Licensing vs. Self Production
and Promotion of Your Toy or Game

You have a great idea that you know is going to be very successful. But which way should you turn? Do you license this concept to another company to produce, or do you produce and distribute this product yourself? Which is better? To determine which may be best for you, it is paramount to understand what "Licensing" and "Self Production" really mean and what they entail.

In basic terms, product licensing is where you allow a company to utilize your patent and product likeness in return for royalty payment.

Understanding Licensing:
First, there are basically three kinds or variations of licensing to understand;

1. Character / image property-- typically thought of as cartoons, but any image or illustration could apply. Some varied examples include: "Disney", "Sesame Street" characters, "Looney Tunes", "Sabrina- the Teenage Witch", "Baywatch", and the Anne Geddes baby images. Royalty rates will vary widely, based upon demand. Toy companies often pay for exclusive rights to utilize a popular image. The dollar amount paid for the top properties can be staggering, plus, there may be many demands placed upon a licensee for performance, advertising, etc. Licensee are limited to a very narrow and specific product or product category.

2. Trademark property such as: "McDonalds", "Coca Cola", "Nike", etc. Royalty for the top "brands", trademarks and properties can be a staggering dollar amount for a licensee. Companies seek brand identities as they do character or images for their ability to have immediate public awareness and appeal. Companies often add a popular identity to their product instead of expending money advertising. Therefor, they need that broad consumer "reach".

3. Product or patent properties: This probably includes any product that you have invented. These are traditionally unproven and "risky" propositions for the toy companies.

Product / patent licensing is where most toy inventors are likely to be. Payment is typically based on the wholesale selling price of your item. The typical royalty percentage is 5%.

Many inventors tell me that they want to license their invention to as many different companies for as many different applications as possible. This is the "ultimate licensing goal", but one that requires a great deal of public knowledge and demand for your property before this can typically happen. Many companies try to turn their products into character or trademark licensing opportunities. This means a company licenses their product, company name or logo to another company or manufacturer for a specific item or application. For example, "Fisher Price" licenses their name for clothing, "Lego" licenses their name for children's furniture, "Barbie" licenses to thousands of different manufacturers for everything from paper plates to bed sheets and children's clothing. The "Power Rangers" and all the popular new character introductions have lists of licensees as well.

Advantages of Licensing