Should You License Your Toy Idea? Here’s What You Need To Know About Toy Licensing.

Toy licensing is the intersection of entertainment and consumer products, playing a crucial role in the modern toy industry. Licensing involves obtaining rights to use popular characters, brands, or intellectual property (IP) from various media sources to create and market toys and merchandise. This practice allows toy manufacturers to tap into the immense popularity of beloved franchises from movies, TV shows, video games, and books.

The process benefits both parties involved: toy companies gain access to recognizable and marketable properties, while IP owners expand their revenue streams and increase brand visibility. This symbiotic relationship has led to countless successful toy lines based on everything from blockbuster films to classic cartoon characters.

Licensing is a viable option for small brands and small manufacturers to grow their reach and revenue. But before you can join the world of toy licensing, you’ve got to understand 2 key terms, licensor and licensee.

What Is A Licensor In The Toy Industry?

A licensor in the toy industry is the entity that owns the intellectual property rights to a particular character, brand, or concept. This could be a movie studio, a television network, a book publisher, or any other company or individual that holds the legal rights to a property. The licensor grants permission to other companies to use their intellectual property in exchange for financial compensation, typically in the form of royalties. They maintain control over how their property is used and ensure that licensed products meet their quality standards and align with their brand image.

The Role of Agents in Toy Licensing

Licensing Agents in the toy industry, act as a bridge between manufacturers and brand owners. In an interview on the “Making It In The Toy Industry” Podcast, Anita Castellar explains, "Your agent will hopefully take a brand deck from the manufacturer, something that just as a handshake deck introduces who you are, what your capabilities are, what retail placement you already have." This initial presentation is crucial in catching the attention of potential licensors.

What You Need To License Your IP

Having an agent is only half of the battle toward licensing your IP. For IP owners looking to license their brand, its essential that the IP holder has a strong and engaged customer base. Your customer base could be through a strong social media following, existing product sales, or other measurable metrics that demonstrate the brand's appeal across a specific demographic.

Top 3 Hidden Costs in Licensing

Before you dive into licensing out your brand or obtaining the right to represent a license, consider the extra cost of this business model. The management, promotion, and production of licensed goods is often more than most people account for. Here are the top 3 hidden costs in licensing.

1. Headcount and Resources:

Many licensors require staff to manage forecasts, retail updates, and daily approval processes.

2. Product Testing:

Especially for children's products, licensors may require specific testing procedures, which can be costly.

3. Insurance:

Product liability insurance is often required, with minimums ranging from 2-5 million dollars. Some licensors are even beginning to require online liability insurance.

The Future Of Toy Licensing

As the toy industry continues to grow, licensing remains a critical component of bringing new and exciting products to market. Anita sees several areas of potential growth and change for the future.

1. IP Ownership and AI

Having ownership of your intellectual property is key in being able to license it out. But with the rise of artificial intelligence, will that ownership be challenged? What is your IP in a digital future? How do we maintain ownership of our IP with the growth of AI?

2. The Creator Economy

Social media influencers and content creators are increasingly entering the licensing space. But will their millions of followers translate into sales? Have caution when collaborating with creators, and assure you have clear contracts and expectations of promotion and sales on both ends.

3. AR and VR in Experiential Licensing

Augmented reality (AR) has been used in toy marketing for some time. In the near future, the use of virtual reality (VR) experiences will only grow as many kids and adults  that will live in the next generation will become more connected with technology than previous generations. An example of Experiential Licensing could include Fortnite concerts or sport live events such as the NBA, NFL, and etc. 

4. Sustainability Initiatives:

There has been a growing interest in sustainability within the licensing industry. Recently there have been partnerships with the National Park Service and initiatives by major brands like Nickelodeon's SpongeBob to encourage sustainable product development. Although these partnerships create a substantial impact, the cost remains a significant barrier for many companies.

5. Potential across the Globe:

Although some companies limit themself to a specific country it is also important to consider the future of licensing throughout the world. Niche markets could play a crucial role as there would be licensing deals that would cater to specific, underserved markets or demographics across the Globe. This would allow for more inclusive licensing and as markets around the world continue to grow, licensing deals with a global perspective would become increasingly important.

Leveraging Social Media in Toy Licensing

In today's digital age, social media is an extremely effective way of promoting licensing partnerships. Anita offers several strategies for effectively using social media:

1. Announce Partnerships Widely:

"The first thing that everyone should do on social media when you have a new license or even a new product is telling people about it," Anita advises. This includes press releases, social media posts, and leveraging trade publications to spread the word.

2. Collaborate with Influencers:

While big-name influencers can be effective, Anita suggests considering smaller influencers as well. "You don't always need famous influencers. You just get someone who has a good following, who has a very engaged following," she explains. The key is finding influencers whose audience aligns with your target market.

3. Utilize E-commerce Options:

For manufacturers struggling to secure traditional retail placement, Anita recommends exploring e-commerce options on social media platforms. "You can sell on Instagram, you can sell on Facebook," she notes, highlighting these as alternative avenues for reaching consumers.

Advice For A Career In Toy Licensing

1. Stay Informed:

Keep up with industry trends, legal developments (especially regarding AI and IP), and emerging technologies.

2. Build Relationships:

Networking is crucial in the licensing world. Attending industry events, joining professional organizations, and maintaining connections with colleagues.

3. Understand Both Sides:

Whether you're a manufacturer or a brand owner, try to understand the perspective and needs of the other party. This empathy can lead to more successful partnerships.

4. Be Patient:

Licensing deals can take time to happen. Don't get discouraged if negotiations are lengthy or if your first attempts don't succeed.

5. Embrace Diversity:

Look for opportunities to work with diverse brands and creators. These partnerships can lead to unique products and help reach new markets.

6. Consider Sustainability:

As the industry moves towards more sustainable practices, think about how you can incorporate eco-friendly elements into your licensing strategy.

Conclusion

Success in licensing requires a blend of creativity and adaptability. Whether you're a manufacturer looking to license a popular brand, an IP owner seeking to expand your reach, or an aspiring professional looking to break into the industry, understanding the nuances of licensing is crucial. By staying informed, building strong relationships, and embracing innovation, professionals in the toy industry can use licensing to create products that delight, inspire, and stand the test of time.

To learn more about licensing check out these podcast episodes: