TOTAL LICENSING
EUROPEAN INSIGHT
TIME FOR CHANGE IN THE
INDUSTRY?
Last Autumn, we talked about mas- benefit. More specifically, what we have own or control? I sometimes wonder
saging the gatekeeper – about add- experienced recently is that markets why it isn’t more popular to split this
ing expertise and understanding to that have been hit the hardest, such difference once the licensee’s risk has
make life easier for your retailer as Russia, are wanting to put deals on disappeared. One way to change things
or other partner. Who would have hold or extend payment times, and round, for example, would be to use
thought that over the following few there is a strong push downwards for the known model from the DVD mar-
months the current financial crisis lower minimum guarantees (or less ket, referred to as ‘cost of top’ where
would descend so quickly. risk), spread out payment instalments there is a 50/50 split on income from
Although some effects have been in- and, even, cancellations on deals on a brand after the deduction of agreed
stant (it killed off one of the UK’s top properties that aren’t ‘need to have’ costs, marketing spend, sales costs,
licensed products retailers, Wool- brands. We have to take all this on shipping etc. By using that model, we
worths, for example), its more pro- board but the big question is how do would all share the risk more evenly
found effects will become apparent we react? My response is to make sure but, more importantly, we would also
in the longer term – effects that may our portfolio is strong in ‘need to have share the upside more evenly.
change the way we do business and brands’ ie long-term, lower-risk prop- The next few years look certain to
our relationship with consumers. erties such as Thomas, Lego or Turtles. bring tough trading conditions and I
One thing that is always thrown un- But we also have to think about chang- think this will make us reconsider how
der the magnifying glass when the ing the deal terms. If a client wants a we do things. My view is that only a
economic going gets tough is the deal lower minimum guarantee at the out- much closer partnership, with fully
itself – its construction and especially set, he might then be encouraged to open books, between agents/licensors
the terms. We’re already seeing licens- ‘pay’ more over the longer term from and the main licensees in our markets
ing deals come under fresh scrutiny an increased royalty percentage. will work. As always in difficult times,
in the new and emerging markets of Which makes us pose a more general the ones who dare to change and find
Eastern Europe and Russia and I be- question. Why do agents and brand new ways of doing things can blossom.
lieve that the current financial crisis owners make, on average, 10% to 12% I really believe it might be time to dare
will make reviewing the nature of the royalties when the licensee makes an to change the architecture of some of
relationship between licensor/agent average 30% to 35% margin, after hav- our deals in order to remain one of
and licensees, hopefully, to everyone’s ing paid royalties on something we the key players in our industry.
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