September 17, 2014, 11:24pm
The Ins and Outs of Licensing
I'm not sure where this thread will go. I personally feel quite ignorant on what is involved. Maybe there are people out there willing to share some information.
Here are some questions I have:
Why are there not more licensed MOTU products? Is it lack of demand, lack of a TV show/movie, lack of interest from companies, Mattel keeping things close to the chest?
Why does Mattel not let He-Man.org create T-Shirts?
Hypothetically why would Mattel be hesitant to license? Isn't it almost pure profit from their end with very little risk?
Is the Filmation license through Mattel or Classic Media? Or do you have to go through both?
What can Classic Media do if anything with its rights without the involvement of Mattel?
Does Mattel actively market the brand to third party companies?
It seems there are many brands that are able to keep products out there in stores whether it be via Pez, greeting cards, stickers, halloween costumes, t-shirts, straight to dvd movies, party supplies, children's books, etc. I do not understand why this can't happen with MOTU. Why does there have to be a major 200X like brand relaunch for any of this to take place? Wouldn't it help a potential movie/ tv show if kids actually recognize the brand going in?
September 18, 2014, 12:20am
Speaking for myself, and in more general terms that apply to a lot of licenses:
There's many factors at play when it comes to what a company will license, a few of which are a projection of how much the license will make,
who the company is requesting the license,
and how active the brand is.
When it comes to the projection, a licensee (the person or company who pursues and holds the license to make product based on a company's brand) must estimate their sales across the term of the license. A seasoned company will know how to create that projection, but it's not an exact science because some brands perform better with different licenses.
No matter what that projection may be, the licensor (the person or company that owns the property) may only be willing to license to them if they are a reputable company. There are so many instances where licensees have failed to pay royalties. No licensor wants to chase down what they are owed. So the licensor has to be careful who they license to.
Then for everyone involved, the licensee may or may not perform well based on the current success and popularity of the brand. And even then, as mentioned above, some products just don't sell well for certain brands, even though they may have performed well for other brands. Sometimes it's a complete mystery as to why some things take off and others do not.
There's also exclusivity at play. One company may want to do posters. But the licensor may already have an exclusive agreement with another company to do posters, or a deal that includes multiple printed items including posters. So some licenses aren't available just because of existing deals.
There's also a time VS expense factor as well for everyone involved.
As an example, let's say there's a pencil company that wants to make He-Man pencil sets. Let's say the retail price on a set is 3.00, and the wholesale price on that (the price the pencil company sells the sets to retailers for) is 1.50. Royalties are usually around the 10% mark on wholesale (this is no secret. you can Google search this kind of info). That means Mattel would make 15 cents per set sold.
This pencil company projects that they can sell 1000 sets per Quarter 1, 3 and 4, and 5,000 sets for Quarter 2 (back to school). So per year, they feel they can sell 8,000 sets.
Mattel's royalty is 8,000 * .15 = 1200.00 a year
The problem there is, 1200.00 a year for Mattel is next to nothing. Just the time involved in the Legal paperwork and review, and the time any employee takes each quarter to review the product almost eliminates the profit, or possibly eat up time MORE valuable than the royalties the license generates.
So, in this case, Mattel may not issue such a license. It may be a cool product and people may really want it, but it's not a practical business decision.
Let's do an example of a projected success turned failure.
Let's say a major t-shirt company wants to do 3 different He-Man shirts. They think they can sell 5000 of each design, per quarter. So that's a total of 60,000 shirts for the year.
The shirts retail for 9.99, with a wholesale of 3.99. At 10% royalty, that means Mattel would make .40 cents a shirt
So per year, Mattel is projected to make 60,000 * .40 = 24,000.00
That's a lot more appealing for royalties.
BUT, let's say to everyone's surprise, the shirts don't sell. Instead of selling 5000 of each design, they only sell 1000 of each design. That immediately drops their royalties to 4,800.00 for the year.
Not only would that disappoint Mattel, but it would really disappoint the licensee who may be sitting on unsold product they had to pay to produce. This would cause Mattel to be concerned about future t-shirts licenses, AND it would cause this major t-shirt company to possibly never want to license He-Man shirts again.
There's all sorts of scenarios you can come up with that outline the difficulties faced by licensing, and to explain why you don't see more of it for any given brand.
There's things like royalty advances and contractual guarantees the licensor can demand from the licensee to help protect the licensor from having their time wasted.
but if the license performs poorly despite paying an advance and/or guarantee, it's doubtful that licensee will return in the future for a license on that brand. And other licensees have some idea of how products perform in their same industry. So it may cause other companies to be weary of a particular license.
And if the company is a young upstart and/or an unstable company, despite a guarantee, they may close up shop and the licensor would get screwed in the end.
Also, a licensee can't just do what they want, as they need to follow standards and guidelines in place from the licensor to insure the product has a look and feel that is in line with the image of their brand. This is why a lot of companies have styleguides that have a set of approved images and design standards licensees must follow. That's also why you see a lot of the same images show up on different products. It also cuts down on design time for the licensee and approval time for the licensor. And no matter how good of a product a licensee may create, there's no guarantee it may sell.
Licensing is a tough business. I could go on and on about it, but hopefully that sheds some light on the topic from a guy who's both licensed products and also helped create licensor styleguides for many years.
September 18, 2014, 01:11am
Thanks for the insight Val. I appreciate you taking the time to write that up.
Using your pencil example, it seems like the brand owner would find some value in having the brand out in the marketplace. Advertising and marketing is very expensive. If you could in essence accomplish this in some form while breaking even or making a little something, that seems like a win. After all pens and pencils are often used for that very reason. I realize this was a random hypothetical example, but I think my statement remains true for similar low risk, small reward scenarios where your forgotten/dormant brand becomes visible in the marketplace.
Last edited by foots_mcgee; September 18, 2014 at 01:42am.
September 18, 2014, 01:18am
So it's really low profit with high risk?
September 18, 2014, 01:34am
Good questions. Slight off topic here, but I would love for Mattel to allow DC to do some cartoon films of the new MOTU DC comic series (akin to their Batman, Superman, JLU output)...or even motion comics like the Marvel Knights releases...
Also, considering many of the original cast members are still around, why not make a new filmation inspired MOTU / She-Ra direct to DVD animated movie (be it a possible pilot for a Son of He-Man series) whilst we wait for the live-action reboot? The 2000's TMNT cartoon did a crossover movie with the original cartoon characters...what about a worlds collide Filmation / 200x crossover animated movie?
September 18, 2014, 02:35am
And if the t-shirts are poor quality, and have loose stitching, bad dye applications, reversed shoulders, and cost alot to ship, consumers may not be as interested as projected.
Originally Posted by JVS3
The licensee might even put their face all over the shirts, and mistreat the line of shirts like its their own. Then the company will be forced to liquidate their inventory.
The company may not sell them at a reduced price on their website, because they want to protect their 'brand image' so they may sneak them out the back door to a discount retailer like Big Lots.
So there is no way to predict the success of product.
Last edited by CapricornDefender; September 18, 2014 at 02:40am.
Bugul Noz: The Glorious Hunter
"So why Oo-Lar? The answer is simple. We really couldn't afford to put boots on He-Man, or sculpt exciting new bracers or armor components. We're just too broke. In a first for any figure- bare feet."
September 18, 2014, 07:31am
A lot of the time it can be. You'll notice a lot of licensed product you see in retail stores is based on properties that have active cartoons, or movies, etc.
Originally Posted by Ridureyu
Most of the consumer interest comes from a wider audience drawn to current entertainment. Relying on nostalgia is generally a poor purchase trigger unless it's a high-dollar item (resulting in a much larger royalty) produced in lower quantity aimed at a specialty market.
For example, if there's someone selling silver, engraved, hand painted something-or-others that retails for 1000.00 a piece and they have a loyal collector base dedicated to that brand and/or that type or product, that might work okay. If the wholesale on that is around 400.00, the royalty would be 40.00 an item. If they could produce and sell 200 of them, that's 8000.00 royalties on that one item alone. Still not a huge amount of money for a big company, but much better than what the pencil examples would produce, and may be a license a company like Mattel might explore.
Putting aside the sarcastic and overstated nature of your analogy and bringing it back to the topic at hand, no, a licensee can't just liquidate items at will.
Originally Posted by CapricornDefender
Many retailers will chose to liquidate poor-selling product they have ordered and placed onto their shelves. They sometimes try to use it as a lure for customers in ad solicitations, or other times they just blow it out to clear shelf space. The poor performance of ordered product will cause a major retailer to be weary of ordering any more of that current product/brand.
A lot of the product you see in liquidation outlets is additional stock the bigger retail outlets cancelled their order on because they were unable to sell through their initial stock and/or overstock produced by the manufacturer.
But a licensee would need permission to do that as they agreed upon a wholesale price and royalty projection with the licensor. If they want to sell their licensed items at a liquidated price lower than the original wholesale and it's early or midway through the license, it affects the royalty and life-of-license projections. Now, if a brand as a whole is performing poorly, or it's just one particular poor-performing item in a license where other similar items are doing okay or well, a licensor may have more leniency towards a licensee liquidating stock that early in the game. Otherwise, it can be hard to get approval on that and doing so may reflect poorly upon the licensee and future business they may want to conduct with the licensor.
Revenue generated and brand perception are important with a licensed product. As a license ages, it's understood there may be some instances that product may require being moved in bulk. But a licensor (and licensee for that matter) don't want to lose out on projected revenue. And we're also talking about the licensed product as a whole, where the licensor definitely doesn't want to see all product from one license for their brand out in liquidation as it can contribute to the brand looking like a poor performer in a major retail setting.
It's not accurately comparable to MOTUC which is the manufacturer's own product, where only select products were liquidated, and only limited stock at that. That goes back to what I was saying earlier where it's more acceptable if there's one or a limited number of items that sell worse in comparison to other related items. This happens all the time at retail. In toys, peg-warmer is term that ties to this situation. Some products may sit while others in a license or a manufacturer's line have performed quite well.
A lot of it goes back to what I mentioned above in reply to Ridureyu. In theory, that may seem like a good idea for advertising/marketing. But if a product sits, or sells poorly in low quantity, or causes a lot of paperwork and time consumption, it's bad. As a fan, we may walk into a store, see a MOTU item, and think "Awesome! It's a MOTU (insert item type)!" But if it sits and doesn't move? That's bad. That would be very poor advertising for the brand, as it's not actually reaching a consumer and it reduces a retailer's faith in that brand/item.
Originally Posted by foots_mcgee