Myths & Misnomers About Collegiate Licensing

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1 CAMEX/ICLA Meeting New Orleans February 28, 2005 Terry Livermore, Michigan State University Dick Rademaker, Licensing Resource Group Derek Eiler, The Collegiate Licensing Company Overview Why Does Licensing Exist? Collegiate Licensing Facts & Figures The Role of Licensing Departments Common Conflicts Building Bridges & Success Stories Takeaways & Industry Resources

2 Why Licensing? Maintain ownership of trademarks Product liability insurance protection Indemnify university from third party claims Human rights compliance concerns Ensure graphic standards compliance Generate revenues for campus programs (i.e. student scholarship funds) Increase exposure for the institution Three P s of Licensing - Protect, Promote, Profit Collegiate Licensing Facts & Figures Sales of Sports Licensed Merchandise (in billions) $13.80 $13.80 $14 $13.14 $13.40 $13.65 $12.60 $12.10 $12.10 $12 $11.45 $11.30 $10.50 $10 $12.10 $12.70 $8 $6 $4 $2 $ Source: The Licensing Letter

3 Collegiate Licensing Facts & Figures Collegiate Licensing Facts & Figures Since 1998, apparel products have accounted for 65 to 68% of college sales while non-apparel products have accounted for 32 to 35% annually. After sales decreases in the mid-90 s, apparel products have rebounded during the past four years: (+9%), (+14%), (+17%), & (+12.6%). The expansion of product categories has had a major positive impact on sales of non-apparel products over the same time period: (+1%), (+32%), (+18%), & (+27.7%). Source: CLC

4 Collegiate Licensing Facts & Figures Collegiate Sales by Product Category Paper/Printing/ Publishing 3% Gifts/Novelties 7% Home & Office 5% Sporting Goods/Toys 4% Accessories 3% Electronics 12% Specialty Items 1% Apparel 65% Source: CLC Collegiate Licensing Facts & Figures Collegiate Apparel Sales by Product Category Loungewear 1% Fleece 16% Women's Apparel 5% Fashion Apparel 5% Authentic Sideline 0% Clothing Accessories 1% T-shirts 27% Youth Apparel 6% Infant/Toddler/ 3% Replica Team Apparel 6% Misc. Apparel 5% Headwear 17% Outerwear 8% Source: CLC

5 Collegiate Licensing Facts & Figures Collegiate Apparel Sales by Product Category ACCESSORIES (9%) 1. Class Rings 5% 2. Jewelry 2% 3. Misc. Accessories 2% HOME & OFFICE (13%) 1. Furniture 4% 2. Domestics 4% 3. Housewares 4% 4. Office Products 1% GIFTS/NOVELTIES (19%) 1. Misc. Gifts/Novelties 7% 2. Collectibles 6% 3. Auto Products 4% 4. Signage Products 2% PAPER/PRINTING/ PUBLISHING (7%) 1. School Supplies 3% 2. Checks 2% 3. Stationary 1% 4. Paper Products 1% SPORTING GOODS/ TOYS (12%) 1. Balls 5% 2. Sports Equipment 4% 3. Toys 3% SPECIALTY ITEMS (37%) 1. Electronics 35% 2. Footwear 2% Source: CLC Collegiate Licensing Facts & Figures Channels at which Consumers Reported Purchasing Sports Licensed Apparel in Past 12 Months Source: 1/2004 NPD FashionWorld

6 The Role of Licensing Departments Develop the the institution s licensing strategy Determine criteria for granting licenses & manage licensee base Determine trademark usage policies and ensure consistent use of marks and logos Manage trademark registrations Develop on-campus support for the program Ongoing campus/community education about licensing Conduct trademark enforcement activities Work with licensees and retailers to increase sales Manage financial aspects of program accounting, reporting, budgeting Manage licensing agency relationship Build long-term value in trademarks The Role of Licensing Departments Develop Licensing Strategy Policies vary widely across campuses royalty rates, advance fees, restricted product categories, etc. Quantity approach to licensing during the 1980 s/1990 s is being replaced by a quality approach to licensing in the current decade. Many institutions now view licensing as a strategic component of on-campus branding and marketing programs. Licensing policies and standards have been developed and refined on many campuses to further reinforce the institution s brand building message.

7 The Role of Licensing Departments Determine How Licenses Are Granted Institutions consider the following factors in granting a license: Quality of the product Manufacturing capabilities Proposed distribution and pricing strategy Existing distribution channels or retailer feedback/support Applicant s prior licensing experience (in college or with other licensors) The availability of similar product(s) for the institution Potential liability of the product The overall fit of the licensee/product with the institution s mission/objectives Potential royalty impact term length, royalty guarantee, exclusive vs. non-exclusive Applicant s prior history (audits, contract compliance, bankruptcy, etc.) Licensing is a privilege, not a right there are no guarantees of obtaining a license with any institution. Typically, the larger the institution s licensing program, the more challenging it will be to obtain a license. The Role of Licensing Departments Determine How Licenses Are Granted The quality of applications and marketing plans can vary greatly

8 The Role of Licensing Departments Determine How Licenses Are Granted Determining what products will be licensed The Role of Licensing Departments Manage Licensee Base Assessing licensee performance at contract renewal Retailer feedback Royalty performance Licensing compliance history approvals, audit results Reviewing licensee performance against stated marketing plans Product category needs Many licensing departments are starting to take a more active role in analyzing licensee performance at renewal

9 The Role of Licensing Departments Ensuring Consistent Use of Marks The Role of Licensing Departments Ensuring Consistent Use of Marks

10 The Role of Licensing Departments Ensuring Consistent Use of Marks Everything goes faster and faster, but not necessarily the development of trademarks. When they are simplified to the bone, they last. Marks of Excellence the history and taxonomy of trademarks The Role of Licensing Departments Ensuring Consistent Use of Marks

11 The Role of Licensing Departments Ensuring Consistent Use of Marks The trademark licensing program plays a critical role in serving as the steward of the institution s brand identity. The Role of Licensing Departments Ensuring Consistent Use of Marks As a result of this more strategic approach to licensing, many institutions are now developing extensive trademark usage guidelines to ensure brand consistency in the retail marketplace.

12 The Role of Licensing Departments Ensuring Consistent Use of Marks The Role of Licensing Departments Ensuring Consistent Use of Marks

13 The Role of Licensing Departments Manage Trademark Registrations The Role of Licensing Departments Manage Trademark Registrations

14 The Role of Licensing Departments Develop On-Campus Support The on-campus reporting lines for licensing departments vary widely across institutions - Athletics, Finance/Auxiliaries, Institutional Relations/Advancement, Legal/General Counsel, Bookstore, Alumni Office, and Purchasing. Campus budget cuts have led to many licensing directors having multiple responsibilities. This can result in licensing-related issues, including design approvals, often not receiving the priority attention that is needed. Some institutions utilize a licensing committee to set strategy for the program; while others use committees to make decisions on granting licenses to new applicants or new products. Licensing departments also can serve as a liaison to the local community in dealing with topics such as human rights or town & gown issues. The Role of Licensing Departments Educate Campus/Community Active education of campus departments, student groups, and community organizations about licensing policies

15 The Role of Licensing Departments Conduct Trademark Enforcement A failure to actively enforce trademark rights can lead to abandonment or dilution of trademark rights The Role of Licensing Departments The Role of Licensing Agencies Manage administrative processes on behalf of the institution application, contracts, royalty reporting. Provide data/resources to the licensing director and serve as an advisor to the institution on licensing-related issues. Communicate with retailers and build programs to increase sales, including trade shows, web sites, and in-store promotions. Provide trademark enforcement and contract compliance support. Conduct audits to properly enforce the institution s trademark rights. Develop systems to streamline the licensing process logo sheets, resource information for licensees, royalty reporting standards, etc. The on-campus licensing director is always the decision-maker on all issues related to the licensing program.

16 The Role of Licensing Departments Building Programs to Expand Sales The Role of Licensing Departments Build Long-Term Value in Marks

17 The Role of Licensing Departments Build Long-Term Value in Marks Marks are a reflection of time and accomplishment Neither retailers, licensees, or licensing managers have the right to diminish their value Without guidelines, there is no value Goal is to build lasting brand value for the institution s trademarks, which benefits the institutions (as well as licensees and retailers) Licensing departments utilize stringent brand control in the approval process to protect the marks Common Conflicts Your rival approved it, why won t you? I have an order pending for this item, why won t you license the company? How come you allow so many retailers to sell merchandise? Why was the design disapproved? Why are there so many steps in the licensing process? Reliance on retailers to verify licensee status Mutual lack of understanding of respective roles Lack of understanding of the role of licensing agencies Same destination, but a different roadmap

18 Common Conflicts Your rival approved it, why won t you? Product approval processes and licensing policies can vary widely across campuses Common Conflicts I have an order pending for this item, why won t you license the company? 50% of bookstores indicated that they had increased or substantially increased the number of licensees selling to their store in the past three years; yet 35% of licensing directors think that there are too many licensees in their program. Many institutions are actively seeking additional licensees, while others are not. The decision to grant licenses rest solely with each individual campus and varies widely across institutions, depending on size, market strength, licensing strategy, and other factors. Research Data CLC 2005

19 Common Conflicts I have an order pending for this item, why won t you license the company? One Institution s Headwear Category Top 5% Generate 90% of $$$ 15 Licensees = 88% of Royalties 30 Licensees = 97% of Royalties 366 Companies Had Headwear Rights 253 Licensees were < $200 (69%) Too many licensees across all product categories without a strategic plan to manage trademark rights can dilute the institution s long-term brand value. Common Conflicts How come you allow so many retailers to sell merchandise? 50% of bookstores indicated that the expansion of licensed merchandise sales into off-campus retailers has had either a minor or major negative impact on their store sales; yet 79% of licensing directors said that off-campus sales did not have a major impact on the bookstore s sales. A licensing program can only control the licensees that it has under license agreement where they sell, what they sell, how they use the marks, etc. Research Data CLC 2005

20 Common Conflicts How come you allow so many retailers to sell merchandise? The licensing strategy on most campuses seeks to increase revenues, increase product distribution, and build long-term brand value in the institution s trademarks. Common Conflicts Why was the design disapproved? Licensing directors have an obligation to enforce logo usage standards for both brand-building and to reinforce trademark ownership Michigan State Stanford Syracuse

21 Common Conflicts Why was the design disapproved? Licensing directors have an obligation to enforce logo usage standards for both brand-building and to reinforce trademark ownership Marshall Maryland Memphis Miami U Michigan Minnesota Mississippi Missouri Common Conflicts Why was the design disapproved? Conflicts arise when an institution s brand guidelines blanket licensees design creativity and hinder sales Zephyr s X-Line Designs

22 Common Conflicts Why was the design disapproved? Designs vs. Trademarks seek a balance between brand standards & flexibility for product creativity Some marks that have created a high level of consumer recognition in the marketplace can allow licensees more creative latitude in developing licensed products.

23 Common Conflicts Why are there so many steps in the licensing process? Many newer licensees oftentimes do not have the staff or the internal systems established to properly manage licensing requirements. Labor Code major increase in standards required for licensee compliance; added costs for licensees Liability Insurance Standards consistency required by on-campus risk managers vs. inflexibility among licensee insurance providers Authorized Manufacturer s Agreements to cover overseas production Product Labeling and Licensee Identification Royalty Reporting Requirements Finished Sample Requirements Logo Usage Guidelines Integrating with Campus Policies Common Conflicts Licensing directors assume that all retailers always review licensee lists when making buys 58% of bookstore buyers indicated that they trust the vendor s response when they inquire about their status as a licensee. Research Data CLC 2005

24 Common Conflicts At many institutions, there is a general lack of understanding about the respective roles of licensing and bookstore personnel 33% of licensing directors indicated that they are not aware of when bookstores purchase their licensed product inventory. Research Data CLC 2005 Common Conflicts At many institutions, there is a lack of understanding about the role of licensing agencies and the fact that control of the program remains with the on-campus licensing director 28% of bookstore buyers believe that licensing agencies have sole discretion in determining which companies become licensees for their institution. Research Data CLC 2005

25 Common Conflicts Same destination, but a different roadmap Licensing Goals Maximize sales Indirect selling Protect trademarks Service all retail & consumer markets Reach as many target consumers as possible through multiple retail channels Bookstore Goals Maximize sales Direct selling Generate profits Service campus market Reach as many target consumers as possible through its own marketing and distribution efforts Building Bridges Success Stories Creative solutions to support smaller licensees Merged the licenses of C & J Jewelry (Romac), Paramount Chocolates, Josef s Pewter, Artfield Silver, Anson Silver Jewelry, and LaserTek Crystal underneath a single license with Jardine

26 Building Bridges Success Stories Capitalizing on hot markets with bookstores Building Bridges Success Stories On-campus integration - athletics & bookstores

27 Building Bridges Success Stories On-campus integration other departments Building Bridges Success Stories On-campus integration other departments

28 Building Bridges Success Stories Creating/protecting additional marks to increase sales opportunities for licensed products Building Bridges Success Stories Creating/protecting additional marks to increase sales opportunities for licensed products

29 Building Bridges Success Stories Communicating with consumers Building Bridges Success Stories Communicating with consumers

30 Building Bridges Success Stories Communicating with retailers Online Licensee Lists Building Bridges Success Stories Communicating with retailers Online Tradeshows/Buying Exchanges

31 Building Bridges Success Stories Communicating with retailers Licensing Department Web Sites Building Bridges Success Stories Communicating with retailers Licensing Newsletters

32 Building Bridges Success Stories Communicating with retailers Retailer Receptions Building Bridges Success Stories Accelerating the product approval process through online approval systems and

33 Takeaways There can be great synergy between the efforts of the trademark licensing program and the campus bookstore. Strive to find a balance between logo usage guidelines and the need for product creativity. Take time to understand the issues before jumping to conclusions there are two sides to every story. Be willing to walk in their shoes for a day. Communication is the key to success. Useful Industry Resources Trademark Enforcement Information Trademark Registration Information Collegiate Licensing Agency Collegiate Licensing Agency Collegiate Licensing Agency Educational Association National Assoc. of College Stores Licensing Industry Mfg s Association Online Licensee Trade Show Labor Rights Monitoring Organization Labor Rights Monitoring Organization ICLA s Labor Code News Site A great web site on all aspects of intellectual property rights