Effective licensing can help your brand or your creative work reach more customers, make more revenue, and get more recognition. As a creator and business owner, Intellectual property (IP) licensing allows you to reach broader markets while staying focused on your main calling!
In this article, we explain briefly what IP licensing is and how it might work for you. Many smart and creative applications of licensing are possible. Here, we highlight three major ones:
Licensing is essentially giving permission to another person or organization to make use of your intellectual property (IP) in exchange for payment. If done right, licensing can be a powerful tool for revenue growth and for gaining wider brand recognition and influence. For example, you could license artwork to a household goods manufacturer or to a lifestyle brand to use it across a range of everyday products. In exchange for the licensed rights, you would get payment (usually a percentage of revenue from relevant product sales bearing the licensed work). In other words, you get royalties in exchange for the license you gave. But this is just one basic example.
Licensing can help you participate in broader markets, diversifying your customer reach. Finding and carving out a niche can take significant effort. If you’ve found yours, it might feel comfortable working within that space. However, parallel markets might have demand for your content. These horizontal market opportunities could enable you to broaden your business and diversify your reach. Stock photography databases, promotional business apparel and goods, design and template stores, household goods, personal accessories, and mass retail are some other examples of horizontal markets that can be accessed through licensing.
Licensing makes it possible to pursue powerful business synergies. Everyone has their strengths and talents, but it’s hard for one person to do it all. Opportunities broaden when two or more people with complementary abilities work together. Think about a greeting card company with a well-established retail distribution network. Coupled with the engaging works of a talented designer or illustrator, that company can be very successful in marketing new lines of popular cards. The licensee (the designer) can also get significant royalties, benefiting from the wide distribution network of the licensing partner. The great thing is that each party to the licensing deal usually gets to continue focusing on what they do best: selling or creating. Licensing is the legal tool that enables that type of synergistic collaboration to come to fruition.
Licensing can also help increase productivity and create additional revenue streams. You could sell your creative services by focusing on one major customer at a time. But, outside of hiring additional employees or contractors, which can be costly and complex, there’s only so much time you can dedicate to each customer or project. So, you could also license your intellectual property and try to reach thousands or even millions of potential end-customers. In this approach to licensing, each individual sale might be smaller, but the massive volume and reach can still make a difference. Take the example of a successful web designer. If they focused all their energy on one major website project at a time, they could make good money. But if in parallel they created customizable templates and then licensed those for broader use, they could also get a secondary revenue stream that works alongside them. Branded properly, the licensed templates can also increase recognition and even help bring in individual customers for future projects.
Let’s add some rough numbers to the discussion. Say each major web development project pays $5000 and takes about three weeks to complete. Give or take a few weeks off, that’s close to a good 80K a year. Now, let’s say at the same time our successful web-designer creates templates and themes that are licensed and distributed through a website theme marketplace. Let’s say the template is $80 per purchase and is licensed through a major blogging or website-hosting platform with a 40% revenue share for the template designer. That’s just $32 a sale, a far-cry from the $5000 per customer. But remember that the licensing deal works at the same time as you, and with the right distribution platform that has solid global active users, that could mean two or three sales a day. In other words, that’s potentially another $29K+ a year in additional passive revenue. The templates can also include trademarks and branding, serving as a form of passive advertisement. Best of all, the licensed templates keep working for you yearlong as long as people find it interesting, and they keep buying. This of course is back-of-napkin numbers, but it illustrates how licensing can help you get more done without doing it all yourself.
Your unique and engaging content is at the heart of all of this. Moreover, there’s no doubt that it takes effort to network, connect, and do business development to find licensing partners. But a solid licensing arrangement requires some grasp of IP concepts and a bit of strategy. Licensing is like renting a home. It is property and you’re lending it to another for a price. One of the major differences is that if you structure it correctly, licensed IP can serve multiple users and a broad variety of purposes at the same time! So, in some ways the sky’s the limit in terms of the variety of licensing avenues. IP can also help promote your brand, your name, or your business. Copyright protected content and trademarks are common types of IP that are licensed. Every creative professional and successful IP-generating business should understand at least the basics of these types of IP and have a strategy for developing it, protecting it, and growing brand value and good will.
If you’re lucky enough to have a potential licensing deal in front of you now, it’s important that you understand the terms of the proposed contract and that you negotiate what makes the most sense for your IP and your interests as a business. An experienced intellectual property attorney with licensing and contract experience can give you valuable guidance and advice. Even if you’re still working your way toward a future licensing opportunity, some background knowledge on IP can help you think about your work in a new way. Crafting an approach that is poised to take advantage of all the potential opportunities that licensing can bring, whether its synergistic partnerships, access to broader markets, or to enable scaling and additional revenue streams.
We’ve laid out some major examples of how licensing can increase your brand revenue and help you grow and continue to succeed. It’s up to you to learn more and to put licensing to good use!
This article is presented by Trestle Law APC, www.trestlelaw.com and may be considered Attorney Advertising. It is intended to provide general information and is not intended to be specific legal advice and it does not create an attorney-client relationship. If you’re interested in talking to a Trestle Law attorney about your IP-generating business, a licensing deal, or your brand and trademark strategy, you’re welcome to schedule a discovery call here.
Kristen is the Founder & Managing Attorney at Trestle Law, APC. A California-based intellectual property attorney who helps business owners build a bridge from their brands to their bank accounts.