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

 

Some Advantages of Licensing:

- Low to no initial investment (the cost of your time and prototype)
- If you work with an agent, licensing usually requires no further effort on your part
- You can make a lot of money each quarter without doing anything
- You benefit from the financial backing, marketing and development efforts, and more from your licensee
- Spin-offs or line extensions of your product are possible- giving you a broader royalty base
- Toy company licensees will be aggressive in protecting your concept
- Worldwide opportunity without complex distribution

Some Disadvantages of Licensing:

- High demand for innovation- few products will be appropriate for most manufacturers
- Your product will likely need to be shown to numerous companies
- It can take a while to get a license. Eighteen months or more is not uncommon.
- It is also not uncommon to enter into a licensing agreement with a company to find that your concept never "goes anywhere"
- Auditing may be necessary to assure proper royalty payments
- Sometimes smaller companies "forget to pay"
- 5% of the wholesale price isn't anywhere near what you can make if you self produce and market your item. An item that wholesales for say $7.00, will give you $0.35 cents per unit.
- Licensees may expect royalty free accounting for returns, samples, defects, shipping allowance, discounts and much more
- You are at the mercy of your Licensee for performance
- Licensee will likely change your product- a lot

Understanding Self Production and Direct Marketing
This is where an individual or a company has their product produced and is responsible for getting their toy or game into the retail market. This is where you become the "toy company". You have your product designed, produced as well as sell and ship your product directly to retailers that you have encouraged to buy your product.

Some Advantages of Self Production:
- Some products have great potential for marketing, but are inappropriate for licensing
- You "run your own ship"
- You can make a lot of money. An item that you are wholesaling for $7.00 will likely provide you $3.50 per unit-- that's 10 times as much as most licenses
- Niche opportunities can be lucrative and are typically avoided by major manufacturers


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