5 Licensing Trends, 2 Case Studies, and 4 Misconceptions
Tomas Geerkens
Enabling CFOs & Licensing Teams to Drive Revenue ?? | IP Growth through Scalable Compliance & Royalty Audits that Build Trust ?? | 10+ Years in Global License Compliance
The licensing industry is experiencing tremendous growth, with global retail sales of licensed products and services hitting an impressive $356.5 billion in 2023.
This 4.6% increase over the previous year highlights the vital role of intellectual property (IP) in driving revenue across various sectors.
As industries such as fashion, music, and sports continue to thrive, staying ahead of trends and ensuring compliance through royalty audits has never been more critical.
??Key Trends
The latest Global Licensing Industry Study reveals significant trends that are shaping the future of the industry:
??$356.5 billion Growth in Global Retail Sales: Global retail sales of licensed products and services reach $356.5 billion in 2023, representing a 4.6% increase over the previous year.
?? $31.7 billion in Fashion: Retail sales of licensed fashion products grew by 7.5% to $31.7 billion.
?? $5.1 billion in Music: The music sector saw an outstanding 16.4% increase, reaching $5.1 billion.
?? $39.5 billion in Sports: Licensed sports products grew by 5.6%, totaling $39.5 billion.
?? E-commerce: Now accounts for 37% of global licensing sales, reflecting the ongoing shift towards online retail.
These trends illustrate the vast opportunities within the licensing market. As the industry expands, so do the complexities in managing licensing agreements and ensuring accurate royalty payments.
Looking Ahead to 2025
The Top Global Licensors Report 2024 identifies critical areas for future licensing opportunities, predicting that Apparel, Food and Beverage, Toys and Games, and Location-based Entertainment will be key categories driving growth in 2025.
2 Case studies:
??Toy Industry Trends
The toy industry has faced significant challenges, with a 3.5% decline in the licensed toy category and a 4.5% decline in the overall toys/games market worldwide in 2023. Despite these declines, specific categories, like building sets, saw a 20% sales growth. Film-related licensed toys also performed well, accounting for 32% of the total toy market and growing by 6% compared to 2023.
These trends underscore the importance of strategic licensing and robust royalty audits, which can be crucial in navigating challenging markets and maximizing revenue.
??Mars and Kellanova’s Strategic Merger
In a significant development, 玛氏食品 has entered into a definitive agreement to acquire Kellanova , a company known for brands like Pringles, Cheez-It, and Pop-Tarts.
This $35.9 billion transaction highlights the growing need for meticulous IP oversight and the potential benefits of royalty audits, especially when integrating high-profile brands.
With Revenue comes Risk - The Value of Royalty Audits???
Royalty audits are not just about ensuring financial accuracy—they are essential for protecting IP, building trust with licensees, and maximizing revenue potential. In challenging markets like the toy industry, careful IP management and accurate royalty tracking can make all the difference.
?? Protect Revenue: Ensure that you’re capturing every dollar owed from your licensing agreements.
?? Build Trust: Establish transparency and fairness with your licensees, reinforcing a strong partnership.
?? Enhance Compliance: Regular audits help maintain compliance with the terms of your agreements, reducing the risk of disputes.
Best Practices for Effective Royalty Audits ?
To get the most out of your licensing agreements, it’s essential to follow best practices that ensure compliance and optimize revenue. Here’s a checklist to guide you:
? Incorporate a Clear Right-to-Audit Clause: Make sure all agreements include this.
? Conduct Initial Audits: Early audits post-agreement help set expectations.
? Implement a Tier-Based Approach: Tailor audit strategies based on the licensee’s tiers/risks
? Schedule Regular Audits: Periodic checks ensure ongoing compliance.
? Utilize Various Audit Types: Use desk audits, full-scope audits, and everything in between
? Leverage Data Analytics: Use analytics to pinpoint discrepancies and high-risk areas.
? Foster Open Communication: Maintain transparency and regular dialogue with licensees.
? Engage Qualified Auditors: Partner with experienced firms.
? Stay Vigilant: Monitor changes in IP and market conditions.
Best Practices: What Not to Do ??
Avoid these common pitfalls that can undermine the effectiveness of your compliance program:
?? Limiting Audits to Top-Tier Licensees: Expand your audit scope to uncover hidden issues across all licensee levels.
?? Relying Solely on Full-Scope Audits: Use a mix of audit types to ensure a comprehensive approach.
?? Ignoring Identified Issues: Address discrepancies consistently to maintain the integrity of the audit process.
?? Using Inexperienced Auditors: Choose providers with a proven track record in licensing audits.
?? Neglecting Communication: Keep open lines of communication to prevent misunderstandings and build trust.
4 Common Misconceptions ??
While royalty audits are essential, there often needs to be more clarity about how they might impact relationships with licensees. It’s important to clarify these misunderstandings and highlight the actual benefits of audits:
An audit will damage our relationship with the licensee ??
Clarification: Audits are not adversarial; they are collaborative tools designed to ensure accuracy and fairness. A transparent and fair audit can actually strengthen relationships by removing ambiguity and building trust.
Requesting an audit signals a lack of trust in our licensee. ??
Clarification: Audits should be viewed as routine check-ups that ensure everything is in order. Being upfront about the audit’s purpose and maintaining open communication fosters a sense of partnership rather than mistrust.
If the audit reveals underpayments, it will lead to conflict. ??
Clarification: Audits are about correcting course, not assigning blame. Addressing discrepancies promptly and fairly demonstrates your commitment to a balanced and transparent partnership, which ultimately benefits both parties.
Overpayments Are Not as Serious as Underpayments ??
Clarification: While underpayments are often the focus of royalty audits, overpayments can be just as significant. Overpaying royalties can drain resources, reduce profitability, and pose a significant opportunity cost.
??Assess Your Royalty Readiness
Understanding where your business stands in terms of royalty compliance is the first step toward optimizing your licensing agreements.
That’s why we’ve developed a Royalty Readiness Assessment—a tool designed to help you evaluate your current practices and identify areas for improvement.
What the Assessment Covers:
?? Awareness and Industry Context: Gauge your understanding of industry norms and the common issues uncovered in audits.
? Understanding and Compliance: Assess how well you understand your royalty clauses and your confidence in compliance.
?? Past Experience and Current Practices: Reflect on your previous audit experiences and current royalty management practices.
?? Readiness and Relationships: Evaluate your preparedness for an audit and the strength of your licensee relationships.
?? Commercial Use and Additional Comments: Provide insights into how your technology is used and any additional concerns you might have.
Taking Control of Your Licensing Strategy
In an industry where growth and complexity are constants, ensuring that your licensing agreements are profitable and compliant is critical to long-term success.
Royalty audits are crucial tools in this process. They help you protect your intellectual property, build stronger relationships with licensees, and maximize revenue.
Don't wait until issues arise—assess control of your licensing strategies. By assessing your royalty readiness, you can identify potential risks and opportunities, ensuring that your business is well-positioned to thrive in an increasingly competitive market.
At Connor , we specialize in providing comprehensive royalty audit and compliance services. With nearly 15 years of experience, our global team is dedicated to helping businesses optimize their licensing strategies, ensure compliance, and maximize revenue.
Sources:
Customer Success | Partner Ops Management | Sales Operations | Deal Desk Management | Software License Compliance | Licensing Advisor **Immediate Joiner**
3 个月Thank you Tomas. Very informative and Insightful..!
Enabling CFOs & Licensing Teams to Drive Revenue ?? | IP Growth through Scalable Compliance & Royalty Audits that Build Trust ?? | 10+ Years in Global License Compliance
3 个月https://llmd84y9yxp.typeform.com/to/bk86Z9fS?typeform-source=www.dhirubhai.net
Enabling CFOs & Licensing Teams to Drive Revenue ?? | IP Growth through Scalable Compliance & Royalty Audits that Build Trust ?? | 10+ Years in Global License Compliance
3 个月https://www.licenseglobal.com/streaming-tv/ollyball-snags-hasbro-licenses?utm_campaign=LICENGLNWSLTR_News_LicenseGlobal_Daily_NL__20240815&utm_emailname=LICENGLNWSLTR_News_LicenseGlobal_Daily_NL__20240815&utm_medium=email&utm_source=eloqua&utm_MDMContactID=86bfe931-e706-47f8-88c4-08712dfbca7d&utm_campaigntype=Newsletter&eM=2ca0e2e65425905882a89d9ff4ed1fe8b35adeae4d0e6e955ae23699675b361b&eventSeriesCode=ES_LICENGLOBAL&eventEditionCode=NAM00LCG&sessionCode=S_LICENGLDLYNWSLTR&sp_eh=2ca0e2e65425905882a89d9ff4ed1fe8b35adeae4d0e6e955ae23699675b361b
Enabling CFOs & Licensing Teams to Drive Revenue ?? | IP Growth through Scalable Compliance & Royalty Audits that Build Trust ?? | 10+ Years in Global License Compliance
3 个月https://www.dhirubhai.net/pulse/10-steps-royalty-revenue-optimzation-tomas-geerkens-aqcde/?trackingId=8MiER55sTk6KZXMcgQDVJA%3D%3D&lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BCdTBwqysRxC9mrAJFUf%2FAQ%3D%3D
Enabling CFOs & Licensing Teams to Drive Revenue ?? | IP Growth through Scalable Compliance & Royalty Audits that Build Trust ?? | 10+ Years in Global License Compliance
3 个月https://www.dhirubhai.net/posts/mars_snackingisbettertogether-tomorrowstartstoday-activity-7229452884206125056-p-bG?utm_source=share&utm_medium=member_desktop&lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read%3BCdTBwqysRxC9mrAJFUf%2FAQ%3D%3D