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
- 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
- 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
- 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
- Auditing may be necessary to assure proper royalty
- 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
- 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