In case of a children’s character, it’s the emotional connection that the child (or, in some cases, the mother or grandmother that’s buying something for the child) shares with the product in context. A licensed pattern or design on dishes or a wall hanging might bring the warm feeling that goes with appreciating any piece of art. A fashion or lifestyle brand is valuable only if it generates some specific feeling in the target customer - “I’m chic and fashionable,” or “I’m youthful and cool,” or “I’m wealthy enough to afford this, and I want everyone to recognise that.” Even the use of a corporate brand on a product is meant to evoke the trust of performance or reliability which that brand has earned in the consumers’ eyes.
Licensing programme’s core appeal
Perhaps nowhere is emotion more at the centre of a licensing programme’s core appeal than in the world of sports. We can think of those in the stands who were cheering for (or against) athletes in the recent Commonwealth Games. The same goes for whichever side one may support in the IPL, since professional sport is built on passion. When one talks about the fans that root for a national team, a club or an athlete, one should consider that the word ‘fan’ itself is shorthand for ‘fanatic’ - though one would hope in a mostly benign way!
There’s another factor which helps establish sport as a licensing platform: constant media exposure. Like the entertainment business, sport gets an incredible amount of the sort of free publicity that any other sector of commercial life would crave for. It could mean a prominent section in newspapers, regular reporting, commentary on news shows and the list does not end here.
One significant sector
For the simplicity of understanding the appeal of sport as a licensing platform, it’s the area of licensing for which the basic structure of the business differs most from region to region around the world.
Sport is one of the most significant sectors in the licensing business globally. In the U.S and Canada, for example, it accounted for 18 per cent of all retail sales of licensed products in 2009, according to LIMA’s Annual Licensing Business Survey. While it accounts for smaller percentages in most other parts of the world, it still offers significant potential for growth.
In North America, sport licensing is built around the central licensing operations maintained by the major leagues in basketball (NBA), baseball (MLB), American football (NFL), ice hockey (NHL), and soccer (MLS). For the most part, a manufacturer who aims to produce team-licensed goods in the US to be sold through general retail channels cannot just take a license for two or three popular clubs, but rather must be prepared to produce for all clubs in that league. (By the same token, the entire clubs share equally in the royalty revenue generated by the licensing operation, so as clubs’ fortunes on the field rise and fall from year to year, what matters is the size of the total pie, rather than any specific club’s success.)
This is in contrast to the model in most of the rest of the world, in which individual clubs operate their own licensing and merchandising programmes. A Manchester United, Barcelona, Ajax or Arsenal may have an extensive or small presence on retail shelves, depending on the resources they devote to building a programme, as well as the success they achieve on the football pitch.
Other important factors
However, we must never lose sight of the fact that success in sport licensing is built in large part on how successful the athlete or club is on the pitch, field or court. But there are also other factors - besides success, that help drive success in sport licensing:
- Long-term loyalty - even clubs at the bottom of the fixture have their loyal supporters, driven perhaps by geography or some other factors. Those everyday fans are a baseline market for licensed goods attached to that club.
- Fashion or societal trends - occasionally, fashion trends will help boost the merchandise sales and profile of a particular sport. For example, at certain points, major rock bands began to appear on stage in the US in the sweaters of various ice hockey teams. It’s not certain how the trend started (or even how it eventually petered out), but it helped boost sales for the NHL. Similarly, in some years, one constantly sees college students wearing casual apparel emblazoned with the names of their universities. In other years, it’s nowhere to be seen. Fashion trends may be difficult to predict, but occasionally offer an opportunity.
- The souvenir or keepsake factor - People love to have some physical remembrance of a noteworthy event which they’ve attended or want to be identified with. A local team might have won a championship. Somebody might have attended a Commonwealth Games event at which they had a wonderful time. However, it’s extremely important that the products be available when and where the event takes place. That’s when the emotion is highest and the sales opportunity the greatest. It’s a merchandising truism that to generate success, you need to have the right product at the right place and the right price at the right time. If any of those is overlooked, the opportunity is diminished, if not lost. One needs only look at the recent experience with the Commonwealth Games for evidence.
Sport is an important platform for licensing, but only if the basics are adhered to.
The author is SVP Industry Relations and Information, LIMA.
