Once considered a stepchild to the marketing mix, licensing is mutating into a golden child -- one that has the potential to rake in millions in additional revenue for marketers at little extra cost.
While entertainment properties still comprise a big chunk of licensing deals, "corporate brands" is now the fastest-growing category, rising at a rate of 5% a year, according to The Licensing Letter.
That reality isn't lost on ad agencies that consider themselves stewards of corporate brands. In fact, Leo Burnett Co., Young & Rubicam and McCann-Erickson Worldwide are all said to have explored the option of purchasing a licensing shop.
Mark Dowley, chairman-CEO of McCann's events and promotions marketing network, Momentum Worldwide, said he has scrutinized licensing for two years and decided that "we are going to be in this business."
He declined to say whether a deal is imminent, but added: "For us to understand the properties and value of a licensing idea, we have to have the subject experts at hand to do it. We need to provide that service ourselves."
DOLLAR VALUE OF LICENSING
In an effort to harness agencies' and marketers' enthusiasm, the licensing industry is stepping up efforts to promote itself as a serious marketing tool.
The leading trade association, International Licensing Industry Merchandisers' Association, recently commissioned its first-ever study to measure sales. It calculated that licensing is a $110 billion industry in the U.S. and Canada -- a far cry from The Licensing Letter's $71 billion estimate, while License! magazine gauges worldwide sales at $132 billion (see story at right).
While the numbers may be in dispute, licensing's effect on marketers isn't. McCann's Mr. Dowley believes the next six to 12 months will see germination of many licensing deals between well-known brands.
He pointed to such recent examples as the agreement between Toyota Motor Corp.'s Lexus luxury brand and Coach, and Lincoln Mercury Co.'s Lincoln Continental deal with Cartier Inc. as the wave of the future.
"Now, one in two Fortune 500 companies is using licensing as a tool," said Nancy Bailey, president of licensing agency Nancy Bailey & Associates, Coral Gables, Fla.
KNOWN BRANDS' ADVANTAGE
Added Margaret Smyth, a partner and licensing specialist at Arthur Andersen: "It's much more important than it was in the past. [Well-known brands] are starting from a position of strength. They have a history with the consumer."
Since corporate brands predominantly are handled by ad agencies, LIMA and its member companies are exploring agency relationships.
"We're at the threshold of [the formation of] relationships between advertising agencies and licensing agencies," said Charles Riotto, LIMA's executive director. "As the first marketers become successful, that will really open the doors,"
However, the level of ad agency involvement will probably vary. Ogilvy & Mather Co-President Bill Gray said he believes some shops will buy licensing shops, some will create in-house capability and others will form alliances.
"Licensing is clearly on the rise," he said. "The question boils down to 'Do you want to own it all?' "
Licensing shops say they would embrace agency involvement. Many see alliances, or even mergers with agencies, as an inevitable outcome.
"Strategic alliances will likely be the next step," said Carole Francesca, president of Broad Street Licensing Group, Upper Montclair, N.J., which handles licensing for Unilever's Snuggle.
Ammirati Puris Lintas, New York, the ad agency for the fabric softener brand, played an important role in developing the licensing plan.
"Advertising has definitely created Snuggle's personality and brand essence, and licensing will be another way to . . . help Snuggle leave lasting impressions long after our :30 is over," said Paula Alexander, assistant brand manager at Unilever Home & Personal Care.
Ammirati will be part of a licensing approvals committee to ensure that future products maintain each brand's "essence, vision and positioning," Ms. Alexander added.
"It's not common to work with the ad agency, but I think it will become more common," Ms. Francesca said. "Licensing is a tool that can build a brand, just like promotion, PR or [general] advertising. It's another element."