Licensing Basics

           Licensing Expo kicks off this week in Las Vegas. If you’ve never heard of it, a simplified explanation is it’s a trade convention where brand owners can seek out companies interested in licensing their brands for use on other goods and services and vice versa. Licensing is important to brands for a number of reasons, but two of the biggest are additional revenue and increasing brand awareness.

Licensing Expo is a good excuse to discuss licensing for comic book creators. The first thing to keep in mind is that licensing rights are valuable. A typical licensing deal will involve an advance, a royalty percentage paid on sales, and a minimum guaranteed amount payable to the brand owner. The advance fee is usually deducted from the minimum guaranteed amount, and the licensee usually does not pay a royalty until it has sold enough to recover its advance fee payment.

For example, let’s say you signed a licensing deal with Company Z to make clothes featuring your property. If the deal terms are a $5,000 minimum guarantee with a $1,000 advance, a 10 percent royalty, over 3 years, then it means Company Z will pay you $1,000 when the deal is signed, and Company Z guarantees you will earn another $4,000 in royalty revenue by the end of the deal. They will not pay you until royalty revenue has exceeded $1,000 – the advance – and will pay the 10 percent royalty rate on goods sold thereafter. If at the end of the 3 year deal, they have not paid you $5,000 in royalty, then they have to pay you the difference.  

If you are thinking about licensing your brand, it is important to have a licensing agreement in place. At a minimum, you need to address the length of the deal, the royalty rate, and any other payment terms. It’s also important to address where the items can be sold by identifying both distribution channels (brick & mortar stores, online) and territory (U.S., Europe, Canada, etc.), implement an approval process to make sure the use of your brand meets your expectations and requirements, make sure the company licensing your brand agrees to abide by all relevant laws, require the company to indemnify you if an action they take harms you or your brand, and address the reasons for early termination of the agreement. Some of these terms are necessary for business reasons and some are necessary for legal reasons. If you are going to be licensing your brand, make sure you work with someone who understands these types of deals and can walk you through it.

Additionally, if you are signing a deal with a publisher you need to know what rights you are giving up. If a publisher is seeking the ability to license your property to others, be it on posters, apparel, drinkware, board games, or other goods, you need to be aware of it. You need to understand how much you will receive from any deals, and you need to make sure you have some say in the process.

Licensing can be a great way to increase exposure of your brand and to make additional money. It is important to understand how these deals work, and it is also important to make sure you retain some control over your brand if you decide to license it.