The "El Triomf I el Rodoli de la Gala I en Dali" by Salvador Dali
The following is a brief synopsis of the "El Triomf I el Rodoli de la Gala I en Dali" international licensing program. One of the most important aspects of any licensing program is the company's philosophy regarding the property's image. (On the right you can find 43 Salvador Dali's images that can be used on the products). We are extremely sensitive to this all important issue, and have established guidelines for quality control and distribution, to ensure the status of the property \ brand. The company has established a long –term plan for the brand throughout the world. Our philosophy is that in order for Licensees to be successful, they must keep this same longevity in mind. A key element for the success of a licensee is a complete and thorough understanding of what the brand is all about. We conduct various licensing activities, which continue to enhance the licensee's understanding of the property.
Not a lot of people have a basic idea about the licensing industry. This article provides an overview of the licensing industry, including the common phrases and terms that are most commonly used in the industry. Hopefully, these explanations can provide you with a clearer understanding of the internal processes and operations of the industry. With such information, you can now make more informed decisions as regards opportunities that can be maximized or tapped within the industry.
Licensing enables well known imagery from films, cartoon characters, books, comics sports events etc. to be used on a product to both increase it\'s consumer appeal and provide a distinct point of differentiation and a unique selling point from other similar products. The use of well know imagery is often enhanced through huge advertising campaigns often associated with films or sports events, enabling licensed products to ride on the back of increased awareness.
Commonly used terms
In any industry, it is quite common to have a set of terms that refer to concepts applied in specific transactions. Let us take a look at some of these.
Licensed Product – This refers to a product upon which the licensor grants the licensee to use the latter’s imagery. Generally, product areas are based on or defined by gender, age and product type (e.g., for example stockings for girls aged from 5-13 years). A license can cover a wide range of products depending on the terms. However, the wider the range of the product areas, the higher the expected sales; as such, the advance that shall be required should also be higher.
Property – this is the common name assigned to all kinds of imagery deemed to be licensable. These include imageries, such as entertainment, brands, logos of sports clubs and events, logos for other kinds of products, music, art, design, and personalities as well as TV, film, and cartoon characters.
Contract –This refers to the agreement between the licensor and licensee, which binds both parties to the terms and conditions stated therein (the contract). Depending on the parties involved (e.g., licensor), the contents of the contract may change or vary. However, there are a few key terms that are discussed and possibly negotiated before the signing of a license. These are discussed below as well.
Licensing Agency – This refers to the agency, which is appointed by the licensor to create and coordinate a licensing program for the characters or brands included in the agreement.
Licensee – This refers to the party who has voluntarily elected to pay for the right to hold the license. It shall also be using licensed imageries on a wide range of products depending on the restrictions of the contract or agreement. The licensees include the product manufacturers and retailers.
Licensor – This refers to the owner of the intellectual property rights used with or alongside the imagery. The licensors may include a sports club, a movie studio, or a TV company, to name a few. In some cases, the licensor can represent their own rights directly; in other cases, the licensor can also choose to hire a specialist agency to represent them in all transactions. The specialist agency will then ensure that all the rights of the licensor shall be preserved as the agreement is carried out.
Advance – This refers to the payment given in advance, which represents the percentage of the licensee’s forecasted royalties. Depending on the parties involved, there is usually no specific amount and the advance is in fact negotiable. This clause, which guarantees security against the royalties, ensures that the licensee shall do its best to carry out the terms of the contract. The advance is payable upon signing of the licensee. Based on common computations, the broader the terms of the licensing agreement, that is, the higher the number of product areas and the wider the distribution area, the higher the advance should be simply because the royalties generated is expected to be higher.
Guarantee – This refers to a commitment on the part of the licensor to generate a minimum royalty income throughout the duration of the agreement. A shortfall is required if the licensor fails to reach this minimum limit at the end of the. However, the guarantee is agreed upon signing of the licensee. This guarantee is also negotiable.
Distribution – This refers to the coverage of the licensee’s network of retailers or outlets to whom the licensee shall sell all related merchandise and products.
Term - This is the period of time, during which the licensing agreement takes place. The length of any licensing agreement may vary depending on the requirements of either party and can range from anywhere to six months up to two years. Upon expiration of the agreement (which also signifies the end of the term), the licensee will can face any of the two situations: a) if the licensee fails, the agreement is no longer renewed and the licensee will simply sell all remaining merchandise without creating new ones. This period, which can last for three months, is called the “sell off period.” The other situation would be b) when the licensee expresses the intention to continue the term, the license will be renegotiated or renewed. In this case, the licensee is bound to pay further advance to the licensor.
Royalty – This refers to the payment made for the usage of the licensed property. There are two common ways by which royalties are computed. First, it can be based on prevailing wholesale or retail prices. Second, it can also be a percentage based on the cost price of the product; for example, the price at which the product is sold to the retailer by the licensee.
Royalty Declaration – This refers to a statement that encompasses information pertaining to royalty payments. Most licensing agreements require such declarations or statements on quarterly, semi-annual, and/or annual bases. Usually, royalties are offset against the advanced payment and thus, it is likely that the licensee will not pay any royalties earlier than these except when the demand proves to be huge immediately upon release. In light of the advance payment, however, no royalty payment is required until the declared royalties match the advanced payment made. If the statements already indicate that the accrued royalties already exceeds the advanced payment, then the licensee shall be required to declare and pay the royalties indicated in the declaration.
Non-Exclusivity – This term refers to a clause, which guarantees that the license for a specific product shall be used on a "non-exclusive" basis. Although this is an available option, it would be better for a licensor not to sign duplicate licensing agreements because the disadvantages far outweigh the advantages. Therefore, any license that has been signed must still be exclusive in one way or another.