There are many reasons for an intellectual property (IP) owner to grant a license. The most obvious one is to generate revenue from the guarantee and royalty payments. But licensing also can serve a number of other purposes.
- Marketing support for the core business – For a television show, movie, children’s book or sports franchise, the retail display and proliferation of licensed products doesn’t only generate product sales, but it also promotes the core property.
- Extending a corporate brand into new categories, areas of a store, or into new stores overall – Licensing represents a way to move a brand into new businesses without making a major investment in new manufacturing processes, machinery or facilities.
- Trying out potential new businesses or geographical markets with relatively small upfront risk – By licensing its brand to a third-party manufacturer, a property owner can try new businesses, or move itself into new countries with a smaller upfront investment than by building and staffing its own operations.
- Maintaining control over an original creation – Licensing represents a way for artists and designers to profit from their creative efforts, while maintaining control over how they are used.
The most obvious benefit to a manufacturer or service provider the licenses a brand, character, design or other piece of intellectual property is the marketing power it brings to the product. It can take hundreds of thousands or millions of dollars to build a brand from scratch, and licensing represents a way for a manufacturer to take advantage of all the brand building and image building that has gone on before.
- Moving into new distribution channels – A manufacturer who licenses artwork or designs to be applied to hoe textiles, wall coverings, housewares, or on apparel has less reliance on in-house art staffs that wold otherwise need to be maintained.
- Reducing in-house costs – A manufacturer who licenses artwork or designs to be applied to hoe textiles, wall coverings, housewares, or on apparel has less reliance on in-house art staffs that wold otherwise need to be maintained.
- Enhancing authenticity and credibility – The publisher of a car-racing video-game might license a host of well-known automotive brands and car models to lend legitimacy and authenticity to the game.