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Lucrative Opportunities in Licensed-Property Printing

Licensing is a powerful way to bring fresh, unique, and trendy designs to your garment-printing operation. Read on to learn more about this competitive and rewarding market and how it can help your business grow.

Have you noticed lately folks wearing "Vote for Pedro" T-shirts, "24" ball caps, and other apparel featuring catchy logos or phrases from current box-office hits and television sensations? Even children are stylin' in their Spongebob Squarepants and Dora the Explorer T-shirts. Where are folks buying this trendy apparel? Who is printing it? And, more importantly, how can your shop capitalize on the latest crazes in themed apparel?

The key to profiting from icons in the entertainment, sports, and music industries is to secure a license to print high-profile properties. The benefits of licensed-property printing are many, and numerous screen-printing operations over the years have enjoyed success from obtaining such licenses. Before you consider investing in a licensed property, learn what the licensing process entails, areas you can explore for opportunities, challenges you may face, and how to determine whether your shop is equipped to print licensed properties.

The early days of licensing

A licensed-property contract involves a property, in the form of an image, logo, saying, or character, and an agreement between the owner of the property (licensor) and a manufacturer or printer (licensee), who will apply the property to manufactured products as a tool to increase sales of the product. According to Charles Riotto, president of the International Licensing Industry Merchandisers' Association (LIMA), New York, NY, some of the earliest examples of licensing date back to 1904 with the Buster Brown comic character, who was associated with a brand of shoes, and President Roosevelt, who allowed his name to be used on a teddy bear for royalties that would foster the establishment of a network of national parks. In 1929 the Girl Scouts of America (GSA) licensed suppliers of official GSA products.

Licensing really began to take hold in the 1930s with the growing entertainment industry. During this era, Shirley Temple licensed her image to a line of dolls. Disney hired Kay Kamen (the "Father of Modern Licensing") in 1932 and established a licensing program with Mickey Mouse. The Howdy Doody television character became a hot licensed property in the 1940s. The 1950s saw a surge of licensed properties with TV Westerns, Warner Brothers' Looney Toon characters, and United Media's Peanuts and Garfield characters. It was also during the 50s that the Los Angeles Rams became the first sports team to license its logo. The next decade brought the licensed properties of the NFL, Walt Disney's Winnie the Pooh, Warner Brothers' James Bond character, and Jim Henson's Kermit the Frog and Sesame Street characters.

Star Wars was the benchmark licensing program. It was established in 1977 and was the first program to use an active toy license, with Kenner Toys. Licensing in the fashion world also took hold in the 1970s with Pierre Cardin, followed by the Calvin Klein, Ralph Lauren, and Cherokee brands.

Collegiate-sports licensing came charging onto the scene in 1982 when the University of Pittsburg licensed its logo. Major league sports also stepped up their involvement in licensing programs, especially Major League Baseball.

The corporate sector made its debut in licensing programs with Coca-Cola, whose goal in establishing a licensing program was to protect its trademark. Little did the company know it would generate in excess of $1 billion in retail sales for the Coca-Cola brand.

Licensing programs in the entertainment arena continued to grow with programs for Strawberry Shortcake, Cabbage Patch Kids, ET, and Barney, the purple dinosaur that we all love to hate. The 1990s brought more growth in the entertainment industry with licensing icons Harry Potter, Pokemon, and South Park.

The licensing industry covers a range of markets, from non-profit organizations to art to trademarks/brands and more. Table 1 presents a comparison of the markets by estimated royalties paid for use of licensed properties in 2005. According to LIMA data, the dominant categories include characters (entertainment, TV, movie), followed by corporate (trademarks and brands), and then fashion. The entertainment category accounts for approximately 44% of all licensing sales in the US, according to Riotto. Trademarks/brands take second place with an 18% share of the market, and the fashion and sports categories tie for third place with 14% each of the market share.

Table 1
2005 Estimated Licensing Revenues by Property Type

Property Type

Estimated Royalties Paid for Use of Licensed Properties ($ millions)

Character (entertainment, TV, movie)

2626

Trademarks/brands

1086

Fashion

822

Sports (leagues, individuals)

810

Collegiate

203

Art

175

Music

128

Publishing

41

Non-profit (museum, charities)

43

Other

18

Source: International Licensing Industry Merchandisers' Association, New York, NY

Screen shops that excel in printing licensed properties are typically able to succeed in a broad range of markets. For example, Fortune Fashion Industries (FFI), Vernon, CA, a 16-year-old, 1800-employee operation, prints licensed properties for a variety of categories, including characters, television/film, private labels for retailers, brand-related properties for major corporations, and brands that the company has created specifically for retailers. Figure 1 shows a sampling of FFI's printed T-shirts. The company prints apparel for General Motors, US Army, American Airlines, Airstream Trailers, Chevron and Texaco, and Hasbro, among others.

Ric Munoz, vice president of licensing and corporate brand development for FFI, says companies such as General Motors that have been in the marketplace for 100 years have more staying power in the marketplace because of the strength and longevity of their brands.

Securing success in licensed properties

The sports category is dominated by the major leagues, including the NFL, NBA, and MLB, as well as NASCAR. Riotto says these entities account for about 80% of the sports business in the US. While the big four take the lion's share of the sports market, several niche licensed properties have entered the playing field, including collegiate licensing programs. Big players here include Notre Dame, The University of Michigan, the University of North Carolina, the University of Alabama, and other big NCAA names. The Professional Bull Riders Association, the World Poker Tour, and various soccer teams also fill the sports niche market.

Figures show that the sports licensing category has grown every year since 2002, and Riotto attributes the growth to more creativity in logo treatments, expanded marketing programs, and the extension of apparel to women and children. Scott Warfield, manager of public relations for NASCAR's division in Charlotte, NC, where all licensing processes are handled, says that NASCAR has experienced significant growth in apparel, namely in the ladies category (Figure 2). In fact, 40% of NASCAR's fan base is female. "We've seen a lot of licensees want to create products geared for the female fan base, in the colors they like, and the styles and sizes they prefer," Warfield says. Other hot categories for NASCAR include die-cast products, food (NASCAR BBQ sauce, fruits, vegetables, and frozen meats), and youth (NASCAR-branded rocking chairs, sippee cups, pacifiers, and coloring books).

Prolific Screen Printing, Hayward, CA, started printing licensed properties for the collegiate market when it opened in 1992. The 25-employee, 7200-sq-ft operation holds licenses for several schools, including Stanford University, University of California Berkeley, San Jose University, California State University Hayward, and Santa Clara University. Figure 3 is an example of the type of apparel that Prolific prints for them.

Junia Chu, marketing manager for Prolific, says marketing is one of the most challenging aspects of serving the collegiate market. Even though a screen printer might hold a license to print garments for a specific university, it doesn't always guarantee product placement in prime retail outlets, such as a high-traffic campus bookstore. She says that many colleges and universities are controlled by their own licensing programs, and with so many printers producing apparel for the university, not everyone is guaranteed the prime spots.

"Make sure you have connections," Chu says. "Everyone can get the same garments and use the same printing equipment, but you might have a better press operator to produce a higher quality product. Even if you have a higher quality product, but you don't have the connections to get into the store, you're not going anywhere."

Prolific also serves as a subcontractor for Greensboro, NC-based VF Imagewear, a screen-printing operation that holds licenses for major league sports, such as the NFL, MLB, NHL, NBA, and NASCAR. In its role as a printer of so-called hot-market jobs (i.e., NCAA Championships) for VJ Imagewear, the team at Prolific is on standby during major league championship games taking place on the west coast. The shop is prepared to immediately begin printing the announcement of a team win and deliver the printed garments to various retail stores on the west coast within 12 hours. Prolific has printed apparel for professional sports teams including the Giants, 49ers, Raiders, A's, and Sacramento Kings.

Silkworm Inc., Murphysboro, IL, a 26-year-old, 50-employee screen-printing operation began printing licensed properties for Southern Illinois University in 1992 (Figure 4). The proximity of the company to the school gives Silkworm an edge. "It allows us to be competitive in serving our local university market with quality products on a short delivery time," says Bob Chambers, president of Silkworm. "When they win a championship, we can get the shirts to market very quickly without having to order through another licensed company."

Chambers agrees that the collegiate market is very competitive and notes that the campus bookstores typically deal directly with the big players, such as Nike, Reebok, and Adidas. "It can be difficult to compete with them directly, so we have to find ways to stand out. As a small company, the competitive advantage we have in this market is not only our ability to offer quality designs with a quick delivery time, but that we have an intimate understanding of the customer and community being served," he says. Silkworm also established an online store to sell its apparel for the university.

Shops that work in the fashion industry are capitalizing on the popularity of the revival of retro styles of the 1980s, in both music and corporate brands. Consumers, mainly in the teen and young-adult age range, are sporting T-shirts with logos of popular cereals, soft drinks, junk food, logos, and album artwork from that era.

According to Donna Sheridan, vice president of apparel for Disney Consumer Products, two major trends in the children's market include the princess theme for girls and the pirates and cars themes for boys. Fully-loaded T-shirts also are popular. They feature 3-D elements, the ability to light up, and characters that appear in action poses all over the T-shirt. Figure 5 shows a sampling of popular Disney-themed apparel for youth.

Licensing essentials

So you know what licensed properties are, the various markets they cover, and the potential they bring to expanding your product line and growing your profits. Now you need to know how to go about snagging a license and what the process entails.

If you're going after the big dogs, especially in major league sports, you'll need to keep in mind that these organizations may have signed exclusive deals with major producers of athletic shoes, apparel, and accessories to be the primary resource for licensed products. If major league sports organizations do have contracts available to screen printers, they might only award a license to you if you wow them with a unique, new product that fills a specific need or is more impressive than the products their current licensees offer.

With numerous printers competing for a license, you must be willing to negotiate. The licensor might base his or her decision on which printer will pay a higher royalty, will pay a higher minimum-guarantee payment, has the best distribution network, or has the best reputation for delivering high-quality merchandise in a timely manner. Licensors also may consider which printer has the qualifications to become a partner and work with them on a long-term basis.

"There are only so many ways a screen-printing company can differentiate itself, and I think the better companies try to differentiate on quality, creativity, service, how quickly they can deliver the product, and how established they are to be able to meet the needs of a particular retailer," says Scott Bouyack, vice president of apparel marketing for the Collegiate Licensing Company, an Atlanta-based business that manages licensing programs for more than 200 colleges.

Sheridan says Disney picks its licensees very carefully. "We value their expertise in the marketplace, and that is very critical to us. We value quality on our product, and that is paramount. We also believe in a win-win partnership. We believe that when we enter into a partnership, it is a long-term relationship. We want to guide them to make the best product they can because at the end of the day, Disney stands for quality, and Disney is a brand that needs to be represented well in the marketplace."

When you are awarded the rights to reproduce a licensed property, your agreement with the licensor will cover several crucial points. These include licensing fees and royalty payments, minimum guarantee payment, duration of the contract, and what is expected of you as the licensee.

In typical licensed-property agreements, the licensee will pay a licensing fee (royalty) to the property owner. Royalty rates vary from market to market. Riotto explains that in the entertainment market, average range for royalty rates is 8-14% of the wholesale price of the product. In the sports arena, the rates average between 8-11%, and in the collegiate market, the rates range between 6.5-10%. The average range is between 6-10% in both the corporate and celebrity sectors. Some licensed properties, including those in the children's market, fall at the lower end of the range because they often have a limited age demographic.

In many programs, the royalty payment includes a minimum guarantee or advance, which can range from a few hundred to a few thousand dollars, depending on the market and the client. In effect, the licensee is guaranteed to pay a minimum fee to the licensor. Riotto explains that the minimum guarantee is established for two reasons: It serves as a motivating factor for the licensee to market and actively sell the licensed product, and it protects the licensor in situations where the licensee is not able to manufacture the property after all or does not aggressively sell the product. In most cases, all or some of the minimum guarantee is paid when the agreement is signed.

Contracts generally cover a period of one to three years, with most contracts falling in the two- to three-year range. Contract length typically depends on the strength of the brand and the length of time it has been in the marketplace. Contract length also may be determined, especially in the fashion and film markets, by the length of time the product remains in the marketplace.

Contracts also may include what are called price points. For example, one screen printer might hold licensing rights for T-shirts sold up to $25 at retail. Another screen printer might have a license for that same property but at a higher price point, meaning that the T-shirts are sold in a more upscale or specialized store.

Whatever the scenario or contract agreement, the image, logo, character, or artwork being printed is the most critical element in the licensing contract. Licensors typically do not allow printers to take liberties with the licensed property. Most licensors provide a style guide that the printer must use. In some instances, particularly in the collegiate-apparel market, a licensor will invite a printer to submit designs. In all cases, the design requires final approval from the licensor. This process can take anywhere from a couple of weeks to several months, depending on the licensor's approval process and how quickly the products need to hit the marketplace.

"In the vast majority of cases, screen printers are encouraged to be creative," Bouyack says. "Colleges will provide a style guide [digitally] of the college's logo/artwork and how they want it to appear, but how the screen printer wants to use the college's artwork in a design is largely up to the screen printer. Colleges do like to see creativity and screen printers coming up with something new and different."

When NASCAR awards a license, it is for use of the NASCAR bar mark only. If screen printers are interested in printing apparel with designs that include names of NASCAR drivers or teams, and images of the cars, they must approach the drivers and/or teams and obtain a cross-license. NASCAR's licensing division helps facilitate that process by putting licensees in touch with the appropriate contacts.

What's in it for you?

With so many potentially lucrative possibilities in a range of markets, it makes sense for screen printers to invest in printing licensed properties. Bouyack says screen-printed T-shirts and fleece have been the foundation of CLC's apparel business for the 25 years that the company has been in business. "Every year we see at least single-digit, if not double-digit, growth in these categories. Our business can be cyclical, but I think those are staple categories."

While apparel accounts for 17% of all licensed-product sales, the products aren't limited to T-shirts and ball caps. One product that is rising in popularity amongst children is bedding decorated with logos and images of their favorite cartoon characters and talent from popular children's shows on TV.

Other items, such as mugs, key chains, mouse pads, magnets, and seat cushions, can just as easily be decorated with a logo or character. "It never ceases to amaze me the ideas that come through our office for different products," Bouyack says. "When you get into the hard-goods area, there seems to be a market with college fans, where the loyalty lies with strong colleges, for everything you can put a college logo on. It's virtually limitless in terms of potential opportunities."

Screen printers can put themselves one step ahead of the competition by doing some research in the marketplace to determine which movies, television shows, sports players, and other characters will be popular. "It's not always the programs with the biggest dollars behind them," Riotto says. He suggests that screen printers talk to people who would be their target audience and find out what they're watching and interested in. He also recommends using the Internet to find out what is popular. It also doesn't hurt to be aware of what movies are due out and how they are expected to perform.

"I think the people who succeed in the marketplace are good at what they connect to," Sheridan says. "Quality is paramount, and having a good relationship in the marketplace, but when you have a licensee who knows that 'tween' girls want a roushed edge on their T-shirts and denim incorporated, they know the tween market. That is one we want to connect with—someone who is good at the kids market and is willing to focus on that."

Screen printers should have a realistic understanding of their ability to fulfill responsibilities in the markets that draw their interest. For example, movie and television licensed properties might be a good match for a shop that can distribute nationwide and in large volumes. If a shop already has experience in supplying sports-related apparel regionally, licensed properties in the sports market are an appropriate choice.

The industry of printing licensed properties is certainly not without its challenges and obstacles. Munoz says that the biggest limitation is that the retail climate is shrinking, due to consolidation in the marketplace. There are only so many venues in which to sell product. Additionally, in the past six to 12 months, retailers have consolidated their vendor base. Conversely, the licensing business used to be a narrow field, but these days, there is a great deal of competition.

This doesn't mean that screen printers don't stand a chance at tapping into the licensing market and securing profitable contracts. It just means that screen printers will have to realistically determine their strengths, what sets them apart from the competition, and their capability to deliver a high-quality product that meets the often stringent demands of licensors.

"Licensing is not a license to print money," Chambers says. "You still have to be able to do the marketing, which is usually a lot more difficult than making the product. Like any business venture, you have to do your homework. Be sure you understand the market you are getting involved in."

In the quest to win a licensed-property contract, be sure to research the marketplace, make sure your shop can support requirements for quality and fulfillment, and be certain that your new product line will appeal to existing and potential customers. With knowledge, preparation, a few winning ideas, and solid printing techniques, you can be on your way to exploring money-making avenues in the apparel world that you may not have realized were available.

Licensing Information Resources

International Licensing Industry Merchandisers' Association (LIMA)
350 Fifth Ave., Ste. 1408
New York, NY 10118
212-244-1944
Fax: 212-563-6552
Web: www.licensing.org

The Collegiate Licensing Company (CLC)
290 Interstate North Cir., Ste. 200
Atlanta, GA 30339
770-956-0520
Web: www.clc.com

License! Global magazine
641 Lexington Ave.
New York City, NY 100
22212-951-6600
Fax: 212-951-6714
Web: www.licensemag.com

Licensing Partners Int'l
13000 Sawgrass Village Cir., Ste. 41
Ponte Vedra Beach, FL 32082
904-224-5100
Fax: 904-224-5107
Web: www.licensingpartnersintl.com

Licensing World
The Old Stables, School Lane, Crowborough,
East Sussex. TN6 1PA. GB
44 1892 668444
Fax: 44 1892 668555
Web: www.licensingworld.co.uk

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