Barry Brager: Top Ten Black Holes in Brand Licensing
by Sarah Banick

Licensing your company's brand may seem like an easy way to generate revenue while gaining marketing exposure, but there are multiple risks inherent in the licensing of brand, trademark, and copyright assets. Successful companies invest heavily in their brands, so if the parties involved in the licensing agreement don't align their objectives, it can be costly, says Barry Brager, founder of Perception Partners.

Brager, a marketer, entrepreneur, and innovator with more than 12 years of professional experience in intellectual asset creation and management, spoke at a ZIBS Forum sponsored by the Zyman Institute of Brand Science at Emory University's Goizueta Business School. His Atlanta-based firm provides expert strategic, marketing, and business development services for high tech, biotech, and consumer goods enterprise. Brager is currently co-chair of the Atlanta Chapter of Licensing Executives Society.

Businesses license their brands in order to leverage brand equity in a new or related category. When things are working correctly, licensing can boost sales and profits for the licensee, while generating royalties and marketing benefits for the licensor. In fact, the greater benefits of the match lie on the marketing side. Entertainment and cartoon characters are by far the most popular type of licensing, but brand and trademark licensing is found in nearly every industry today: music, fashion, sports, arts, and of course, colleges and universities. It is $7 billion of the U.S. economy. At an average royalty rate of five percent, it's a big opportunity. "So," Brager asks, "What can go wrong?"

Turns out, plenty of things can go wrong, as Berger describes in his "Top Ten Black Holes in Brand Licensing." For quick reference, here are the 10 things your company should stay away from:

1. Thinking outside the box
2. Ignoring market behaviors
3. Putting licensing in the wrong organization
4. Indiscriminate licensing
5. Overlooking the best options
6. No trademark usage guidelines
7. Not understanding the risks
8. No criteria for selecting suppliers
9. Insufficient quality control standards
10. No criteria for licensed products

There has been no shortage of bad licensing deals over the years, Brager says, but most of them could have been avoided with the proper preparation. The real problem is usually something that hasn't been done, such as setting criteria for the quality of products or developing a useful application for the proper selection of suppliers. Even brands with strong licensing programs have trouble making sure graphic standards are met.

"Much of our time in the deal is spent working on how the relationship begins, and how it ends. We don't spend a lot of time on what happens in the middle," Brager says. The lawyers and the finance people set up agreements and collect the royalties, but adequate monitoring of the program needs to come from representatives across the organization. "It's important to have [a set of rules and regulations] developed ahead of time, and update it on a regular basis as products and licensees are added," he says. Auditing of sample products is essential.

Brand licensing of collegiate products is a good example of the sensitivity associated with branding. It's not unusual to see branded items as diverse as toilet seats, chocolate, license plates, and can openers, to name but a few. But there are rarely any items associated with "sex, drugs and rock'n roll." Brager says, "If the products themselves have problems, there is damage to your reputation." The brand promise is of academia, combined with team spirit, undertones of history, cultures, and sportsmanship. "The outcome of dealing with strong or good practices…is that you manage credibility risks." Most universities deal with this challenge by hiring an agent.

"Anticipate the consequences" and have a plan for failure," Brager continues. "A good what-if tree is a decision tree. It a good planning tool when you are trying to estimate what's the potential outcome here. Too many times the decision tree comes in after the litigation. These risks need to be assessed constantly as new relationships enter the fold." Issues with one brand can touch all the brands it deals with, as Kathy Lee Gifford, Wal*Mart, and ABC learned when it was discovered that garments baring her name were made in a children's sweatshop.

Most of all, Brager says, a brand should be nurtured and treated with respect. Indiscriminating licensing dilutes a brand's reputation, damaging years of goodwill. Thinking outside the box, while admirable, can get your brand in trouble. "You have to fight to get retail space in most stores," Brager says. "This is not the place to get creative."

Sarah Banick is a freelance writer based in Atlanta.