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License to Thrill

Jessica Blue, VP, Licensing Expo Tony Lisanti, Editor in Chief, License Global Magazine

Lia Buffa, VP, New Business, Food Network

PresenterPresentation NotesHello everyone and thank you for joining us for Licensing 101 : Understanding the Basics. My name is Jessica Blue and I am the VP of Licensing Expo. I have been running Licensing Shows for Advanstar Communications for 8 years and previously ran Brand Licensing Europe in London before relocating to the US to run licensing Expo. My colleague Steven Ekstract is a licensing veteran, and is the Global Publisher and founder of license Global Magazine. We’re also joined today by AlitA friedman, Chief Brand officer of Pretty Ugly. Alita is going to share the Ugly Doll Brand and Licening story with us today.

Who are We?

PresenterPresentation NotesSo, who are we? Advanstar Communications is a global media company with 600 employees worldwide. We produce publications, exhibitions and conferences for the fashion and licensing, powersports and science markets. The Licensing team at Advanstar are 23 people who live, breath, eat and sleep licensing so we are the go to resource for everyone in the industry whether they are a retailer, a licensee or a brand owner. We organise the 2 largest licensing trade shows in the world – Brand Licensing Europe in London and Licensing Expo in Las Vegas. We publish License Global Magazine which keeps the global industry updated with licensing news, in depth features and interviews with brand owners, retailers and manufacturers of licensed products. Our events are supported by the Licensing Industry Merchandisers Association who represent the interests of the licensing industry.

Agenda

How does licensing work and who are the players?

Understanding the jargon

How to find the right brand partners

Be prepared and take control

Decoding the pitch

Case study: Food Network

License! Global’s top Trends for 2014

PresenterPresentation NotesI’ll quickly run through the content of our presentation this afternoon: This presentation is for manufacturers and retailers that want to know how licensing works and what it could bring to their business. We'll kick off with a section on what licensing is and how it works, covering some of the terminology, types of licensing, the process of buying a license and how to choose the right license for your company. While we don’t have the magic formula to spotting a sure fire winner for you, we will definitely help you ask the right questions to find the right license for your business. Finally we have some great case studies to share with you that are directly relevant to the home and housewares market.

A Definition

A contractual permission to use a brand in association with a defined product, for a defined

period of time, in a defined territory.

Licensing is the process by which a brand / property owner extends a trademark or character out of its principal environment and onto products

of a completely different nature.

PresenterPresentation NotesSo – what is licensing. Put very simply, it is a contractual permission to use a brand, character or image in association with a defined product for a defined period of time, in a defined territory. The brand is also referred to as the intellectual property or just the property. Licensing is the process by which a brand or property owner extends that brand out of it’s principle environment and onto products of a completely different nature.

Spongebob as you may or may not know is a yellow, absorbent, porous (as goes the song for any of your that have kids) cartoon character. He lives in a pineapple under the sea and his principle environment is on the Nickelodeon channel on TV grilling crab patties at the Crusty Crab for his tyrannical boss Patrick. Sorry – I know too much. I have a 6 year old and a 3 year old. . As you probably know, Spongebob has a huge TV audience built over a number of years. The rights to Spongebob and everything related to him – his image, his friends, his environment, are owned by Nickelodeon. However, Nickelodeon don't make alarm clocks, they make content for TV. Nickelodeon have done a licensing deal with an alarm clock manufacturer to put SpongeBob on a product of a completely different nature, i.e., the alarm clock. The alarm clock manufacturer has tapped into the brand equity that Nickelodeon has build for SpongeBob and they are going to capitalise on that. The alarm clock manufacturer will pay a royalty on each clock sold to Nickelodeon.

In short, this deal has added value and desirability to this product and has meant more clocks have been sold. This has been a win for the manufacturer and a win for Nickelodeon.

How Does Licensing Work?

Consumers are unaware of licensing, they just buy the products that they like

PresenterPresentation NotesMembers of the public are generally unaware of licensing as an industry. They go into a shop and buy the products they like.

Types of Licensing

Brands From Every Segment

PresenterPresentation NotesLicensable properties come from a variety of sources. Although every licensing program is unique, there are certain trends and similarities detectable within each property type.Character and entertainment licensing is one of the most profitable types of licensing. Its where licensing started and the very first licensing deal was done in the 1930’s. In terms of revenue, it’s the largest category This property type is dominated by large players such as movie studios and broadcasting companies for example Disney, Twentieth Century Fox, Dreamworks and Nickelodeon.Licensing programmes are borne out of famous book and comic characters Peanuts, Winnie the Pooh, or Batman, TV-based properties as Bob The Builder, The Simpsons and Sesame Street or properties based on movies such as Star Wars, one of the most successful licensing programs ever. You will see thousands of products here at Toy Fair whose roots are in EntertainmentToys, Games and Gaming – Companies like Hasbro and Mattel are unique in that they both make toys and own their own brands. They are both licensor and licensee. Hasbro, Mattel and Spinmaster all exhibited in 2013 to promote their own brands and find product partners in categories outside toys. More and more Licensing programmes are stemming from apps and videogames such as angry birds and skylanders sports licensing programmes are prevalent in the world of soccer, motorsports, Poker, football, baseball and basketball. When you think of licensing of sports brands, most of the product applications are obvious – football shirts and rugby balls for example. But it also includes computer games (i.e. PGA Tour), sports equipment (golf balls, tees) and even cakes and confectionery (Manchester United birthday cake). Brands - When company names, logos, or brands are licensed on products, this is referred to as corporate trademark or brand licensing, one of the fastest-growing segments of the licensing industry. This area involves some firms with the highest brand equity, as for example Coca-Cola or Harley Davidson. The Housewares category is very important for these consumer brands Fashion -One of the well-established areas in the business, where apparel brands such as Calvin Klein or Skechers extend their name outside of apparel and onto lifestyle products, jewellery, fragrance, health and beauty products etc. Music -In terms of what we are talking about here today, music licensing includes individual artists or bands, their images, logos or even lyrics. A good example of this is Authentic Hendrix, the licensor behind the Jimi Hendrix name. Product extensions here include – calendars, gifts, posters, greeting cards, playing cards, drinks. Art –Licensing is growing year on year and product extensions are prevalent in the gifts, greetings and housewares sector. Think birthday cards, wrapping paper, wallpaper, bedding, table mats and so onCharity / Heritage and Not for Profit -Charity / Heritage and Not for Profit licensing is also a growing sector. Taking Charity first, licensing presents an opportunity for a charity such as The ASPCA for example to drive much needed revenue which can then be invested back into the charity. Product extensions include pet care products through to insurance. Heritage licensing includes museums

Why Consumers Buy Licensed Products

ASPIRATIONAL LIFESTYLE: To replicate a style or brand essence they admire

FANTASY PLAY: Younger consumers (2 to 6 typically) actually role play they are a character and want props that replicate that fantasy world

SOUVENIR: To take something home from a special event (film, concert, theme park visit) NOSTALGIA: To relive special memories from their past either individually or to share with their children

FAN SHIP: To show their affinity, express their interests and find like-minded people

ATTITUDE: To express a personality - humor, edge, sweetness

PresenterPresentation NotesSo, why do we buy these products – well, there are 6 main reasons……

The Players

Licensor /

Licensing Agent

Licensee/

Manufacturer

Retailer

Consumer

Owns/represents the brand

Buys permission to use the license & makes the product

Buys the product from the licensee or buys permission to use the license direct from the

licensor/agent

Buys the product

PresenterPresentation NotesYou will hear these terms a lot when you enter into the licensing world. This is how the relationship works. The Licensor is the owner of the brand or property. The licensor may be represented by a licensing agent or may not. The licensee is the consumer goods manufacturer, app developer, publisher or videogames maker who buys permission to use the license on the products that he or she develops and makes.

The retailer buys the product from the licensee. In some instances the retailers buy permission to use the license direct from the licensor.

Finally the consumer sees the finished product in store and buys it – hopefully – lots of it and everyone makes a healthy profit.

Royalties and Minimum Guarantees

You pay a % of each wholesale sale – a royalty Anything from 3% - 22% depending on the product/volume Minimum guarantees are often required against future royalties

PresenterPresentation NotesThe licensing agreement between a licensor and licensee is a legally binding document to protect the interests of both parties. The licensing agreement is prepared by the licensor and will be approved or amended by the licensee.A licensing agreement is not a fixed price transaction. You will pay the licensor a royalty for use of the licensed property, this is normally in the format of an agreed percentage on sales and payable quarterly.A royalty can be anything from 3 to 22%. The % depends upon the type of property you are dealing with, hot will have a higher % royalty rate as the window of opportunity is shorter, and also upon the property category, an art license will have a lower royalty rate also. BUT REMEMBER - set your limit in advance, and don’t over commit. It is vital to negotiate. The licensor wants as much as possible from you and you want to pay as little as possible. It is sensible to budget for 10% at the outset, but remember, you can’t win ‘em all. You may be required to pay an advance which is an upfront payment from the licensee to the licensor (part of the guarantee) normally paid on signature of contract.You may be required to commit to a Guarantee which is a minimum fee or level of remuneration that has to be paid by the licensee to the licensor, irrelevant of product or service sales. This will happen at the end of contract. TO CLARIFY, at the outset, you will agree with the licensor, the minimum amount of money that will be paid in royalties over the period of the contract. If at the end of the contracted period this amount has not been met, you will be required to top this up.

How do you find brands to partner with?

Get the know the licensing industry & who is licensing what to whom

Network with other licensees

Join the Licensing Industry Merchandisers Association

Read License! Global E news to find out who has won licenses and new brands coming to market

Attend Licensing Expo to shop over 5000 brands

PresenterPresentation NotesSo, you’ve decided that you want to explore this licensing idea a bit further and you want to start talking to some of the brands and agents that could be a good fit for you. So, where do you start? Well, You need to get to know the licensing industry - Who is licensing what to whom? You need to start networking – this business likes to shake hands and face to face exchanges are really important. There are many opportunities to network at licensing Expo including a bit opening night party where 3000 licensees, retails and brand owners network on the beach at Mandalay Bay. licensing Expo is free to attend if you are a licensee or retailer and the party is only $60. You should subscribe to License Global’s free daily e news. So that you can keep up to date with the daily deals. License global also product 6 magazine issues per year with in depth reports and analysis. They publish the top 150 global leading licensees list and the top 100 global licensors lists. Invaluable information. Joining Limas also a good thing to do . They are our show partners and represent the interests of licensees, manufactures and licensors. They also host networking events on eh west and east coast.

What can you achieve at Licensing Expo?

Hear the latest brand strategies direct from the brand owners

Build relationships directly with the brand owners who are creating and developing the brands, characters and art

Compare and contrast licenses in one place

View style guides for the hottest brands, characters and images

Attend seminars to find new/better ways of doing business in licensing

PresenterPresentation NotesLicensing Expo gives you a window of 3 days and 5000 brands to shop. These some of the things that licensees tell me they use the Expo for. The brand owners know their brands inside and out. They live a breathe them every day. They can tell you the story, the strategy and the future plans for the brand. You can start to build those relationships. You can go from booth to booth comparing and contrasting the brands rather than looking at them in isolation. Many licensors will show you the style guide. That is the physical guide that dictates colours and treatments of the logos and imagery. 20 seminars run alongside covering everything from royalty negotiation to trends and technology. There is a 5 hour beginners masterclass the day before the show opens and 2 keynotes too.

Licensing Show Tips

Prepare: Formalize your objectives, review attendees and select who you want to see; not just who has contacted you. Review brand owners and agencies websites and recent news and be ready to ask questions so you can make informed decisions.

Network: Attend the formal presentations, circulate, go to all the parties. Relationships are everything!

What to bring: Business Cards: While old school you are going to want to formalize connections and keep track of who you meet An Open Mind: There will be buzz about what is hot but there are lots of surprises and you could discover something nascent yet perfect for your guests Comfortable Shoes & Your Camera Phone: Walking the show is part of the secret to discovery and finding best practices - takes photos to remember ideas you have along your journey

The Jargon

DTR (Direct-To-Retail): The retailer holds the license and pays the content provider directly.

We’re #1: Not everything can be #1. Ask for specific time periods, compared to what competition...get context Unprecedented Support: Often true but ask for context and examples of support levels

Franchise: Multiple forms of ongoing content and established proven success in multiple categories

Evergreen: The property sells day in and day out and does not necessarily rely on new entertainment

Lifestyle: Should mean that a consumer wants to bring the property into their lives in several product categories -- apparel, home, personal care, stationery, etc.

PresenterPresentation NotesIt is imperative that the right resources are in place for design, product development, manufacturing, marketing and account management. All details regarding who is responsible for what need to be transparent for success.Lots of #1 entertainment don’t necessarily translate to merchandise (is there a fashion play, style, play pattern, pent up product demand from a strong fan base etc)

Decoding the Pitch

Your statistics are impressive but what product success are you already enjoying? What are the best products in the line? Who are your top competitors and how will this property be unique? How will this compete with and complement what I already manufacture?

What are the content drivers for the property? Film, TV, publishing, gaming, social networking? How often will refreshes occur?

Who is the brand consumer? How did you select this target? (Don’t let them say “everybody.”) Will it work cross-category?

How have you selected the licensees to represent the property? Experienced in licensing? Design leadership? Innovation and new Features offered?

What are best practices you have seen from other licensees? What has led to sell through success?

PresenterPresentation NotesSo, you’ve done your homework and identified which brands might be right for your business . You’ve booked at meeting with the brand owner at Licensing Expo. What happens next? It’s important that the brand owners undersatdn your business, your successes and your priorities. Ask lots of questions such as what marektign support you might expect. Negotiate Offer to spend 5 minutes on your business: Demographic target, Top 3 Business Priorities and what you are looking for in new properties

Ensure their presentation is always addressing your specific needs. Ask questions.

Ask what type of marketing support you can expect

What Makes a License Successful

RELEVANT: To the ever-changing marketplace and consumers’ interests CONSISTENT: In brand image and quality in all forms

PREFERRED: Desired over the competition so consumers will seek it out, pay a premium and desire multiple items

CREDIBLE: Consumers believe the brand will deliver what it promises - the emotional connection of how it makes them feel.

INSPIRATIONAL: leading the way in its innovation, design, technology, brand values.

UNIQUE: Special and worth paying more for. Differentiated positioning

CONSTANTLY REFRESHED: Content and Style Guides

PresenterPresentation NotesWell, while we can’t give you the magic fairy dust to pick a sure fire winner, we can give you these pointers to look for.

PresenterPresentation NotesWell, while we can’t give you the magic fairy dust to pick a sure fire winner, we can give you these pointers to look for.

License! Global’s Top Predictions for 2014

Box Office Bonanza. 2013 was a record year at the box office driven primarily by popular entertainment properties including Man of Steel, The Hobbit, Iron Man, Frozen, Despicable Me 2 and The Hunger Games. Appetite for Apps. All you have to do is view the top list of paid and free apps for Apple or Android devices and the realization is obvious–games dominate. Look for chart topper “Candy Crush,” from King and represented by Striker Entertainment, to push licensing in 2014.

License! Global’s Top 14 Predictions for 2014

Brazil is Big. As host of the World Cup this summer and the Olympics in 2016, along with a growing middle class with an interest in pop culture and greater willingness to spend Making Music. The rock and roll legends continue to tour, the reality shows continue to produce new talent, and country keeps on rockin’ as well, all to the beat of consumer products. Just a Click Away. E-commerce continues to set records in consumer purchasing and that bodes well for brand licensing for fans of all types, and for niche properties in particular

License! Global’s Top 14 Predictions for 2014

Niche is Nice. While every property can’t be a mega big deal around the globe, many properties have built a loyal fan base along with a viable collection of fun products Super Still Super. The superhero phenomenon, which many observers pontificated couldn’t last, will continue as strong as ever through 2014 and beyond New Tech Tips. From 3D printers to drone delivery to branded emojis, new tech has already impacted brand licensing and it will continue particularly as these products become more mainstream and accessible. (See "Signs of the Times" in the December issue of License! Global.)

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License! Global’s Top Predictions for 2014

Celebrity Brands. As Gwyneth Paltrow and Tracy Andersen spoke about during the keynote at Licensing Expo, their foray into health and fitness licensing will kick off in a big way in 2014.

Acquisitions. Whether it’s WME’s acquisition of IMG, the largest brand licensing agency in the world, or Authentic Brands Group’s acquisition of Elvis Presley and Muhammad Ali, expect more M&A activity in 2014.

Russia is Real. With the Winter Olympics taking place in Sochi next month, there’s a new level of interest and credibility that can be achieved as a result of this global exposure.

License! Global

#1 Global Magazine and Daily E News Audience of top global retailers, licensees and IP owners Authoritative and objective editorial Subscribe for free at WWW.Licenseglobal.com

THANK YOU!

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