Exploring the world of licensing

In India, entertainment and sports licensing segments are the areas where entrepreneurs can explore business opportunities.
Exploring the world of licensing

By Namrata Kath Hazarika

What is actually Brand Licensing? Do you know? Brand Licensing is a legal process where a brand owner allows other businesses to use his/her brand and trademark for promoting their own products in the potential market. An entrepreneur can start an enterprise by just purchasing the license of a brand. This is a new business model in India that is yet to pick up its momentum.

The idea is consumers today usually get attracted to products that have the image of their favourite celebrity, cricketer or an icon on products. Children are also more drawn towards a T-shirt having a design of their favourite cartoon character on it. A successful licensed manufactured product will delight the customer when they see their favourite brand expressed in a new and exciting way.

Opportunities for Entrepreneurs

In India, entertainment and sports licensing segments are the areas where start-ups or entrepreneurs can explore. Experts say that if an entrepreneur is thinking to start a restaurant business in India and want to attract customers, then he/she can replicate the picture of a celebrity or sports icon as a design to attract customers in their restaurants. However, India is way behind in adopting the Brand Licensing business model as compared to the US. So, there is a business opportunity that is available for India to explore.

Opining in this context, Martin Brochstein, Senior Vice President, Industry Relations and Information, Licensing Industry Merchandisers’ Associations (LIMA), says, “At the moment, the projected retail sales of licensing goods are at $450 million in India. In 2011, it was $125 million. So, it is a growing industry in India.”

In the US, the Brand Licensing business has grown significantly. In the year 2013, the sales of licensed products especially items bearing the trademarked names, cartoon characters, corporate logos and brands, and major sports teams have grown significantly there. The industry has generated $5.655 billion in royalty revenue in the US and Canada, translating to $115.75 billion in retail sales, an increase of 3.3 per cent and 3.25 per cent, respectively.

Moreover, the largest portion in licensing product business in the US is covered by the following sectors.

• Entertainment or Character (47 per cent)

• Corporate Business (17 per cent)

• Fashion (14 per cent)

• Sports (12 per cent)

• Sports + Collegiate (16 per cent)

“India has to grow potentially in this segment. There are tremendous opportunities for Indian entrepreneurs in the Brand Licensing industry. We should learn from foreign markets and implement them in boosting the Indian licensing industry,” says Nagarajan Subramaniam, Founder & Managing Partner, En Theos.

In fact, with the growth of organised retail sector in India, the collaborations between international licensing companies and Indian business houses have increased tremendously. It is expected that the organised retail can grow from $40 billion to $200 billion in the next five to seven years. And, the growth is expected to be in food and grocery sectors to footwear to lifestyle products.

Importance of Brand Licensing

As per Theos, Brand Licensing is important as it helps a licensee to get associated with a well-established brand (licensor) having strong values. He further says if a manufacturer desires to use brand equity of licensed products that is relevant for a category, then it helps to improve the factors to 100 per cent. Brand licensing is important because it helps small entrepreneurs to invest in brand building and make a business successful.

Michael Okebiyi, Co Founder & Managing Partner, Tyrek LLC, says, “India needs to recognise the fact that it is new to the licensing business. India also needs to be very selective in recognising the strongest products in which they can be successful.”

He adds, “In the UK, they provide license for many popular television shows. The UK is ahead in sports, such as Football and Rugby. UK is providing licenses for such types of brands, so, India also needs to provide licenses for such segments and follow the UK business model for growth.” Experts believe that India needs to decide the brand on which they would like to avail the licenses. Okebiyi says, “India has a big cricket team. A licensee can get the license of such brand entity.”

Industry stalwarts say that the concept of licensing is fast gaining acceptability as potential number of international brands are entering India via licensing. Manufacturers from various sectors including apparel, consumer goods, toys, gifts, accessories and sports are keen on taking licenses. The market is gearing up for the Brand Licensing business in India slowly and steadily.

But there are certain challenges that Indian manufacturers face in getting a license. The main challenge is to find the right partners and also developing a licensing deal. The solution is to trust your agent to identify potential partners to deliver strategy and objectives.

Licensing Agreement

An arrangement to license a brand requires a licensing agreement. A licensing agreement authorises a company, which markets a product or service (a licensee), to lease or rent a brand from a brand owner who operates a licensing programme (a licensor). “The advantage of a licensed agreement is to get good ROI. It enhances the reputation and social image in the circle once a business gets associated with an established brand,” says BD Nathani, Chief Executive Officer, G & D Trade Zone, a footwear manufacturer.

He also says with a licensing agreement, a licensor has the right to choose the product categories to be licensed. Licensor finds and negotiates a license with the best licensees. Moreover, the licensees need to develop concepts, prototypes and final products on samples and submit for approvals under the agreement.

On the same note, Vishal Sinha, Business Head, Amigo Sports Pvt Ltd, says, “A licensee needs to perceive promotional marketing strategies that will help a business grow. A brand usually brings in more consistency. In a brand licensing business, one has to get a brand and licensee together for the growth of a business.”

Chris Evans, Managing Director, Oxford Ltd, says, “We develop a style guide for licensees. In this book, we ensure which images can be used by the licensee. We essentially develop the visual communication.” Pointing out the deals that went wrong between celebrities and a brand, he says, “For instance, Nike withdrew its collaboration with Tiger Woods in a wake of a sexual scandal in late 2009. Nike had to safe its brand image so they stopped negotiations and dealings with Tiger Woods besides his status.”

He also says that it is requisite to choose the right licensing agency as there is a need to have an objective and strategy between licensors and licensees.  Brand awareness and expertise in distribution channels is vital.  There is a need to read the markets and local agents dealing in the trade.

A proper agent can help a licensing business to flourish.  “Licensing is not simple as there are chances of making mistakes at the cost of the company. So, it needs to be chosen carefully,” concludes Evans.

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