SEM I - CONTENT/TEACHING OUTLINE
COMPETENCY: 6.00 Identify the components of branding and licensing within the sports and entertainment industry.
OBJECTIVE: 6.02 Discuss product licensing.
A. Recognize the importance of licensing.
1. Licensing is the permission to copy the name, logo, or trademark of a league, athlete, sports team, entertainer, film, television show, or character for a fee, also called a royalty.
2. A licensor is the rights-holder of the name, logo, or trademark.
3. A licensee is the company paying for the permission to use the name, logo, or trademark. Well-known licensees include Nike, Reebok, Adidas, Sony, Nintendo, and Sega.
4. Licensed products are manufactured by licensees under an agreement with a licensor. Licensees can have a significant impact on a licensor’s perception among consumers.
5. A license is issued to another company that will manufacture, market, and sell the licensed products.
a. The licensor approves the product and collects the licensing fees and royalties. For example, Warner Brothers will give permission to Electronic Arts to use the Harry Potter character and movie scenario in a video game or a manufacturer of children’s clothing may pay royalties to Sesame Street in order to put Big Bird on their clothes.
b. Companies typically pay between 5 and 10 percent of wholesale sales in the form of royalties.
6. Licensing provides greater profit, promotion, and legal protection for the licensor.
B. Classify character and corporate licensing.
1. A sports or entertainment entity permits a licensee to use their image, name, or character for a fee. For example, LucasArts Entertainment Company licenses a manufacturer to use the images of the characters from Star Wars: Attack of the Clones.
2. A corporation permits a licensee to use the corporate image or name for a fee. For example, Coca-Cola licenses a manufacturer to use their corporate logo on a baseball cap.
C. Consider the advantages of licensing.
1. Advantages for the licensor include:
a. Enhanced company image and publicity.
b. Increased profit from royalties.
c. Increased brand awareness or recognition.
d. Increased opportunity for penetrating new markets (especially international) or enhancing existing markets.
e. Increased revenues from sales as a result of brand awareness and expansion of new markets or enhancement of existing markets.
f. Limited manufacturing costs or risks.
2. Advantages for the licensee include:
a. Existing brand awareness or recognition.
b. Lower advertising and promotional costs.
c. Increased possibility of success and profitability.
d. Connection with an athlete, sports team, entertainer, or corporation.
D. Consider the disadvantages of licensing.
1. Disadvantages for the licensor include:
a. Potential for poor quality of a licensee’s manufactured products.
b. Partial relinquishment of control over the marketing mix of the brand.
2. Disadvantages for the licensee include:
a. Athlete, entertainer, or corporation may become involved in a scandal or lose popularity.
b. Sports teams may suffer losing season(s).
c. Change in styles, trends, and consumer preferences.
d. Royalties and licensing fees can be expensive.
e. Manufacturing costs and risks.
f. Competition can drive up costs associated with licensing fees and royalties.
g. Competition can cause a negative impact on market share.
E. Discuss the impact of licensing on consumers.
1. Increased opportunity to associate with an athlete, sports team, entertainer, or corporation.
2. Increased supply of available products.
3. Competition can result in lower prices, new products, and better quality.
F. Discuss the concept of bootlegging.
1. Bootlegging is the unauthorized use of a name, logo, or trademark of a league, athlete, sports team, entertainer, film, television show, or character.
2. Bootlegging reduces the profits of licensors and legitimate licensees.
3. Bootlegging can result in poor quality products for consumers, which will decrease brand loyalty.
4. Bootlegging can result in higher manufacturing costs to the licensee, which will result in higher prices for the consumer.
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