The incidence of property owners taking an ownership stake in a manufacturer’s company as part of a licensing agreement—while not unheard of in the past—has been on the rise over the past couple of years.
This activity has been particularly notable of late in the sports licensing sector. Back in 2015, the NHL took an equity stake in Fanatics and Outerstuff, two of the league’s three primary apparel licensees. Earlier that same year, the NFL had also invested in Outerstuff, which serves as one of its licensees as well. Meanwhile, the NFL, MLB, and NFL Players Association all acquired a percentage of their licensee Fanatics this year, with the NFL’s share pegged at 3% and the NFLPA’s at less than 1%.
The same phenomenon is happening in the entertainment, character, and toy arena as well. In May, The Pokémon Company signed a master toy agreement with Wicked Cool Toys for animation-related playthings; as part of the deal, the licensor made a strategic investment in Wicked Cool. (Tomy remained the licensee for videogame-related Pokémon toys.) And, in a slightly different variation on the investment trend, Mattel signed Sonokong as its primary distribution partner last year for its portfolio of licensed and proprietary toys in South Korea, taking a 12% stake in the company at the same time.
Financial arrangements between licensee and licensor that go beyond the traditional licensing structure come up in the fashion industry more often than for other property types. Fendi owned a stake in its watch licensee Taramax before purchasing the entire company, to name just one example. Conversely, licensee G-III holds an investment position in the North American joint venture that manages most of the consumer products business in that territory for Karl Lagerfeld, one of the licensors with which G-III works.
These types of arrangements, which have long been a fact of life in the global fashion-licensing business and are becoming more frequent in sports and entertainment, offer the participants a number of advantages. They can, the partners believe, increase synergies between licensee and licensor, spur greater attention to the licensed products on the part of both parties, offer additional financial rewards (upfront for the company receiving the investment and on the back end for the investor), and generally strengthen the relationship between the two companies.
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