Licensing has not spread full-fledged as desired by licensors as there are factors that restrict its smooth operations.
Be it Dora the explorer stationery, Game of Thrones apparel range or Candy Crush merchandise, all have one business module i.e. licensing. While the retailers find this as an easy and lucrative means to expand their businesses in multiple domains without actually getting into trouble of initial set ups, the licensors are not satisfied with the growth of this industry.
In the times when this industry is promising exponential growth, the licensors are in a catch-22 situation due to the bottlenecks in operation in India, which leave them with very constrained set of genuine licensees, thus reducing the competition in the market.
Market Size in India
If one goes by market size, the licensing and merchandising industry in India stands worth USD 637 million and is primarily dominated by entertainment and kids’ licensing which counts to 80 per cent of the total market. But the hurdles faced by licensors are eating upon their businesses.
What is trending?
A lot of global characters such as Doremon and Pokémon have entered the Indian market and Indian characters are expanding their reach by going global with Chhota Bheem being the most popular Indian IP. Apart from merchandising, the IP owners are seeking ways to get entry to other domains including apps, video games, theme based amusement parks, Real Estate etc.
Also, the characters which were earlier limited to kids are entering adult segment, for instance, Disney had tied up with Designer house Satya Paul for Mickey and Minnie inspired range of sarees. The licensing arm of Yash Raj Films has inked pact with Games2win to develop casual gaming domain under YRFL.
The major slowdown in this industry is the frail state of laws for protection of intellectual properties of any licensor, resulting in piracy.
In the words of Saugato Bhowmick - Senior Vice President – Consumer Products, Viacom 18, the major cause of sluggishness in this market is the weak IP Protection laws in India, which narrow down the choice of genuine licensees.
According to an index released by the U.S. Chamber of Commerce in year 2012, four members of BRIC group - Brazil, Russia, India and China, received worst scores for protecting copyrights, patents and other intellectual property.
The index prepared for the Group's Global Intellectual Property Center scored 11 countries on a point scale from zero to 25. While the United States received the highest tally of 23.73 followed by Britain at 22.40, India was last with 6.24 points, reflecting its low scores in each of the categories. China was tenth with a score of 9.13, below Brazil with 9.57 points and Russia with 11.17.
Other challenges in this domain include counterfeiting and parallel manufacturing. The fly-by-night manufacturers produce identical merchandise of sub-standard quality, ending up in eating the market portion of authentic retailer. Also, a major issue is to maintain high quality all the time. The licensors fail to receive desired amount in lieu of licensing out their brands, which results in shift in quality of the merchandise.
In the words of Abhishek Maheshwari, VP and Head, Consumer Products, Disney India, “While the sector is growing at a steady pace, the biggest challenge that it faces is Piracy. It is an issue at ground level that the entire industry and for that matter any company with Intellectual Property, faces.”
Analysing the high potential that the licensing industry hold, the administration needs to strengthen the laws for protection of IPs in the country, else the piracy market will take over the genuine one.