Profiting from Niche or Novel Products

There are times when the only practical way for licensors to capitalize on an up-and-coming new category is to add it to an existing licensing agreement, rather than signing a new deal:

• Compressed timeframes. When a category becomes hot quickly—even if it is likely to burn out just as fast—licensors want to jump in, both to take advantage of a new opportunity and to guard against counterfeit products. Fidget spinners seemingly came out of nowhere into mainstream consciousness, and are widely expected to have a short life as a pop culture fad. Most of the licensors who are involved in this category (the major sports leagues, Warner Bros., Nickelodeon, colleges, and more) are working with a current gift and novelty licensee. Forever Collectibles, marketer of the Diztracto Spinnerz brand, is a leading partner.
• Synergies. In situations where a niche opportunity is integrally tied in to a broader category, the best (and often only) option may be to include the product as part of a full-category licensing deal. A case in point: Selfie sticks, which are virtually always included with other electronics accessories in a single licensing arrangement. Examples include Kodak with the Bullitt Group, JoJo Siwa with iHome, Mentos with Accessawear, Smiley with Uunique London/Aegis Vision, and Shopkins with Sakar.
• Competitive issues. An existing deal may preclude signing a new licensee, even if standalone licensees are available for an up-and-coming category. A number of specialty companies make beard oil, a product that has been hot among millennials. But an agreement with one of them would typically conflict with existing licensees in the men’s grooming category. When King Features decided to introduce beard oil tied to the Popeye character Brutus, it turned to Razor MD, its collaborator for limited-edition men’s grooming and shaving products for the Popeye brand overall.

When one or more of these circumstances is in play, the decision to go with an existing licensee for a smallish opportunity simply makes the most sense from a business perspective. In some cases, it may be the only viable option.