The Licensing Agency Benchmarking Report
Based on original research conducted specifically for this project, The Licensing Agency Benchmarking Report summarizes the changes that have been facing licensing agencies and provides a snapshot of the current status of the licensing agency business. (Purchase the report here.)
Following are the report’s table of contents, list of exhibits, and introduction and executive summary.
Table of Contents
Introduction and Executive Summary
1. The Agency Landscape
Licensing Agency Size and Scope
A Global Agency Business
2. Competitive Analysis
The Big Get Bigger
Launch of New Agencies
New Players from Outside of Licensing
Agency-driven Competitive Landscape
3. Challenges Facing Agencies
A Crowded IP Landscape
Digital Distribution of Properties and Products
What is Licensing, Anyway?
Increased Demands from Licensors, Retailers, and Licensees
Challenges Vary by Property Type, Category, Geography
4. Changing Role of the Agent
Specialization by Property Type
A Countertrend: Diversification
Specialization by Product Category
Adding Value Through New Services
New Business Models
Alliances with Agencies and Other Players
Formalizing Relationships Through Mergers and Acquisitions
5. Compensation Trends
What Is Driving New Compensation Models?
Commissions: Still The Core Compensation Structure
Retainers and Other Non-Commission Compensation
6. Final Thoughts
Assessing and Selecting Properties to Represent
The Changing Nuances of the Agency-Client Relationship
Unique Characteristics of Global Agency-Client Partnerships
Impact of Agency Evolution on Manufacturers’ Reps and Other Providers
Looking Toward the Future
About the Author and Raugust Communications
List of Exhibits
1.1 Global Licensing Agency Stats
1.2 Retail Sales of Licensed Merchandise Attributable to Agency-Represented vs. In-House-Represented Properties, 2018
1.3 Number of Properties Represented, by Agency, Worldwide, 2018
1.4 Number of Employees by Agency, Worldwide, 2018
1.5 Percentage of Licensing Agencies, by Retail Sales of Licensed Merchandise Driven, Worldwide, 2018
1.6 Retail Sales of Licensed Merchandise and Commissions Generated by Agencies, by Size, Worldwide, 2018
1.7 Agency Offices by Ownership, Worldwide, 2018
1.8 Licensing Agency Offices by Territory, Worldwide, 2018
1.9 Number and Percentage of Licensing Agency Offices, by Territory,
1.10 Primary Geographic Focus of Agency Offices, Worldwide, 2018
1.11 Percentage of Licensing Agencies that Work with Sub-Agents, Worldwide, 2018
1.12 Percentage of Licensing Agencies Serving as Sub-Agents, Worldwide
2.1 Percentage of Current Licensing Agencies Founded Since 2013, Worldwide, 2018
2.2 Licensing Agency Ownership by Non-Licensing Entities, by Type of Company, Worldwide, 2018
3.1 Percentage of Licensing Deals, by Primary Distribution Strategy, Worldwide, 2018
3.2 Share of Retail Sales of Licensed Merchandise by Distribution Channel, Bricks-and-Mortar vs. E-Commerce, U.S., 2018
3.3 Percentage of Children’s TV Properties, Streaming-Only Versus Traditional Television, Worldwide, 2018
3.4 Types of Merchandise Partnership Deals, Traditional Licensing Versus Collaboration Versus Non-Product, Worldwide, 2018
3.5 Percentage of Experiential Initiatives, by Type, Worldwide, 2018
4.1 Number of Property Types Overseen by Agencies, Worldwide, 2018
4.2 Percentage of Agencies Operating in Various Property Types, Worldwide, 2018
4.3 Percentage of Agencies Focusing Mostly on One Product Category, Worldwide, 2018
4.4 Percentage of Licensing Agencies Offering Services Beyond the Scope of a Traditional Representation Agreement, by Type of Service, Worldwide, 2018
4.5 Percentage of Licensing Agencies That Consult On a Project Basis, Worldwide, 2018
4.6 Percentage of Licensing Agencies That Represent Manufacturers for Licensing Acquisition, Worldwide, 2018
4.7 Percentage of Licensing Agencies That Broker Licensing Deals on a One-Off Basis, Worldwide, 2018
4.8 Percentage of Licensing Agencies That Own Proprietary Properties, Worldwide, 2018
4.9 Percentage of Licensing Agencies That Have Collaborated in Some Way With Other Agencies, Worldwide, 2018
4.10 Methods of Agency-to-Agency Collaboration, Worldwide, 2018
5.1 Percentage of Agencies Receiving Compensation Beyond Traditional Commission on Royalties, Worldwide, 2018
5.2 Licensing Agency Commissions, by Level, Worldwide, 2018
5.3 Licensing Agency Commission Splits, Master Agent vs. International Sub-Agent, Worldwide, 2018
5.4 Percentage of Licensing Agencies Charging Monthly Retainers on Top of Commissions, Worldwide, 2018
5.5 Agency Retainers, by Amount, Worldwide, 2018
Introduction and Executive Summary
Over the past decade, the business of marketing consumer products and services has changed dramatically. Consumers’ tastes and shopping habits have evolved, the retail and e-tail landscapes have been profoundly altered, and social media has transformed marketing techniques, to name just a few elements contributing to a new landscape.
The licensing business is struggling with all of these developments, along with a parallel proliferation of properties, often of the niche variety. This has caused companies involved in licensing to change the way they do business, relying more on collaborations and capsules than long-term merchandise lines, more on experiences than products, and more on targeted initiatives than mainstream programs.
These long-term, far-reaching, and momentous shifts have had a significant impact on licensing agents, causing them to reassess business models, payment structures, services offered, and many other aspects of their trade. And all of this is occurring in an environment that is more competitive than ever, with more agents in business and more companies outside of the traditional agent realm offering services that overlap with those of licensing specialists.
The Agency Landscape
Raugust Communications estimates there were approximately 855 licensing agencies and 940 agency offices worldwide in 2018, collectively accounting for an estimated $102.9 billion in retail sales of licensed products worldwide. When compared to estimates of the size of the global licensing business, as compiled by Licensing International, that translates to approximately 36.7% of total retail sales of licensed goods being attributable to deals managed by an agent.
Licensing agencies tend to be small companies, with almost a third representing five or fewer properties and more than 70% having 10 employees or less. The business is also top-heavy, with just 2.3% of agencies driving $1 billion or more in retail sales, collectively accounting for 59.8% of agency-facilitated retail sales of licensed goods.
The landscape is continually being reshaped, with agencies entering and exiting the business continuously. As of mid 2018, almost a fifth (19.4%) of licensing agencies in business globally were founded in the five-year period from mid-2013 to mid-2018, making them relatively new agencies.
Changes to the Agency Business
Not surprisingly, given the transformation of the licensing and retail market, agencies have been transitioning away from a purely long-term, sales-focused, commission-based licensing model and toward a more flexible template that positions them better for success.
For example, they are increasingly:
- specializing. On a global basis, nearly four in 10 (39.4%) of licensing agencies specialize completely or mostly in just one property type, while a small but growing group (5.7% of agencies) specialize solely, or almost solely, in one product category.
- adding services, both for existing licensing clients and other companies. A majority of agencies globally (62.1%) provide design services, to name one example.
- entering into additional business models, such as project-based consulting, manufacturer representation, or brokering individual deals. More than four-fifths (81.2%) of licensing agencies worldwide report doing at least some project consulting.
- becoming property owners. Almost 9% of agencies have dipped their toes into property ownership (outright or as an investor) as of 2018.
- working with other agents. More than two-thirds (67.8%) of licensing agencies report collaborating with other agencies in some way on at least one property.
Many of these changes have been ongoing for many years and, as of 2018, have become a standard mode of operation.
As the business moves more toward niche properties, short-term capsules and limited editions, retail-exclusive deals, experiential and promotional ventures, and e-commerce, it becomes more difficult for agencies to receive adequate compensation through the traditional model, which is based on a commission tied to royalty income.
Revenue streams tend to be smaller and more fragmented than in the past, especially when compared to the growing amount of work it takes to achieve this revenue. Many deals today are not royalty-based, and a growing number are more promotional than revenue-generating, or even not revenue-generating at all.
Meanwhile, commission rates have also gone down over the years as the number of agents has increased. At the same time, demand for straight licensing agency services has declined somewhat (at least in some sectors of the business) as more licensors feel they have gained the experience to take their licensing activities in-house.
These changes call for different compensation models than in the past. While 21.1% of agencies report being compensated wholly on the traditional commission-on-royalties basis, the remaining 79.9% are compensated at least in part through other means. Fully 42.8% of agencies now require a retainer, either regularly or occasionally, while others negotiate à la carte fees, flat project fees, or other configurations.
About this Report
The Licensing Agency Benchmarking Report offers original data on the current status of the global licensing agency business. It includes six chapters:
- Chapter 1 offers a macro-level overview of the global agency landscape, including retail sales of agency-driven licensed products, licensing agency size and scope, ownership trends, and global presence.
- Chapter 2 provides information on competitive trends within the licensing agency sphere specifically, as well as the broader competitive set.
- Chapter 3 spotlights the challenges facing agencies, from broad retail and licensing trends—which affect all companies involved in licensing—as well as issues specific to agencies alone.
- Chapter 4 gets into the details of how agents operate as of 2018, with facts and figures about agency specialization, provision of services, changing business models, and participation in alliances of various sorts with other agencies.
- Chapter 5 analyzes compensation trends, from commission rates to sub-agency splits, to methods of payment beyond royalty-based commissions.
- Chapter 6 looks at the impact of these agency trends on other players in the business, including licensor-clients and manufacturers’ reps, and takes a quick peek into the future.
The report includes includes 34 exhibits highlighting the original research conducted specifically for this project.
Methodology and Acknowledgments
This report was compiled using a variety of research methods, including:
- An online survey of global licensing agencies, conducted in mid-2018, which was used as the basis for compiling most of the data included here. Responses were submitted anonymously and confidentially.
- Telephone interviews with a representative handful of agencies and manufacturers’ reps to expand on some of the themes uncovered in the research. Thanks to Adina Avery-Grossman of Brandgenuity, Rita Bonnell-Illig of RBI Associates, Carlos Carvajal of KOPA Licensing, Alita Friedman of Alita’s Brand Bar, Germaine Gioia of Playlife Company, Joan Luks of The Serenata Group and The ThinkTank Emporium, Ross Misher of Brand Central, Carole Postal of Spotlight Licensing and Brand Management, Maca Rotter of La Panaderia Licensing & Marketing, Neal Rudge of Pacific Licensing Studio Pte Ltd., Luis Salazar of Compañía Panamericana de Licencias, Stu Seltzer of Seltzer Licensing, Vivian Velasco of Pacific Swell Brands, and Ilana Wilensky of Jewel Branding & Licensing.
- Information from Raugust Communications’ proprietary databases of research and trend insights, sales data, corporate information, and the like culled over many years in licensing.
- Company information such as press releases, websites, marketing materials, and financial releases.
- A review of third-party research and statistics (e.g. data by category or geographic region), as well as a study of newspapers, magazines, newsletters, and directories, to provide context and expand the total pool of agents to survey.
Through all of these resources, Raugust Communications compiled the all-original data included in the report. Figures are for calendar year 2018 and are global unless otherwise indicated.
Purchase the report here.