Licensors ‘license-out’ their trademarks to obtain marketing benefits and high margin royalty revenue. Licensees ‘license-in’ trademarks to achieve high consumer awareness and appeal that results in incremental product sales.
The ‘licensing industry’ is often defined by the type of intellectual property (I.P.), and the product category that is licensed.
I.P. refers to trademarks/brands, character, entertainment, celebrity, designer, sports, art, music, nonprofit
Product categories include accessories, apparel, accessories, electronics, food/beverage, home furnishings, gift/novelties, housewares, music/video, publishing, sporting goods, stationery, toys, videogames/software.
There are two common forms of trademark licensing: conventional
and brand extension. The difference is important because the
approach and requirements for each type can vary dramatically.
Conventional Licensing: can include characters, designs or trademarks that are used to convey an affiliation and/or for aesthetics purposes. Typically, licensed products fall into lower price, less important product categories. Most characters, movies and sports teams utilize conventional licensing.
Brand Extension Licensing: the trademark is a brand with a clear, positive imagery that provides a strong ‘fit’ with the new product. This brand fit creates a transparent relationship between the licensor and manufacturer. Many corporations selling food, beverages or durable goods utilize this type of licensing.