Helen Beatrix Heelis (; 28 July 186622 December 1943), usually known as Beatrix Potter ( ), was an English writer, illustrator, natural scientist, and conservationist. She is best known for her children's books featuring animals, such as '' ...
and patented in 1903, to be sold alongside the first public edition of '' The Tale of Peter Rabbit''. Merchandise of Peter and other Potter characters have been sold at
Harrods Harrods is a Listed building, Grade II listed luxury department store on Brompton Road in Knightsbridge, London, England. It was designed by C. W. Stephens for Charles Digby Harrod, and opened in 1905; it replaced the first store on the ground ...
department store in London since at least 1910 when the range first appeared in their catalogues. For the rest of her career, Potter would continue to oversee merchandising and licensing opportunities for her characters, with Peter depicted in a multitude of spinoff merchandise such as porcelain figurines, painting books and dishes. Trademark licensing also has a rich history in American business, largely beginning with the rise of mass entertainment such as the movies, comics and later television.
Mickey Mouse Mickey Mouse is an American cartoon character co-created in 1928 by Walt Disney and Ub Iwerks. The longtime icon and mascot of the Walt Disney Company, Mickey is an anthropomorphic mouse who typically wears red shorts, large shoes, and white ...
's popularity in the 1930s and 1940s resulted in an explosion of toys, books, and consumer products with the lovable rodent's likeness on them, none of which were manufactured by the Walt Disney Company.
McDonald's McDonald's Corporation, doing business as McDonald's, is an American Multinational corporation, multinational fast food chain store, chain. As of 2024, it is the second largest by number of locations in the world, behind only the Chinese ch ...
play food,
Burger King Burger King Corporation (BK, stylized in all caps) is an American multinational chain store, chain of hamburger fast food restaurants. Headquartered in Miami-Dade County, Florida, the company was founded in 1953 as Insta-Burger King, a Jacks ...
T-shirts and even ghastly Good Humor Halloween costumes became commonplace.
Brand extension Brand extension or brand stretching is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category. The new product is called a spin-off. Organizations use this ...
s later made the brand licensing marketplace much more lucrative, as companies realized they could make real dollars renting out their equity to manufacturers. Instead of spending untold millions to create a new brand, companies were willing to pay a royalty on net sales of their products to ''rent'' the product of an established brand name. Armor All auto vacuums, Breyers yogurt, TGI Friday's frozen appetizers, and Lucite nail polish are only a handful of the products carrying well-known brand names which are made under license by companies unrelated to the companies who own the brand.


Reasons for licensing

A company may choose to license its brand(s) when they believe there is strong consumer acceptance for brand extensions or products. Apart from benefits to licensors, there are benefits to licensees as well. Licensees lease the rights to a brand for incorporation into their
merchandise Merchandising is any practice which contributes to the sale of Product (business), products ("merch" colloquially) to a retail consumer. At a retail in-store level, merchandising refers to displaying products that are for sale in a creative w ...
, but do not share ownership in it. Having access to major national and global brands, and the logos and trademarks associated with those brands, gives the licensee significant benefits. The most important of these is the marketing power the brand brings to the licensee's products. When brand managers enter or extend into new product categories via licensing they create an opportunity for a licensee to grow their company. Below is an example of the licensed product process steps: * Licensor chooses the product categories to be licensed * Licensor finds and negotiates a license with the best licensees * Licensees develop concepts, prototypes and final production samples and submit for approval * Licensor approves licensed products for sale * Licensees sell licensed products to authorized retailers Licensees expect that the license will provide them with sales growth. This sales growth may be in the form of growth within existing market or the opportunity to enter a new market. To achieve this, licensees expect that the brand they are licensing has significant brand preference, that it will open doors and ultimately help them meet or exceed their business objectives. The licensing contract forces the licensee to achieve certain sales targets and royalties; therefore, the goal of the licensee is to quickly meet their business objectives, thereby achieving their contract obligations.
Royalties A royalty payment is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or ...
are the money paid to a licensor by the licensee for the right to use the licensed property. It is calculated by multiplying the Royalty Rate by the Net Sales.


Global brand licensing industry

The main international
professional association A professional association (also called a professional body, professional organization, or professional society) is a group that usually seeks to advocacy, further a particular profession, the interests of individuals and organisations engaged in ...
for brand licensing is the Licensing Industry Merchandiser's Association, which sponsors the annual Licensing International Expo. Each Year, ''License! Global'' magazine publishes an annual list of "The Top 150 Global Licensors". For 2017, the leader was Disney Consumer Products with $53 billion in retail sales of licensed merchandise, followed by Meredith Corp. with $23.2 Billion and PVH with $18 Billion. According to the International Licensing Industry Merchandisers' Association (LIMA), global licensed merchandise sales was $272.2 billion in 2016, versus $262.2 billion in 2015. In the fashion industry, branded perfumes and cosmetics are often produced under license. For example, L'Oreal Group holds the fragrance and beauty licenses for Yves Saint Laurent,
Giorgio Armani Giorgio Armani (; born 11 July 1934) is an Italian fashion designer and a billionaire. He first gained renown working for Cerruti 1881. He formed his company, Armani, in 1975, which eventually expanded into music, sport, and luxury hotels. By 200 ...
, Valentino, Prada, Ralph Lauren, and more.


Brand licensing in South Korea

Han Chang-Wan, a professor at Sejong University, published the history of animation character design in Korea at the Character Licensing Fair 2016. This study became the first to have rabbit and turtle illustrations as Korean animated characters. This was revealed in ''
The Independent ''The Independent'' is a British online newspaper. It was established in 1986 as a national morning printed paper. Nicknamed the ''Indy'', it began as a broadsheet and changed to tabloid format in 2003. The last printed edition was publis ...
'' newspaper. With American and Japanese characters dominating the Korean animation industry until the 1970s, it was not until 1983 when Dooly the Little Dinosaur (아기 공룡 둘리) appeared in Bomulsum—a monthly magazine for kids—and changed the Korean character market. In 1987, Dooly the Little Dinosaur first aired as a six-part TV show, with another seven parts airing in 1988. In 1995, Kim Soo-jung, its creator, established a company named 'Dooly World' and went into the character design industry. The following year, the animated movie ' Dooly the Little Dinosaur' was released. In the 30 years since Dooly the Little Dinosaur launched, its related market generated 2–3 billion won per year (about 1.7–2.7 million dollars as of July 2018). This paved the way for the character market in Korea.No, Jawoon (2013-05-01)
"'둘리' 이후 30년...캐릭터 시장 규모 8조원 육박'"
0 years after 'Dooly'... The size of Character market is closing in upon 8 trillion won Chosun Biz.


References

{{Reflist Brand management Intellectual property law