The 2007 Global Licensing Industry remained strong with a 2.6 per cent increase over 2006, with about a $ 191.7 billion retail sales turnover, an increase of $ 4.3 billion. Rajiv Sangari talks about licensing in India and the role of licensing agencies.
As I always maintain, 'kids business is no more a kid's business, it's serious'. Today's kids have the kind of time, our generation never had. They have 8 kids channel wooing them, plus a few more coming in soon, including our own 'Spacetoon Kids TV'. They do have various options of choosing the best of the character-based consumer products from swanky departmental and fashion stores, choice of books, choice of fast food chains; they no longer have to play with the monotonous, shapeless wooden or cheap plastic toys of our age and of course, their parents do have more disposable income to spend on them, compared to ours.
Global stalwart licensors have realised that the presence of the biggest kids base and the ever-growing 370 million kids (thanks to India's productivity at play) and the burgeoning media market in India, are definitely making this segment more attractive for them, than anywhere in the world. Finally, someone somewhere has started realising that all the fun in the world is here in India. This concentration is only going to increase over a period of time, and hardly any board room in the world can afford to abstain from the two magic words today, ' India and China'.
I may be taking the risk of repeating the published figures, but for the benefit of those who may be new to the licensing world, the 2007 global licensing industry remained strong with a 2.6 per cent increase over 2006, with about a $ 191.7 billion retail sales turnover, an increase of $ 4.3 billion. The two categories posting the largest percentage increase in retail sales were 'interactive' and 'entertainment', with an increase of 5.3 per cent, to $ 6.1 billion and 3.5 per cent, to $ 23.8 billion, respectively.
Nevertheless, like always, 'character' remained the largest category but only increased by 1.9 per cent to $ 43.5 billion in 2007. The second largest was 'fashion', which increased by 1.8 per cent, to $ 39.8 billion. Estimates that licensed products' retail sales turnover will hit $ 200 billion by 2010, seem to be well on track.
'Who says it's a thankless job, there's lots attached to it.' That is, licensors trust us to get them the best deal; licensees show good faith in us to support them in all possible manners - humongous vertical business models which can be explored being agents; and of course, there is, the respectable commission.
An agent is an entity which in the licensing and merchandising industry, acts as a one stop shop for all licensing/franchising solutions, in return for remuneration in a certain territory, for a specified tenure. It has the following benefits:
- Full representation: An agent owes 100 per cent of his dedication and loyalty to the brand that he represents.
- Great knowledge of the market: An agent knows 'what is out there' better than anyone else. Agents spend much of their time in understanding the market and where all the good deals are.
- Effective negotiating skills: An agent is an effective negotiator, as one main part of his job is to offer the rights holders, the best possible situation and deal. Agents completely understand all the details of a licensing/franchising contract. An agent makes sure that it all works out in the best interest of the rights holders.
- Synchronised brand representation: An agent takes a 360 degree approach towards brand marketing. He not just negotiates deals but also gets various expertises such as events, marketing, sales, etc. together and gives a brand, a total representation in all forms.
An agent is expected to:
- Negotiate and facilitate all contracts between the IPR holder and the licensee/franchisee, ensuring that it meets the criteria laid down by the rights holders. In some cases, there is also a tripartite contract made, in which the agent is also a signing entity.
- Service the licensees/franchisees to ensure that it stays in sync with the demands of the contract.
- Ensure timely and full payment, as specified in the negotiated and executed contract.
- Maintain the brand of the IPR owner in the territory.
Agents have to handle the following process:
- Identification of prospective licensee (client/brand)
- First meeting and presentation proposal and understanding of the client's requirements
- Deal closure
- Execution of applications/deal memos
- Agreement execution
- Invoicing and payment collection
- Design approvals and licensee maintenance
- Product development
- Marketing & events
- Support to licensees
- Royalty reports & royalty payments
Agents have to carry out an assessment of a licensee on the basis of:
- Manufacturing and marketing expertise in their line of product
- Distribution strength
- Design strength
- Financial strength
- Past experience
- Brand name and presence
- Promotional strength
Licensing agents have to use the opportunity of enhancing their scope of responsibilities, in consultation with the licensors and licensees and see how they can best help both the licensors and the licensees, to meet their objectives over a period of time. Worldwide big time licensing agents have taken the opportunity to enhance their portfolio, divisions and categories as well.
With the industry getting more organised and graduating in understanding that there is a clear need for agents to be more responsible, answerable and committed to their licensors and licensees, it makes good sense to create subdivisions and make each subdivision specialised in its segment.
Licensing in India 2009
With the world in recession and people holding on to their money as the last single hair on their heads, the question is imminent globally, people are aware that it's going to be tough, but how about the Indian market? Wasn't it supposed to have just taken off towards growth?
My take is that 2009 is going to be affected due to the economic woes and the belttightening among customers; all retailers have also been struggling throughout 2008. One of the most challenging factors for the licensing business is the volatility of retail this year - some of the bigwigs have gone down, including Steve & Barry's, Sharper Image and Linens N Things.
There is no doubt that in the coming year, retailers will be re-evaluating their merchandising category and inventories will be kept in check, but one thing which is to be kept in mind is that common and unpopular products will always find it more difficult to find a space on the retail shelf.
Customers will buy products that they know, trust and would like to associate with. It'll be the licensed product with character, celebrity, sports and entertainment, which will find shelf space and that's what the wise retail merchandiser will be doing. Because in times of adversity, it's the popular character which will find an easy entry, because history has proven that characters merchandise does well during adversity.
In 2009 and thereon, the key trends that will drive licensing growth at retail are:
Internal expansion, particularly in BRIC nations, where major global retailers continue to expand.
The celebrity influence on licensed products, which will help drive sales at retail.
The strength of entertainment, wherein box offices are becoming bigger every year.
Agents coming true in testing time:
It would be more prudent for licensors and licensing agents to be more flexible than before in the coming time, and accommodate to assist licensees, since their cash flow is going to be affected. It's a testing time for everyone - licensors, licensees, retailers- and the agents should empathise with it them, unfortunately being in the same position. It's very important that the agent be most proactive, and help the relationship between the licensors and the licensees be reinforced.
There is no time for complacency and 2009 is going to see the agents' commission getting eroded with the licensees' and licensors' royalty at a testing time, and with no equity in the character, the only thing that the agents can do, instead of watching helplessly from the sidelines, is to get both the licensees and licensors together into a better communication mode, help understand the position on all fronts and be proactive in all situations. Having said that, I need to sign off, it's time to be proactive!