Mind your L’s and M’s: Licensing & Merchandising – Part 1

This post was first published on 2nd September, 2014.

Merchandising is an extension of a brand into new categories. Any merchandise is created by securing license of different Intellectual Properties such as themes, images, songs or dialogues of a film, characters etc. It is in the past decade that Movie Merchandise and Character Merchandise has gained popularity in India.

According to the industry reports, global licensing & merchandising is a huge business with its top 125 licensors accounting for sales amounting to more than US$ 184 billion. Disney is the largest global player and has generated sales of US$ 28.6 billion in 2010. The Major Baseball League was the biggest sports league in the sport-licensed merchandise segment with sales of around US$ 5 billion in 2010. Popular film franchises such as Star Wars, Harry Potter and Cars have generated licensed merchandise sales worth more than US$ 10 billion since their respective launches.

Licensing in India started roughly about 10 years ago with the establishment of an organised retail sector after the 1991 economic reforms. It is said that retail chains like Shoppers Stop and Future Group played a significant role in creating a market where young and aspiring India could splurge and indulge in products that add to their personality. Various entertainment platforms such as movies, sports and online platforms have also played a huge role for the evolution of the licensing and merchandising business in India. The increasing internet penetration and the saga of online shopping have also contributed to the expansion of the merchandising business in India. According to industry experts, all these factors have created the right environment for licensing to become the next big thing in India.

When one speaks of Character Merchandise, Disney continues to remain the undisputed leader with a host of popular characters like Disney Princesses, Mickey and Friends, Pooh, Cars for kids and the Marvel characters for grown up audiences. Chotta Bheem is one of the popular properties and is a success story of Character Merchandise in India.

Some examples of Bollywood movie licensing are Ra One, the Krrish franchise, the Dhoom franchise etc. Recently, the concept of Celebrity Merchandise has also gained popularity where celebrities like Salman Khan, Hritik Roshan, Bipasha Basu among others are creating and developing their own brands.

Other important categories that are gaining mileage over the areas are Experiential Properties such as Bollywood themed cafés and restaurants, theme parks etc. Gaming also is a vertical where a lot of Intellectual Property owners license their content for creation of games and animated content.

The licensing programme in India is growing multi-fold and in general, content owners license their content for a fixed fee or a running royalty model. On the one hand, the business of licensing and merchandising looks fancy and lucrative but on the other, it poses huge risks. We will look into the legal risk aspects that content owners (licensors) as well as the licensees face, in subsequent posts.

Image: from here