-DEVELOP A LICENSING PROGRAM SEM II-2.07B

How to develop a licensing program 1. Perform nonmarketing activities.  May need an attorney for trademark issues  Coordinate budget issues with Chief Financial Officer  Decide whether the licensing program will be managed internally or externally  Internally—your organization’s employees will manage and oversee all aspects of the program.  Externally—you will hire an agency to manage it for you.  Research shows that internal management tends to work better.  Internal management is more expensive.  It typically produces higher profits than external management because there are no commission fees to be paid.  Professional sports—licensing programs are usually managed by a part of the league known as the “properties division.  Advantages of agency management (external)  Agencies have a great number of contacts in the wholesale and retail industries.  They are experts in understanding licensing programs.  Sometimes it’s a good idea to hire an agency to get your licensing program started and then bring it under internal management once it’s up and running.

How to develop a licensing program 2. Select your licensees.  Most important step in developing a sport/event licensing program  Many different types of companies will be interested in becoming licensees.  Exclusive license categories and nonexclusive license categories  An exclusive category is one in which only one licensee can manufacture merchandise. McArthur Sports—only business authorized to produce golf gear bearing team logos for the NFL  A nonexclusive category is one in which more than one licensee can manufacture merchandise. Trading cards  You will generally be able to charge more for an exclusive license than a nonexclusive one.

How to develop a licensing program 3. Develop an application process for your licensing program.  Develop an efficient way to distribute and collect submissions.  Gather the following information:  A complete business and marketing plan  A listing of their existing retail distribution channels  A sample or drawing of the product(s) they plan to manufacture  A history of their reputation and corporate knowledge  A disclosure of their financial status  A list of licensing references  Proof of insurance  Remember that you are entrusting a substantial portion of your organization’s profits and public image to your licensees.  Consider each applicant carefully.  Choose licensees you feel are trustworthy.  Try to contact the owner personally.  Make sure to speak with the company’s competitors.  Make sure to speak with the company’s previous licensors.  Check with trade journals in the industry about the company’s reputation.

How to develop a licensing program 4. Design the license agreement. (May need to call on legal counsel.) Basic components of license agreements:  License grant  Specifies which rights and properties are being licensed  Specifies what types of merchandise will be produced  Describes the exclusivity of the category  Term  Specifies the begin and end dates of the contract  Describes the processes for contract renewal  Compensation  Contains all details regarding payments  Ways licensor is paid: Guarantee—up-front fee based on expected sales Royalties—5 to 15 percent of profits after the guarantee  Includes a detailed payment schedule

How to develop a licensing program: Design the license agreement cont’d  Quality control  Sets up procedures for you to review the work of your licensee  Sets up requirements the licensee has to report to you on all issues related to the merchandise  Restrictions and requirements  Restrict your licensees from subcontracting any part of the license to other manufacturers.  Require that licensees mark all their products with the proper identification. Hangtags Labels  Protect your organization, but try to do so without strapping your licensees with unreasonable or unfair obligations.  Warranties and obligations  Lists the reasons the license can be terminated  Spells out what happens if either party violates the agreement  Determines under what circumstances the agreement can be changed

How to develop a licensing program 5. Establish a system of maintaining relationships with all your licensees.  Routine checks to ensure the quality of your licensed merchandise  Routine checks to ensure compliance with your restrictions and requirements  “Code of conduct” to prevent unfair wages or worker abuse