Kelvyn Gardner clarifies the mystery surrounding the licensing industry and explains how it can benefit those who have failed to recognise its wealth of potential. 

The formula for success in marketing – licensing. Well, it’s the start of another new year so why not commence with a bold claim? Bold, maybe, but I’m convinced it’s true. As someone who has earned a living from the licensing business for 27 years, and started two companies in that time entirely dependent on licensing for their success, I think my opinion carries some weight. 

Secret World 

Those of us in the licensing business occupy what sometimes seems like a secret world. We are not understood, or even misunderstood, by the majority of the public, the press, or business as a whole. We’re basically unknown. The way we think about opportunity, the places we look to for inspiration and ideas, the channels we follow to secure revenue, retail space and promotions are not those followed by the majority of the companies working in UK plc. We need to remind ourselves of this, to pinch ourselves occasionally before we become convinced that our quaint ways are open to everyone. They are, in fact, open to everyone, but only insofar as business at large can look into our world and understand enough of it to take the plunge. 

A trawl through licensing industry reference books such as The Guide to the Licensing World or Licensing Pages indicates that, in the UK, there are around 600 manufacturers or marketing companies that regularly use licensing as a marketing tool. Only 600! How many consumer goods companies, for one category alone, are there in the UK? 10,000? 20? Clearly there are far more companies not using licensing than taking up the opportunities that licensing offers. I’d like to encourage anyone reading this to give licensing a try. 

Licensing in Practice 

Let me give you an example. For over 100 years Lightbody of Hamilton was a Scottish regional bakery chain with some 30 shops. In early 1994 they looked into the future and saw that it did not include them. They took the decision to sell off the shops, build a new plant and supply supermarkets with birthday and other celebration cakes. Starting this new venture in 1996, they went from a turnover of zero to £50 million in less than ten years, half of which was revenue from licensed cakes. The company completed a successful £47 million merger with the Finsbury Food Group this year.
While birthday cakes may seem an obvious use for famous children’s characters, I’d like to encourage you to believe that, with a few exceptions, the right licence can be found for virtually any product, and bring success with it. High quality electric tyre-inflation pumps are a long way from the bakery business, but they are a big success for the licensee of Michelin for this category. JCB, another ‘chunky’ brand if ever there was one, has had great success with heavy-duty footwear and work boots. A few years ago I arranged a deal licensing a live version of the TV game show Family Fortunes for Butlin’s holiday parks. All of these deals show the diversity of the opportunity that licensing has for you. 

Misconceptions 

There are, of course, misconceptions about licensing and the costs involved. At a trade function last year I ran into a very senior staffer from the IPA. Upon discovering my presence as head of the UK licensing trade association, this person assured me that licensing famous characters was so ridiculously expensive that it was cheaper for a company to develop its own. I was quite frankly shocked to hear such a fallacy. Licensors and agents want paying, of course, for the use of their intellectual property (IP), but quite simply, even the biggest of licensing deals is cheap compared to the costs of establishing your own character or brand. Even if it costs you a six-figure sum to get onboard with a licence as big as Star Wars, Doctor Who or Barbie – and six-figure sums are the high-end exceptions and not the rule – that’s a snip given the weight of the IP you’re buying into. 

I also hear from marketers that licensing is all very well for low-profile businesses who need the association with famous characters to make up for their otherwise lack of trade impact. Such associations do work well, no doubt, but you only have to look at powerful brands such as Nestlé or Yoplait, who have gained greatly through the strategic use of licensed promotions to support already huge brands such as Frubes or Yop, to see that licensing can and does work for established brands. 

Open Arms 

Here’s another thing worth knowing: if you are new to licensing, the industry will welcome you with open arms. More than any other business sector I know, licensing, for the most part, is made up of companies who recognise that a good deal is one that all parties are happy with. Licensors are happy to share success with you. Is it competitive? Do rights sometimes go to the highest bidder? Of course they do, but, on the whole, fair deals are struck and both licensor and licensee expect to make their profits from real sales and the royalties that accrue from them. 

Merchandise covering many areas of consumer goods are produced by established, regular licensees who have worked in the sector for some time and who are respected and trusted by licensors and retailers alike. That’s certainly not to say that this is a ‘closed shop’ of any kind. Far from it. Licensors welcome new blood into the industry. The holy grail is, collectively, companies who approach licensors to look for rights on products not yet established in licensing. If your exclusive widget or new-fangled piece of sports equipment is in a category not licensed to date, this is both ‘found money’ for the licensor plus the chance to move their IP into a new product, or even new industry sector. Selling licences to manufacturers is all about ‘borrowing the competence’ of those manufacturers. If your competence is in a new, uncharted field, this is fresh air for the licensor and you can add a whole new skill set to apply to his/her IP. 

As new products proliferate, so do the licensing opportunities for those products. However, even if you work in a very traditional field, I’m sure you can find the right licence at the right price for your company to benefit. If you need assistance taking your first steps in licensing, I can, naturally, recommend that you take up membership of LIMA. We can help you directly, and also give you details of agents, consultants and other support companies who can assist you professionally and in greater depth to make sure that licensing works effectively for you. Differentiating your products from your competitors is getting harder than ever, and fighting for space at retail can be a battle royal. Let the power of licensing come to your aid: I know you won’t regret it.