Due diligence for choosing the right license
The licensing industry offers a large choice of intellectual properties across many segments and universes. Choosing the right license is a matter of internal and external factors that we are going to discuss in this article.
From the licensee perspective, the challenge is not only to recoup or exceed the minimum guarantee, which is the tip of the ‘investment cost’ iceberg, but mostly to make a profitable and sustainable business.
Nota Bene: in this article, intellectual property (IP), property, brand and franchise are used in the same meaning.
First of all, the IP you have identified needs to fit with the type of product or service you want to develop in terms of DNA, positioning and audience. This fit should appear as naturally as possible.
If you get a license from a luxury brand, your item will need to meet a certain quality standard and generally reach a price point high enough to be consistent with the brand positioning. Also if you target toddler children with an educational offer, Star Wars is probably not the best choice of IP.
Then, the other dimensions relate to your business and market specifities with the following questions:
In order to be profitable and sell enough,
- how long should my product be available on the market? Can I generally make enough volume in a short time or do I require a longer period?
- how large should my product’s distribution be? How many and which territories do I need to reach?
Therefore, it is crucial to see these needs matching with the IP exposure in terms of length (one-shot movie or event vs series or evergreen brands) and geography (local vs international or regional brands).
For instance, if your business requests a proper tooling development for new product and targets preschool children, you should better go for a multi-territory appealing TV series. Paw Patrol is a great example of a suitable IP (and successful!).
Conversely, products that require cosmetic adaptations with short lead times, can work with a larger choice of suitable property types. This is typically the case with event-based brands such as the Olympic Games (London 2012, Paris 2024,…) or the Universal Expositions (Expo Milano 2015, Expo 2020 Dubai,…).
Further assessment
Once you have selected some potential matching IPs or have been introduced to them, existing or new, below is a set of questions for the licensors, yourself or your customers, helping your decision making.
Back catalogue franchises and iconic brands
If your business can target older audiences such as adults and young adults, it’s worth looking into the studio’s back catalogue franchises. They offer interesting perspectives with a long term window and without chasing ratings. Plus agreement’s conditions are generally more favorable (lower MG, cross-collateralized, no CMF,…).
Think about 80s and 90s titles like Back to the Future, Street Fighter, Beverly Hills 90210, Baywatch, Micro Machines … for fashion, collectibles, video games, digital and so on. Some might even be back on screens like Ghostbusters.
This is more or less the same for some iconic corporate and lifestyle brands which have become timeless.
Example of licensed products and services with back catalogue franchises and iconic brands