StrategyOctober 8, 2021

Succeeding in Character Licensing: What You Need to Know

10 min read
Succeeding in Character Licensing: What You Need to Know

Close your eyes and think back to your childhood. What TV, movie or literary character was at the center of your world? Did you rush to buy their toys? Dress up for movie screenings? Think you had their superpowers?

Character licensing is one of the largest segments of the licensing business and is (probably) the most publicly recognized. As with any licensing venture, one of the biggest perks of using a character to promote your brand is recognizability. The right character can boost the look and feel of your product and significantly increase revenue.

Character licensing is also a creative solution for achieving brand recognition without the exorbitant costs associated with advertising. Characters strengthen the profile of your products by attracting attention through instant recognition, thereby increasing audience acceptance and enhancing your product’s perceived value.

But, character licensing isn’t all fun and games, no matter how cute and cuddly the subject may be. Brand owners take character usage rights seriously. Putting a beloved children’s character on a shirt with profanity or a superhero with characters from a competing universe can lead to trouble.

Below, we offer helpful tips to navigate character licensing effectively.

Getting started

Businesses looking to enter into a licensing agreement with an existing, globally recognized character brand will need to create a contract that clearly lays out the licensee, licensor and the deal’s unique terms. The licensor will receive a royalty (agreed upon amount) for every licensed item sold.

It is important to note: most major brand owners will not engage with businesses that do not have a sizable audience, substantial revenue, or a “proven record” of profitability. In essence, large companies want to make sure that licensing their property is worth it.

Know your audience

When licensing a famous character, there is one key element to consider: demographics. Oftentimes, businesses and manufacturers insist on licensing characters that have significant brand recognition (i.e. characters that have become household names). While this is a logical assessment — famous characters from a movie or cartoon series undoubtedly have greater potential for exposure than lesser known figures.

But there is no guarantee that the decision will translate to greater sales. What matters most is the age of the audience you are targeting. If you are manufacturing a product that will be marketed to a more mature consumer base, they may not be as open to using a popular cartoon character as younger people. An older audience is more likely to be interested in product design, quality, and functionality.

If you’re in the infant and toddler business there are significantly less concerns. Kids, more than any group, love it when they recognize their favorite mascots from television and their parents know it.

Those parents are more likely to buy whatever looks nice, suitable and safe for their young children. If a product’s sole purpose is to make their child happy, parents will buy it for them regardless of its lack of timelessness or lasting durability.

Make a move

If you decide to move ahead with licensing a famous character, you will probably end up negotiating with the licensor and their licensing agent to define a set of mutually beneficial terms. In instances like this, licensors want to protect their intellectual property, so they will want to ensure that they are covered.

In addition to royalty payments, you should expect to put down a “minimum guarantee” upfront. However, for some businesses, these costs can be prohibitive. Alternatively, owners of lesser-known characters are usually eager to close licensing deals quickly and tend to be more flexible.

Options for smaller businesses

Because the benefits of having a character to help with a product’s marketability are so great, smaller businesses often turn to other options when the cost of going big is too far out of reach.

Let’s say that you recently started a medium-sized company that manufactures apparel for children and young adults, and you are looking to license the use of a cartoon character to be featured on your garments.

Where do you begin to find a character with an image that resonates for a reasonable price? If you are in the early stages of business growth, you may want to consider working with a team of illustrators and designers to create your own character.

If you’re on the hunt for a source image or concept to create a brand’s character, turn to the web for inspiration. Local animation companies or agencies with a roster of graphic designers and/or illustrators can help you establish a distinct style, especially if you are building the character from scratch.

Pro tip: Some companies design original characters and put them up for sale online. YouTube and other video sharing sites offer examples of characters in motion that can help you build your character's background, personality, voice, etc.

In situations like this, the creator of the character (the illustrator or the design company you partner with) would act as the licensor. You would pay royalties to the licensor for using the likeness of the character they create for you, or you can work to establish a full buyout, giving you free rein to use your new character as you wish.

How should your character look?

It is important to remember that when you are working with a design studio to develop concepts—or even if you are shopping for pre-made characters—you are aiming for long term success. It is important to keep in mind that you are licensing the right type of character for the right reason.

Don’t forget, consumers need to experience an emotional connection with your character, creating a bond that will draw a parallel in their minds, instinctively tying the character’s image to your product.

In addition to the emotional connection, you also need to ensure that the character you choose will complement your product’s look. If your product is marketed toward children, choose a character that will be engaging to a young audience. If your product is sleek and high-end, avoid using something too juvenile, as it can undermine the product’s potential.

Most importantly, communicate with your licensor. Most likely, they will be willing to collaborate and customize graphics based on their own style guide so that you can get the best of both worlds.

As you can see, there are significant benefits to licensing a character for your business and brand. Depending on your budget, there are advantages to licensing certain types of characters—famous, or not yet famous. Whatever your business plan, the options for growth are yours to discover. By following the above tips for successfully navigating the world of character licensing, you can make a foolproof plan for coming out on top.

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