UNDERSTANDING THE PAIN POINTS OF LICENSING
For small and medium-scale brands, licensing has been a magic wand so far, as first it helps them fit into the retail scenario by catering to the ever-evolving demand of the new age consumers, something that the established players have overlooked. For instance, Macmerise is probably the only brand dealing in licensed decals for MacBooks. Also, licensing helps the brands (licensees) get an edge over the peers with the ‘pull’ that an IP comes with.
THE GREAT BUSINESS OF LICENSING
If one wants to launch a consumer brand in India, there is a need to have something on the back of the ‘pull demand’. If one needs to push a brand into market, either one needs to have capital backing or leverage on something that has a pull demand. The reason why entertainment-related licensed merchandise makes for great business is that the licensors, including the likes of Disney and Warner Bros, are already doing marketing worth millions which works in favour of the licensees, though indirectly. These entertainment moguls bank on the million dollar franchisees. Thus, licensees are the first derivative beneficiary of that marketing campaign, thus putting them ahead of the retail curve.
However, given the lack of awareness amongst consumers for licensed merchandise, the scenario is not so rosy for dedicated licensees. As Jaineel Aga, CEO, Planetsuperheroes. com, puts it, “Brand licensing is a broken industry in India purely because first the consumers aren’t mature enough to appreciate and pay the right price. Therefore, we see a lot of people at bottom feeding and the pain points are spread across the width.” In the words of Siddarth Sood, Founder, McSidRazz, “In India, licensing is a factor of the consumer itself, who is not conscious enough to make a licensed purchase.”
SUPPORT FROM LICENSORS
Although licensing has been accepted as an integral part of mainstream retail, yet there are many bottlenecks to be removed. Whilst the situation arising out of lack of stringent IP protection laws is worsening the scenario, missing support from licensors is a major pain point for licensees in India, especially those operating at small and medium-scale. The high eligibility criteria and margins in dollars are some of the major issues that concern the licensees.
Merchandise has become the strongest monetization tactic with the increasing frequency of superhero movies which have been released over the last five years – Batman, Ironman, Avengers, or that of individual characters like Hulk, Thor, etc. “Licensors need to understand the need to align their revenue model with pain points of their licensees; that’s when this model starts scaling,” says Aga, adding that if licensees get shelf space in retail outlets, retailers deal at SOR (sale on return), thus blocking the inventory further.
The main problems arrive in buying that official license to produce merchandise. The margins expected are sometimes so steep that even a niche product which has to be experimented with will die a quick death before it is launched. Opines Sood: “Some of the biggest properties are licensed to many parties at the same time, thus making it hard for the licensees to get return on investment on the minimum guarantee given to brands.” One of the key issues is managing these expectations with the licensors and expecting them to support it to build a brand together. Ultimately, the licensors make money only when licensees make money. It’s not a margin game but more about royalty. Says Jimmy Mistry, Founder, Posterboy Merch: “Everyone has to come together and at a go address the pain points on an immediate basis. Then only the counterfeits can be reduced, if not eliminated completely.” Having said that, this issue can be fixed, given that the licensors understand the realities of the pain points of licensees who pay capital upfront, then invest in the inventory. As said, if content is king, distribution is god when it comes to retail.
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