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Brand Licensing: Making the Most of Product Licensing

Fri 4th Apr 2014 | Marketing & PR

Ladies’ stockings, bandanas and tattoo sleeves will be among the merchandise available to fans at the 2014 FIFA World Cup in Brazil. 

These novelty products are being produced under license by Canada-based Fan Ink which hopes to persuade supporters to spend their money on some fun and impulsive purchases.

Football supporters have always loved merchandise in their club colours. As well as traditional favourites such as replica shirts, scarves and hats, fans are no strangers to unusual products.

You can already buy a Manchester United sliding tackle garden gnome, a Chelsea dog lead and an Arsenal chef’s hat. Less bizarre 2014 include branded mobile phone and tablet covers.

Yet for the world’s increase in TV rights fees and local sponsorship deals in regions such as Asia.

Clubs such as Manchester United, Arsenal, Barcelona, Manchester City and Liverpool can earn up to £2m per sponsor per country each year, according to sports sponsorship research company International Marketing Reports (IMR). Manchester United, for example, has numerous domestic telecom sponsorships in Asia and Africa worth far more than it would ever earn from international licensing.

“There is also a view that having counterfeit merchandise in developing countries is a good loss leader,” says IMR’s managing director Simon Rines.

“To have tens of thousands of fans walking around in an Arsenal shirt, for instance, is reassuring for a local sponsor considering a partnership with the club.

Through buying a counterfeit jersey, the fans are effectively nailing their colours to the mast and helping to develop the club’s brand in a particular country.”

Of course, the lawyers who earn big money representing football clubs to protect their intellectual property would never admit such a thing publicly.

They say clubs must be strict with the pirates if they want to push merchandising revenues from their team and player rights as high as possible. One argument is that counterfeit and often substandard products can seriously damage a club’s brand if, for example, a child was to choke on a toy carrying a club’s badge, or a scarf unravelled after watching one game in the rain.

“Football clubs must check a number of things including how an item is being manufactured as well as the quality. Is child labour involved?” says James Hennigan a partner in law firm Squire Sanders (UK) sports law practice. “These licensing deals are getting bigger and are now 70-page contracts.”

Mark Weston, a partner in brand exploitation at lawyers Matthew Arnold & Baldwin LLP, agrees that as clubs sign more international deals they must guard against problems that could damage their brand.

“Often the counterfeit goods are made on the same production line as official merchandise,” he says. “Clubs must be able to trust a licensee to exploit the brand positively which is why licenses are so tightly controlled. Clubs will only extend the length of a contract if certain criteria are met.”

The merchandising market is getting more complex with intangible properties like web and digital products joining traditional items.

James Earl, a partner in law firm Pinsent Masons’ sports team, says this means clubs must be vigilant when choosing suppliers. “The terms of the contracts must make sure products are not only good quality but are also presented well when sold,” he says. “The impact of on-the-field success can also have a huge effect on future sales around the world. Manchester United remains the merchandising template for most clubs.”

Indeed according to internet retailer Amazon, Manchester United remains top of the league for selling licensed product on its website, followed by Chelsea, Liverpool then Arsenal. Clubs outside the Premier League to make it into the top 15 include QPR and Nottingham Forest.

With such big money to be made from product licensing, clubs are increasingly employing forensic experts to ensure they collect the revenue they are owed.

Fisher Forensic audits agreements signed between a club and its licensees to make sure sales numbers are reported correctly once any discounts or returns are included. If products have been sold too cheaply or mistakes are found in the accounts the licensee must reimburse the football club. Rafi Saville, forensic partner at Fisher Forensic, says that in a large number of cases there is under-reporting of products sold, potentially costing clubs thousands of pounds.

“Clubs have so many licensees around the world that they need to keep track of what is happening,” says Saville. “These audits are part of a club’s corporate governance because when they do a product licensing deal they are giving up their most valuable asset – their brand.”

Tottenham Hotspur exhibited at the Hong Kong International Licensing Show for the first time in January.

The club’s Brand Licensing Manager Gary Jacobson says its appearance alongside Chelsea, Liverpool and Arsenal is part of a strategy to expand its licensing presence in the Far East.

“We wanted to put down a marker and show we are serious about expanding our product licensing in this region,” he says. “But any international deals we sign must fit with our brand as a football club, which is based around a tradition of playing exciting football. We are a team that international fans like to watch.”

Tottenham Hotspur already has a fan base in Hong Kong which it cultivated during last summer’s Barclays Asia Trophy. The club has a long-term partnership with Hong Kong team South China FC and works with the Hong Kong FA on grassroots player development.

The club has also appeared at the Licensing Expo in Las Vegas and has appointed licensing agents in Australasia, South Africa and Middle East and has a partnership with Sport Endeavors in the US.

Spurs has contracts with more than 50 licensees across a huge range of products from core merchandising such as caps and gloves to more unique products.

“We are talking to an agent in South Korea about developing a children’s lunch. The box and the ricebased foods used would be Spurs colours,” says Jacobson.

Words: Steve Hemsley

Posted by: Kev Howland 

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