Licensing Corporate Brands and Trademarks: Knowing What it Should Cost

As someone who runs a licensing agency for the owners of brands and trademarks, I can be expected to argue that brand owners should always hire agents.  Not so.  They should generally do so, but not because it’s the only way to do well.

When a prospective licensing client asks why it should hire an agent, I generally tell them there is no reason they could not license their brand in-house, except this: They will never devote the resources appropriate to the opportunity, or the resources that a professional licensing agent would bring to the job.

Why not?

Because there is not a general understanding about what it costs to do licensing well, or what services professional licensing entails.  If there were greater disclosure of those facts, agency terms of representation would become standardized and the industry would grow.  This is what the world of brands – both brand owners and those who represent them – needs.

Why Brand Owners Need Disclosure and Standardization

Brand owners need to learn that professional licensing requires a large, devoted and experienced staff.  Brand owners have generally confused the job of licensing with the function of registering and protecting its marks.  The two jobs are related, to be sure, but they are not the same, and the person in charge of coordinating registrations and renewals with trademark counsel rarely has the time (to say nothing of the mindset) to focus on opportunistic licensing.

An in-house director of trademarks is usually busy around the clock with maintaining domestic and international trademarks, coordinating cease-and-desist letters, and approving trademark usage by internal salespeople and the brand’s advertisers.  He has little (if any) time to study the licensing industry, to keep up with retail and design trends, or to pursue licensing deals in a proactive way.

When they have looked to outsiders, brand owners have often been misled by pitches from “licensing agents” who resemble full-service, professional agencies about as much as Kinko’s resembles Young & Rubicam.  These logo-slappers allow brand owners to think licensing agents who perform more or less the same work are charging wildly different rates.  Instead, there are people holding themselves out as licensing agents in order to collect finders’ fees and make their clients do the work.  They lack the brand sensitivity, long-term perspective, negotiating skills and professional management with which a true licensing agent earns its fee.

Professional licensing requires a devoted staff, and that costs money.  It also requires a level of quality that can come only from trained professionals.  A brand owner will almost always understaff its in-house licensing effort, staff it inappropriately, or hire a firm it doesn’t deserve because brand owners have not been made to understand how hard it is to launch a full-scale licensing program.

Why Licensing Professionals Need Disclosure and Standardization

Licensing professionals (meaning primarily licensing agents) need standardization and a general understanding of what services licensing professional provide so that they can compete on their qualifications and not on their fees.

Brand owners generally believe that licensing agents demand too large a commission to do their work.  Licensing agents have to spend too much time explaining why the fees and commissions they seek are reasonable compensation for the work and risk they assume on behalf of their clients.  This is not because licensing agents are greedy, but because  there is a general misunderstanding among brand owners about how much it costs to do serious licensing well.

For these reasons, bringing the light of day and standardization to licensing should be the industry’s foremost project.  But it is not.

To this relatively new member of its trade, the licensing industry seems to believe that the less anyone understands about what professional licensing costs (and what professional licensing agents charge), the better.   The only people rewarded by that belief are the unprofessional agents who end up being overpaid.  No other industry has grown with the belief that disclosing what its professional practitioners earn would threaten their work.

Real estate agents, to take one example, charge a uniform commission across the country, a fact that has certainly not hurt its practitioners, who compete not on their commissions but on their skills.  Standardization of terms has helped real estate professionals by creating a universally accepted appraisal of the value added (and risk assumed) by a good real estate agent and a universal understanding of how their commission is earned.  The same could be said for scores of other industries, including talent agents and investment bankers conducting IPOs.

Standardization of agency commissions and the performance expected in return has never hurt any industry’s professional practitioners.   Refusing to disclose what the best licensing agents or managers deserve for their work has kept a disreputable haze hanging over the licensing industry – and kept it from growing even larger.

Greater disclosure, and standardizing terms of compensation, would not only help those who do licensing work – agents and in-house professionals – but it would help the brand owners who need their work.   The licensing of corporate brands and trademarks is an industry that needs to mature to the level of the corporations whose brands make it possible.  It cannot do so by hiding the facts of what its best practitioners earn.  It will help its cause, and advance its own professionalism, by creating a general agreement about what it costs – and what should be paid – to do its work well.

From February 2001 issue of The Licensing Journal