Key Financial Building Blocks of Licensing Agreements to Maximize Revenue and Protect Intellectual Properties

Abstract

In the retail marketplace, the cachet of licensed brand merchandise has consistently buoyed consumer sales. In fact, a survey by the International Licensing Industry Merchandisers’ Association (LIMA) showed that global sales of licensed goods rose 4.4 percent from 2015 to 2016, significantly higher than the 2.9 percent growth rate for overall global retail sales. However, a more pertinent issue to brand owners and licensors is royalty revenue, which showed a year-over-year increase of just 1.3 percent. In its survey, LIMA noted that actual year-over-over royalty rates declined slightly (from 8.5 to 8.2 percent), largely because the continued growth of online shopping among consumers is forcing retailers to be more aggressive about preserving gross margins. More specifically, it’s wise to understand that when royalty revenue rises at a time when average royalty rates are falling, that trend almost always indicates strong demand for licensed brand merchandise.

Keywords: Building Blocks of Licensing, Revenue, Intellectual Properties, International Licensing Industry Merchandisers Association, LIMA