The Licensing Game

[Vigilante]

A friend approached me a few months back with a good idea that would require a license agreement. She didn't know where to start. She had an idea for a new product to bring to retail in conjunction with a celebrity slogan. She hit a wall.

I laughed. Why do people make this so hard? Why do we throw up mental barriers, and fabricate obstacles that don't exist? I picked up the phone and called the agency that represented the celebrity. Within a day, I had her on the phone with the president of that agency. Within three/four days, the concept was approved by the celebrity, and was moving forward towards contracting. All I did for her was make the phone call she didn't think she could make on her own. I gave her a boost over the wall. She did the rest.

She came to my office yesterday, exuberant. She had the signed license agreement in hand, and was moving forward with first production of her product in Asia.

There's no magic to this, folks. I was 100% guaranteed a return call from this guy's agent. Why? I called and offered him money. I offered to manufacture money for this celebrity. 100% of the people on the receiving end of that call are receptive to that. If I called you today, and offered you money for doing nothing, would you call me back? Her next target is Donald Trump... and she now has not only a template to follow, but instant credibility as she has her first deal under her belt that she can show to the Donald as an example. Everyone is accessible when demonstrate an ability to manufacture money for them.

I've done license deals with NASCAR, Dale Earnhardt Jr., the brand Akai, the brand Nakamichi, and a few others.

Main takeaway from this experience? Make the phone call. Action fakers sit with ideas and action paralysis. Action takers... pick up the phone and make shit happen. The person on the other end of the phone --- NASCAR, Donald Trump or whoever --- are ALWAYS interested in how you can make them money.

I would be happy to field any questions about licensing that I can. I am not the world's greatest licensor, but there's a myth that this is harder than it is. Using someone else's household brand name is a short circuit towards the Fastlane where you can capitalize on someone else's equity, someone else's years of business development, and someone else's existing revenue stream.

Need - businesses that solve needs win. As long as your product fits this criteria, a license deal meets the commandment of need.

Entry - license deals may be the ultimate in difficulty of entry, from the standpoint that once you have the license agreement, nobody else can do what you do. You will have no direct competition, and you will capture a controlled market. You still have outside competitors, but nobody else can bring your product --- with your license --- to market.

Control - depends on your license agreement. Is it perpetual if you meet performance requirements? The brand is not yours, but you have an element of control. This may be the weakest fastlane commandment to follow in the licensing arena. The commandment of control can easily be violated with the wrong partner, wrong brand or wrong terms. Definitely something to look out for in the early phases. Awareness of this vulnerability can help you look at this weakness and shore it up.

Scale - The whole point of a license agreement is to ride in on the coat tails of something that has massive scale. When we did NASCAR, we gained access to NASCAR's estimated 75,000,000 fans. Our product wasn't limited to JUST NASCAR fans, but we had a built in base of people that would buy our product. We also inherited existing distributors, and retailers that would buy NASCAR branded product that would not have bought the identical merchandise without the NASCAR logo on it. We short circuited the entire sales process.

Time - Licensing eliminates almost 100% of the traditional time required to develop a brand and bring a product to market. You still need to build a platform that can run without you... the commandment of time is mindful of using automation and systems designed so that you can extract yourself from the requirements of day to day management. So, the license agreement itself will NOT solve the fastlane commandment of time consumption. You still need to integrate time extraction into your business model. Using existing brand distributors is one way to do that.

 

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[Vigilante]

Felix. Start at the top.

If I wanted to get a hold of an executive at Staples, I might call or send a proposal to the president of Staples. NOT because I think he will be the guy (or gal) to help me, but he will always, 100% of the time, get me to the highest ranking executive at the company with direct oversight for my inquiry. If you start at the bottom, there are mechanisms in place to stop you, screen you, and refuse you. When you start at the top, not only are those same mechanisms not in place, but the doors open. "My name is Vigilante, and Mr. Big's office asked that I speak with you directly about an idea that we have to ..."

Publicly held companies are EASY, because simply looking at their stock listing will give you the names of their senior level executives, and corporate contact information. Private companies are somewhat harder to research. LinkedIn is another great avenue to research prospective contacts.

There are a couple of other good threads here on the topic of how to penetrate sales contacts. Search around a bit here in the forum and you will find some great pointers from a lot of posters here about how to get to the right person.

 

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[Vigilante]

She called me this morning.

She got the first check. The first of many.

This first check was equal to 50% of her annual salary. This was just the down payment on her idea from the buyout buyers.

The next check, if everything falls into place, will be 3x her annual salary.

And from there, she gets royalties.



One simple idea.

So here's the (estimated) scorecard.

1 - Phone call that changed her life. One simple call.

50 - The quantity of people who told her that her idea was stupid

6 - Family members who verbalized she would never be successful

40 - People who judged her lack of education/intelligence and dismissed her chances

3 - people who passed on helping her that she called for help

2 - people who believed in her (including herself)

1 - banker that deposited her first check on Friday

100 - people that now want to talk with her. She doesn't realize that 99 of the 100 are action fakers with an idea.

If I could boil it down to one thing she did right? Tenacity. She took action. She stuck with it when everyone told her she was stupid. (Mind you, not ONE of the nay-sayers has EVER done anything even remotely similar to this). She fought through it. She believed in it.

She. Took. Action.

 

[Vigilante]

Dave, can you maybe explain what types of products would be good to license out? I don't think many of us have a clear understanding of what licensing actually means. I think a small example would open the eyes of people who never thought that the product that they are selling could be actually licensed.

In every category, and every store, a significant percentage of the "branded" items that you see are the result of overnight branding using licensing.

If you see a Harley Davidson product, other than a motorcycle itself, it is a licensed product. Someone paid their parent company a percentage to put the Harley logo on a tee shirt. A coffee mug. A cigarette lighter. A deck of cards. A baseball cap. ANYTHING you see with the Harley Davidson logo on it that is not a motorcycle... is a license paid to the parent company for use of the logo.

Susan G. Komen. You see it everywhere, with their iconic white ribbon promoting Breast Cancer Awareness on everything from jewelry to apparel, batteries, clothing, anything. Everywhere you see the Susan G. Komen logo or the pink packaging with a white ribbon or pink ribbon logo, that's a license deal.

Barbie. Nickelodeon. 100% of ALL Nascar products ever made. NFL. NBA. MLB products. Collegiate products for all Universities. Kids toys from Marvel, Mattel, and others.

As someone mentioned, we did a deal with Larry the Cable Guy. He puts his name on EVERYTHING, from TV Dinners to soap-on-a-rope. Imagine using Larry the Cable Guy soap on a rope. Get-Er-Done.

Brand licensing can be complicated, like when we licensed the Samsung brand for categories Samsung doesn't participate in (very expensive).

Brand licensing can be very simple, like licensing The Millionaire Fastlane for a board game. (not available... it's just an example).

See a Ford keychain? License. See an ESPN set of poker chips? License. Weight watchers food? Some licensed. Ferrari parking only sign? Licensed. Bugs Bunny slippers? Licensed. Sesame Street kids soap? Licensed.

The bigger the brands (like Pokemon today) the more you pay. The more you target niche brands, personas, celebrities, or smaller prominent brands, the easier the licensing discussions. Remember you're creating FREE MONEY for them if you license Snoop Dog's image and put it on a beach towel.

See your favorite NFL team on a cooler? License. WWE action figures? License.
The Price Is Right, Family Feud and Let's Make A Deal card games? All licensed.

Pierre Cardin cologne? License.

PGA Tour golf gloves? License.

Cinnabon oven pans? License.

All the Frozen kid's toy shit that is EVERYWHERE? All license.

We put the Akai logo on televisions. Samsung logo on CCTV/Security Systems. Susan Komen logo on everything. Daewoo logo on microwaves. Dale Earnhardt Jr. and NASCAR on a GPS. Emerson logo on all kinds of things.

See infomercials for flashlights with logos like Briggs and Stratton? License.

John Deere can cooler? License.

Motor Trend tool set? License.

Toby Keith restaurants? A form of a license.

Trump University? License.

Smiley squeeze ball? License.

Nintendo alarm clock? License.

Lamborghini sun glasses? License.

Polaroid brand televisions? License.

Jim Beam lamp? License.

My kid got a Talking Tom action figure from McDonalds the other day. License.

KISS (the band) bar-b-que apron. License.

Pepsi playing cards. License.

Budweiser bottle opener. License.

Girl Scout candy bars. License.

The list is endless. Probably a third of the consumer products you have in you homes in the United States are license. Ever have a Motorola phone? A Tommy Bahama furniture set? A kermit the frog tooth brush? Barbie band-aids? A Ford coffee mug? An Emerson microwave?

It's all around us, but as consumers, you don't care. You buy based on brand recognition, when in fact what is behind the products in a lot of cases is a company that used licensing... to create an OVERNIGHT BRAND.

 

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[Vigilante]

A few follow up points from Wade's post.

A typical license deal, simplified, will have the following components :
1. the royalty percentage - ranges from 2% to 15% of the wholesale (invoice) price, paid quarterly
2. a minimum annual guarantee
3. a performance based renewal clause
4. An upfront, prepaid amount that counts towards the minimum annual guarantee

In her case, they were willing to literally go with NO minimum annual guarantee. This was the first time I had ever seen this done with no baseline annual royalty guarantee. I may never see that again in my lifetime! I think that because she was honest that this was a startup, and because she fell backwards into a business dealing with some great people, she got a sweetheart deal. She did put what I would consider to be a nominal amount up front...

From a product development standpoint, the product she is going with is an existing concept, so it was not difficult to find a manufacturer overseas. She spent exactly $0 in product development. They (the licensor) didn't even require a sample (we sent them extremely rough handmade drawings) but because she is using a known commodity, it was easy for them to immediately understand what the proposal, and the product were.

When we did Akai, we used existing televisions that Samsung had already developed. We essentially stuck an Akai badge on a Samsung manufactured television. Again, $0 in product development, and short circuited the fastlane commandment of (development) time.

With her celebrity deal, all she needed was artwork on his "slogan" and a few other existing pieces of intellectual property. His time commitment required was -0-, so it literally is straight gravy for the celebrity in this example. Straight shot to return on zero investment.

The licensee's job is to get the minimum annual commitment below the threshold that makes it a no brainer. Also, as long as it includes no PERSONAL guarantee, and the business is conducted between the licensor and a corporate entity, the minimum annual guarantee is negotiated to never be a deal killer.

 

[AllenCrawley]

BIG BUMP!

Thanks to this thread, @Vigilante's Summit presentation, and some personal guidance, I was able to negotiate a licensing deal with a very well known personality/lifestyle brand.

Entry - license deals may be the ultimate in difficulty of entry, from the standpoint that once you have the license agreement, nobody else can do what you do. You will have no direct competition, and you will capture a controlled market. You still have outside competitors, but nobody else can bring your product --- with your license --- to market.

^Think about that for moment.

This is one of the greatest benefits to licensing. No one can do what I'm going to do. No one.

Licensing is a short cut to branding. As Vig states, "Overnight Brand". The hard work of branding has already been done. You just ride in on their coattails. With the brand license I secured, hundreds of millions of people are already familiar with it. I just have to plug into it.

Spoiler

Vig says I worked a sweetheart of a deal:

• A modest signing fee
• 6 month development window
• 3 year term that is renewable
• royalty % lower than industry standard
• no minimum payments due in the first contract year
• minimum guarantees thereafter very modest
• 1% advertising fee with specified deliverables
• Licensed Territory: USA and Canada (negotiated Canada with no additional fees)
• First rights to additional territories.

EDIT: Thread marked GOLD.

 

[Vigilante]

and this is just for that push button thingy w/his voice on it?

Ah. The concept of this response, if you grab it, is the most important point of this thread.

She's not selling a push button thingy with a voice recording.

Bose speakers sell an entertainment experience.
NASCAR sells a 4 hour diversion from a blue collar life of bills, work, and stress.
The lottery sells not a piece of paper, but a dream of a better life.
A home alarm isn't a piece of electronics. It's piece of mind, in a box on your wall. They sell security.
Coca Cola sells sex in a bottle (look at their ads.) Drink Coke and you can be one of the beautiful people.
Even Lamborghini. You think they sell cars? I propose they sell a lifestyle.

Back to her product.

She owns an idea. One simple idea.

Her idea adds levity to executive board rooms. It breaks up monotonous meetings. Her idea brings a celebrity some people love into their homes with his catch phrase. She gives a boss an easy way to throw you out of his office and end discussion with levity.

Anyone can source a button from Asia and add a recording to it. But there is only ONE button in the world licensed to do what hers does.

One.
Simple.
Idea.

She doesn't own the technology. The idea is technology agnostic.
She doesn't own the catch phrase, but now she and she alone can use it.

She owns an idea, and you can't replicate her idea. There's only one place to get it. And that's what she sold.

And that... is the essence... of the license game.

 

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[Vigilante]

A friend of mine licensed the Curtis Mathis brand. He then assigned his exclusive license to Kmart Corporation. Kmart then under the license agreement made Curtis Mathis televisions. The guy did nothing but sit back and watch it happen. He made several million dollars over three years. The girl who was the subject of my original post is trying to sell her idea and her exclusive license now to a retailer.

 

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[Vigilante]

So we are a few weeks short of the one year anniversary of the license deal that was the subject of the OP.

Here's your update.

She just contacted me.

She has a buyout offer for her license arrangement.

The offer has an initial amount up front that will wipe out most of the consumer debt that she has, and a backend payment that will be several times her annual salary.

It's not enough to live happily ever after, but for a year's worth of (extremely) part time effort, she's able now to cash it out and get it into the hands of someone that probably will turn it into millions.

This was a fun update to write, and I am proud of her accomplishment.

 

[Vigilante]

My daughter, fresh out of college, just completed her first license deal and it has the potential to be a blockbuster.

Granted, she had a great coach in her corner.

There's nothing that she did that is not contained within the four corners of this thread.

She's 22, straight out of school, and signed a national license deal. Her products will be shipping in September.

I didn't post this to brag about her --- she's not on the forum.

I posted this for you. If she can do it, using the information contained within this thread, you can do it.

 

[Vigilante]

BIG BUMP!

Thanks to this thread, @Vigilante's Summit presentation, and some personal guidance, I was able to negotiate a licensing deal with a very well known personality/lifestyle brand.



^Think about that for moment.

This is one of the greatest benefits to licensing. No one can do what I'm going to do. No one.

Licensing is a short cut to branding. As Vig states, "Overnight Brand". The hard work of branding has already been done. You just ride in on their coattails. With the brand license I secured, hundreds of millions of people are already familiar with it. I just have to plug into it.

Spoiler

Vig says I worked a sweetheart of a deal:

• A modest signing fee
• 6 month development window
• 3 year term that is renewable
• royalty % lower than industry standard
• no minimum payments due in the first contract year
• minimum guarantees thereafter very modest
• 1% advertising fee with specified deliverables
• Licensed Territory: USA and Canada (negotiated Canada with no additional fees)
• First rights to additional territories.

I have a final negotiation and brand license deal of my own that hopefully will finalize on Thursday of this week. If it gets done (which I think it will) it will be the biggest (and probably last) deal I do before I call it good and switch from building businesses to chasing passions.

I was glad to come along side you and contribute to what will be an epic and possibly life changing deal for you. I am happy for you and proud of you.

Allen didn't do anything that any of you that attended the Summit couldn't do, a lot of which is highlighted in this thread.

 

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[Vigilante]

Mission accomplished. I can't go into to details as it is a publicly held company, but I just secured a multi year license deal with a household brand-name that gives me an overnight brand with immediate consumer perception. The easy part is over which is securing the brand. Now the hard work begins. Those in my inner circle will see the news releases within a few weeks.

 

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[Vigilante]

Made a second call for her today... this time to the license agent for NASCAR. He in turn turned us on to a LARGE deal for her with the Mandalay Bay resorts. Never would have happened if we didn't just MAKE THE CALL.

This was easy. Almost too easy.

This is a pretty simple statement: When you offer to make money for people, most of the time you will find them receptive to taking your phone call.

I propose to the group that if you have a solid idea, and a basic understanding of licensing, you can become a player in a SHORT amount of time simply by ... taking action.

Make the call.

 

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[Vigilante]

Example
AMZN Profile | Amazon.com, Inc. Stock - Yahoo! Finance

Here we can see that Jeff Wilke is the SVP of Consumer Business at Amazon. You can reach him through the switchboard of Amazon at 206-266-1000 simply by asking for him by name.

Here's his bio that I might read before I called him :
Amazon.com Investor Relations: Biography

From other sources I have at Amazon, there's a 90% chance that his email address is jwilke@amazon.com

If for any reason I struck out reaching him, I would look at the bottom of any one of Amazon's press releases, for a media contact. I might send an email to the media contact and ask that they forward it to Mr. Wilke.

I could get ahold of Mr. Wilke. So could you.

 

[Vigilante]

A. We always answer the questions as YES, and then we figure out how to make things happen because NO is not in our vocabulary

B. As long as the artist is currently trending, the retailers have "open to listen"

C. You get the license deal done first, and then you work the retailers. No need to talk to the retailers until you have something to sell them.

D. You might want to use reps to sell the retailers

E. You might want to use distributors to sell retailers

F. Retailers will want to make 60%+ margin on this. Make sure there is enough room

G. The dirty secret about retail is that if THEY are in retail (i.e. the artist's cd's are on their shelves) it is much easier to get in. If his CD's are NOT on their shelves, then doubt it will happen. Those things usually go hand in hand, and you can literally ride in on their coat tails.

H. Just like law is based on law, license agreements are usually based on other license agreements. When we did NASCAR, they knew what they wanted because they knew what they had before. And, the answer to your question is it is like a well played poker hand. Some times you are bluffing, some times you hold cards. Theres no set formula answer to your question (unfortunately.)

Your job is to pay as little as possible. Their job is to get you to pay as much as possible. You swap no upfront money for higher license %. You swap no annual commitment (or small annual commitment) for higher %. It's all relative, and... by the way... it all can be renegotiated when Wal-Mart says YES. Wal-Mart may say "we'll take a million units, but at $4.00). Then, it all pushes back to working backwards against the big retailers cost requirements. If it costs you $3.00 to manufacture, and Wal-Mart wants to buy at $4, there's not much room. Thus, the negotiations begin again.

So, YES you can sell the big retailers, assuming the royalty % keeps the retail price reasonable.

And, it's not likely a test. The only answer a rapper understands about your deal is he wants MORE. MORE is his license %.

And, if you sell units on eBay, they know you can sell 1,000. If you sell to Wal-Mart, you might sell 2,000,000. That's why they are asking NOW how big you can scale this.

And, the only thing bigger than who we are is WHO WE SAY WE ARE because... you can become. You can do this. If the product and price are right, you can sell Best Buy.

I have a distributor I will connect you with when you are ready. They will front the cash, and sell Wal-Mart for you. They probably do $400m with Wal-Mart alone. And they will take an egregious % from you. But it's a super shortcut to the hundreds of thousands of units.

Length of contract will rarely be beyond a year from launch date, with the possibility of renewal. And, if the celeb is on the downward slide do NOT do the deal, as you can't be what helps save them.

For example, today I would do Pharrel, Gwen Stefani, Miranda Lambert, Blake Shelton, Maroon 5. I would look for A list celebs, or artists rapidly moving from the B list to the A list.

I would not do Celo Green, Snoop Dog, or anyone moving from the A list to the B list. Even with high name recognition, retailers won't buy inventory on declining brand names.

We caught Susan Komen a little too late on a deal I did recently. We shouldn't have done the deal, although on the upside we did raise a TON of money for breast cancer research, so from that standpoint it was awesome. However, we should have done it while the brand was peaking, not after it was past the crest and on the downward slide.

 

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[Vigilante]

I have a huge licensing meeting Tuesday. When I get this one done it should be a game changer for a sub-industry/specialized product.

Why?

While your competitors are reacting to what you did yesterday, you should always be working on tomorrow. Everyone wants to take what you have. I wrote an article a few days back in which I quoted that generally everything is usually either growing or dying.

Best Buy has reinvented itself multiple times, fighting back from irrelevancy and capitalizing on emerging trends. You’re about to see Best Buy do it again as the digital products era yeilds to entertainment on demand and Best Buy morphs into a solutions provider for what you and I don’t even know we need yet. Watch Best Buy do it again, while Toys “r” Us locations become retail ghost towns, ironically many in the shadows of defunct Circuit City locations.

Whats the difference? Best Buy reinvented itself. Best Buy didn't rest where it was at.

The reason for my meeting Tuesday is that until I am dead, we're never done. There's always another mountain to climb. There's always a better way.

I am the hunter, not the hunted. I won't be able to post the specifics of the license deal I finish this week until it is made public, but I will pop back in here to tell you that I got the deal done. And... I will... get the deal done.

 

[Vigilante]

She'll do OK. Her biggest problem is that she is in love with her merchandise. Never fall in love with your merchandise... it blinds you AND it has you put stars in your eyes in terms of your true $$ potential. What she has is good... but she thinks it's the next iPhone (and it's not.)

I don't care what I am selling half as much as I care about my formula for selling it. The product can change over time.

 

[Vigilante]

Thank you Vigilante for this great post. It provides some great insights!

From your experience, instead of "making the call," would a letter to the right person do? I'm worried I'll probably sound like a nervous wreck on the phone.

Thanks again!

I would make the personal call over sending a letter 100 out of 100 times.

Why?

1. Chances are you won't get the exact right person on the first call.
2. Similarly, chances are your letter won't fall into the right hands. The person who opens the mail is NOT who you want.
3. If you get stopped at the gate keeper (on the phone OR via. the mail) you just wasted your time.
4. On the phone, you can react, respond, and rephrase. With a letter, it's not a discussion.
5. You know how easy emails are to be misunderstood? So are letters.

There's zero reason to be nervous. These are people, just like you are. If you have something of value to offer to them, they want you to call them. If I called you and offered you money, would you want to take my call? Of course.

Nervousness is natural. However, athletes turn nervousness into performance. Actors turn nervousness into performance. Salespeople need to learn how to harness nervousness, and turn it into performance.

Make the call. You will find out it's not that hard. What's the worst that can happen? They're not interested. (unlikely, but possible). If that happened, and the call was over, would the nervousness that you allowed to become fear instead of performance been worth it? Nope.

Letters are for chickens, and chickens don't do well in license deals. Make the call. If your idea is good enough, they will want what you are selling.

 

[Vigilante]

Vig, do the following feelings make sense?

A major concern that perhaps the performance level is not met and then I lose the entire deal after having sunk a ton of time and money. They then go on to sell the exact same product keeping 100% of the profit.

For me I would be very concerned that I promise to do 100K in sales and end up doing 90K and then lose the contract.

As opposed to building my own brand and getting 90K but deciding to keep going to try and grow the company more.

Seriously looking for your input on this.

Thanks

That's why you want your commitment to be achievable. Can it happen? Yes. Is it likely, if you are kicking a$$? No. For the most part, you are bringing them into an arena they are not in, and do not have expertise in. It's unlikely they want to go it alone, Patrick. Meet that thought with the same skepticism that people on this forum have when they arrive with "I have the greatest idea ever... I just can't share it right now."

If you can't be successful with your license idea, most would assume that someone NOT as familiar with what you do could be. For example, we had 0% concern that Dale Earnhardt Jr. would have done a GPS without us. Why? We knew more about GPS than he did. He doesn't want to manufacture GPS. He wants to drive race cars. Assume eventually everyone will get greedy, but that may be several years into a deal. Realistically, most license deals have a life of 4-5 years. Markets change, trends change, popularity changes. Even if you are tremendously successful, you are going to harvest during the harvest. It is very rare for a license deal to be a decade long... but don't kid yourself. We don't want to work that long anyway!

Don't assign your entrepreneurial ideas, your drive, your sourcing knowledge, and your distribution strategy to people outside of your universe. Part of the reason they should do a deal with you is that you bring as much if not more to the table than they do.

It's valid and worthwhile to consider the worst case scenarios when considering a license deal. It helps you structure a contract. However, as you would know... analysis paralysis is not a reason not to move forward. The bottom line is if the deal works it likely works for everyone, and if the deal doesn't work it likely works for nobody.

 

[Vigilante]

Go top down, not bottom up. Find out who the CEO is and call his office. You found a gatekeeper with that call. You have to bypass the gatekeeper. No matter what the topic, never start at the bottom again. Start at the very top, and they will always get you directly to the right person. The CEO's assistant will listen and route you. Then, you say "I spoke to Mr. Big's office, and they told me you would be the one to get this done."

That applies to any business venture… Not just licensing. Anytime you call corporation for any purpose from now on, research the company… Find a senior-level executives… And dial them directly.

 

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[Vigilante]

Here was the NASCAR/Dale Jr. GPS that we did.

Rightway Spotter GPS Navigator Dale Jr. Edition - YouTube

Dale Jr. GPS can navigate your next trip - YouTube

 

[Vigilante]

I would have asked but I was afraid jr made a lot of money and that would not make me happy lol

Ok so I am guessing you need a BIG chunk of money to make it worthwhile to have a big name brand?

To be used for marketing, promotion etc.

I have an opportunity to take a patented product into 7 Elevens as the person who owns the patent already has serious interest BUT it will cost a minimum of 400K to start marketing the product. errrrrr I made it sound like I am special, actually ANYONE who has the 400K could do it lol

The guy with the patent doesn't have the experience nor the money, nor the will to get loans for the 400K.

Bigger thinkers, risk takers would probably jump at this. I on the other hand don't like having loans for anything.

In the examples I have worked with, the opposite has been true.

The BEST one we did was Samsung CCTV. I worked with a Dallas based distributor who had the ability to put the Samsung brand onto CCTV (video surveillance). Samsung was not in the business on the consumer side, so they allowed us to source merchandise, brand it as Samsung, and sell it through Sam's Club. Because Samsung spent literally hundreds of millions of dollars on branding, our marketing required budget was exactly 0%. We put the Samsung brand on it, put it on the retail shelves, and it sold. No advertising, no consumer perception marketing. Our only marketing expense was displays. The reverse was true in the case of Samsung... they are so particular about their brand that we weren't allowed to do much of anything in that regard.

Same with Daewoo. We did a license deal with Daewoo, and the whole reason we were willing to spend money on them was because that meant we would not need to spend $$ on building a brand. If I do a license deal, I am doing it to buy a household name. I am doing it, knowing I am going to pay the license a %, but knowing that it will short circuit my need to develop brand awareness. I should have to spend LESS, not MORE. I am licensing the brand because they have already built the brand. If I have to pay to build brand awareness, I licensed the wrong brand.

I want to be able to put their brand on my product, and have my product sell because it has their brand on it. Then, I can work with the retailers to get it in their circulars.

 

[Vigilante]

She had almost zero development costs. Existing technology, she simply got the voiceover from the talent and provided it to the manufacturer who put it into an existing device, and screened the logo onto it. Nothing to it. When you think about it, it's no different than when we took a licensed logo and slapped it onto existing tooling for televisions with Akai. Same basic concept.

You could do this with rain boots, condoms, pillows, potted plants... How about a Rachel Ray blender? How about a Bill Clinton humidor (don't laugh... I bet he would do it and it would probably be the best seller of all time in this category.) How about a Cindarella mattress set? How about a Harley skateboard? How about a NASCAR cooler? How about a Scooby Doo dog dish? How about a Winnie The Pooh winter hat and mittens? How about a Snoop Dog headphones? How about a Simon Cowell karaoke machine?

She needed almost zero up front (I can't disclose her exact terms, but most people here could come up with what she needed up front) and an extremely small annual guarantee in exchange for a pretty big license %. The license % will probably need to be renegotiated when it hits large scale retail distribution (read : Wal-Mart) but at that point, everything is negotiable when it comes to getting onto Wal-Mart's shelves.

Components :
1. small up front, prepaid license retainer that went against her first year minimum guarantee
2. small minimum guarantee
3. sample and artwork approval
4. aggressive license % (in consumer electronics, I shoot for between 2% - 5% to make sure the price point stays reasonable compared to similar branded goods. she was way higher than that).

But the bottom line is this deal can lead to many others. Many different ways she could take this business if she hangs onto it and doesn't sell out. Or, she can sell out, sit back, let someone else bring this thing home... and collect a (smaller) check.

***warning : they don't usually work out this simply, this quickly***

 

[Vigilante]

Hey @Vigilante, thanks for all the great info and examples. Licensing was something I always thought was a great business model, but never something I could do myself. Really gets me thinking about all the possibilities.

I have a potential idea for a software product (app+webapp) that I think could really take off given the right licensing agreement falls through. The problem is, if I take this idea to the company, what's stopping them from just taking the idea and doing it themselves? The company is large enough that they could take the idea and just do it in-house and eliminate the need to license to me -- securing all the profits for themselves.

Basically the idea is the user would design/create the product on the app then send it to Company X for production. Company X has the technology to make these, as they make similar products already. I would need the licensing agreement to advertise the app with this companies name on it. Perhaps this is more of a partnership than licensing?

More often than not, companies aren't in business to rip you off. Does it happen? Yes. Watch the movie Flash of Genius.

So here's where we sit.

1. You have an idea
2. You have a license concept
3. You have a potential partner who could finish this for you
4. You have zero revenue

Lets go to extreme worst case scenario. You get robbed and ripped off.

I would argue you are NO WORSE OFF than you are today.

Tremendous upside, and an infinitesimally small chance you get it stolen.

That's not a reason to not take action.

I've done 10 similar deals. 0 of 10 were stolen.

@Kak did one. Not stolen. @AllenCrawley did one. Not stolen.

I propose you have a greater risk of someone else coming up with the idea while you sit in analysis paralysis (fear) than you do of your fears manifesting.

I did a license agreement a little less than a year ago. Rather than stealing the idea from me, they are driving me further than I ever would have gone without them.

Pick your partners carefully, but take action.

 

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[JEdwards]

Depending on the product and the shelf life.

I for one might hope the celeb blows up.. when celebs blow up, people google them. when people google them, your product might show up..

I might add to this, that if you get the run around play the shareholder card.. I have, on several occasions. Just say What do you mean he cannot speak to me? I am a shareholder, what is the investor relations phone number? Usually that works.


This is one of the best threads on this site.. Hats off to you.. Vig..

 

[Vigilante]

Vigilante; Can you please clarify the difference (if there is any) between endorsement deals, and what you refer to here as licensing?

Isn't it pretty much the same thing in this context - with regards to celebrities? Whenever I read licensing I think of patents, royalties, and licensing a patent out to a manufacturer.

Pardon my ignorance..

Endorsement is a celeb lends his name to a project. People buy the product because the celeb vouches for it. Compare that to a license deal.

My deal with NASCAR and Dale Jr. was a LICENSE DEAL, not an endorsement deal. In a license deal, I got to use Dale's logo, signature, images, some digital content. My merchandise was branded as Dale Jr. merchandise.

Contrast that to an endorsement deal, where Katie Perry might be a spokesperson for Diet Coke. Diet Coke is still the brand, Katie just endorses it, and her fans buy it because they think she drinks it.

 

[Vigilante]

I have a great idea for a digital product and would need licensing from any big organizations, Nascar or MLB, NBA, NFL. I know some of those are very difficult to get and cost 100k but the biggest stumbling block is that they require clients to prove sales. I dont sell anything and i dont have a factory so im looking to partner up with anyone who has any type of such license to get started.

My idea is great because it doesnt require much inventory, or much investments (based the licensing) but i dont really know how wellit will do because it wasnt done before.

I'm not good at calling companies and convincing them to work with me so if anyone wants to help pm me.

Hi and welcome to the forum.

First, I would recommend that you stop by the Introductions & Networking part of the forum and make an introduction post. You're not likely to get many serious responses based on your post above. Take off your coat, stay a while and chime in when you can. From watching interactions around here, you will see that people that show up here with a business idea and need for help are usually not taken seriously until people think they are seriously worth spending time on. So... add some value around here and over time you may find some kindered spirits.

License agreements don't require you to prove sales as much as guarantee $$. And you are right... the ones you mentioned are some of the most expensive and huge pains in the a$$. However, also... they will all be product specific. You can't ride on the coat tails of someone's existing license agreement, as that is a specific % for a specific product and with a specific commitment. You don't get to just add additional shit to it. It's much more tightly regulated than that.

Your last sentence is complete bullshit. Fear is a barrier to entry for some. If you can't pick up the phone and offer someone to work for them making them money (which is what a license agreement is) you'll never make it happen. Practice with your wife, your dog, or anyone that will listen. Then pick up the phone and make the call. If you fall flat on your face, do it again. And again, and again. However, giving yourself the easy out that you're "just not good at it" is nonsense, and tends to be a hallmark of action fakers.

If you believe in your idea... if it is good enough... PICK UP THE PHONE. Your sentence is a sentence of fear, not ability. And you have nothing to be afraid of, because the worst thing that can happen is they say NO. You're no worse off in that scenario, other than the fact that you gave yourself an MBA in license agreements in the real world. If you are prepared... if you have a good idea... and if your idea makes sense, make the call.

And... welcome to the forum.

 

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[Vigilante]

We recently had an aberration from the pattern. We made contact with a potential non-profit with a large following, offering to donate proceeds from a license deal from them in exchange for their support, logo, and participation.

The deal became so arduous that we decided to walk away. This is only the second license deal that I have ever engaged that has not resulted in a partnership deal.

It has to be win/win/win (win for the licensor, win for the licensee, and win for the consumer.) License negotiations are a blend of vision, personality, and value provided. Generally, when you call to offer someone money, they are appreciative and engaged. If you call to offer someone a new source of free money, and they respond like they would be a huge pain in the a$$ to work with... In the famous words of Kenny Rogers, you gotta know when to hold 'em, and know when to fold 'em.

Spend time working on big, legacy building things and surround yourself with people you want to invest in.

 

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[Vigilante]

Once a deal is signed, this isn't really relevant, is it? By definition, no one can steal anything since you've got a a unique contract in hand that no one can copy.

On this forum it is always relevant. We consistently have people looking for low hanging fruit... and just because you have a brand license doesn't mean you want forum members trying to replicate your business platform. Too many people here looking for Shortcuts, knockoffs, and money chasing. If I have a pencil company and license a brand for it that doesn't mean I want other people copying my pencil company. Operating as a brand doesn't mean you don't have competition. We are not going to enable people replicating other peoples business models regardless of the brand. MJ still gets people trying to replicate his limos aggregator.

Reminder... Don't post your business details on the forum unless you are comfortable with people researching it and replicating it. Part of growing a business is protecting it.

***Plus, his question was irrelevant and none of his business.

 

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[Vigilante]

And that begs the question are there typically any contingencies protecting her in case manufacturing costs turn out to be too much, celebrity ruins their image, etc.

You can negotiate stuff like this into the contract. She didn't. Manufacturing costs were known ahead of time, and her product could absorb a significant cost increase without really destroying the concept. The agreement will be reviewed 18 months from now, and if manufacturing costs increase, it presents a great opportunity to negotiate for license % decreases.

The "celebrity destruction clause" would have been worthwhile and interesting. She (and I) never thought of that, and I didn't spend much time with her on the contract. However, that would have been a good idea. Since they required no annual minimum from her though, if the celebrity self destructs she's out only her on hand inventory and a few other expenses. Great point, though. All those ideas can go into the framework of a license deal. If they required an annual guarantee, your idea of a celebrity destruction clause would have made all the sense in the world. I may mention that to her on the one she is working on with Donald Trump.

 

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