Obtaining Merch Licenses from Brands

loopline · Nov 19, 2018

So Ive sold some merch that was giving allusion to a brand, and it went really well. Thats of course not legal, and Im not doing it now (although it was stumbled upon by accident and we were not aware it was giving allusion to a brand, then later found out why it was selling, lol)

At any rate, it opened the door to a new world for me, I knew about getting licenses to sell branded merch but I didn't really consider it. Now Im all in.

So Ive done research, but Im still a newb at this so Im asking has anyone done this?

Any resources you can point me at or if your willing to talk about it here or privately, Im all ears.

Im currently in talks with a brand, a music group that is of a medium size. Spoken to a band member, a band manager and the legal group, but still trying to connect with the people that can give me the merch license.

Im sure that in this area there is plenty of art to be had with the science of working out a deal. However I see the long term value in this and its something that Im willing to dig into over the next several years.

I currently sell merch on amazon and I can easily expand to PODs such as red bubble etc... Or shopify. I can also do creative marketing and drive my own traffic, already experienced in that.

I also have an artists that can hand draw anything and someone that makes iOS stickers. iOS stickers and Android stickers is something I want to do with brands as well as standard merch like apparel and normal stickers and anything that works Im open for.

Although Ideally Id like to stick to things that I can run on a POD site to trial them until I can sort how well a given design or item will sell and then once its justifiable I can take it to FBA or such on amazon. That or digital goods like iOS and Android stickers, because obviously those require no inventory management and its a billion+ dollar space just in stickers.

So I probably don't know what I don't know at this point, but Im a fast learner.

Any advice or resources from people that do licensing now?

And a bit question, if you do this now, are you typically able to obtain a license to sell branded merch that either is solely royalty based or that allows a $1000 to $2000 prepayment of royalties?

Or do you typically need to pay big flat multi thousand dollar fee up front just to get the license plus royalties?

Im not looking to get stuff into walmart etc... and Im not looking to work with Taylor Swift or Maroon5 and Im not limiting it to music either, thats just where I started and it made sense. I also am not looking to work with the artist that has 37 views all time of their songs on youtube.

Aside from that, Im not sure what Im looking for.

Check-1-2 · Nov 20, 2018

Whaddya know, something I can actually advise on!

At the very basic level, a generic licensing agreement is going to consist of a few things:

1) Minimum Guarantee (MG)
2) Royalty Rate
3) Term Length

A minimum guarantee is exactly what it sounds like. You guarantee that the licensor will receive a minimum amount of money from this arrangement. Some places will require all, or a portion, or that money up front, but I would advise you to walk away from anything of that nature unless you're talking with a seriously big player. It simply introduces too much risk to your venture, and you can argue that you need that money for product development, marketing, and reserve funds. In fact, you should aim to negotiate the timing of your royalty payments (quarterly), beginning 6-12 months AFTER your agreement goes into effect to give you time for development, testing, and marketing. I would also suggest you don't mention anything about an MG unless they bring it up.

A royalty rate is probably going to run between 3% on the extremely low end and 20% on the very high end, with 8-15% being pretty standard. That's at least for toys, which is what I'm more familiar with. I don't know how it would be for licensing a band's images, but I assume it's similar.

Term length is generally 1-3 years, and since you have no experience, 1 year with a renewable clause is probably what you should plan to negotiate for.

Now, there are exclusive and non-exclusive licensing agreements. Exclusive means that you, as the licensee, are the ONLY entity that can use the images/sounds/video/whatever. These can be region-specific. For example, you could have exclusive licensing rights for California, North America, The Americas, etc. You can also have something like "Exclusive licensing rights for every country EXCEPT X, Y, Z." It can get as granular as is necessary to get the deal. Exclusive rights will be more expensive and likely more strict. You'll need to weigh what your expected level of competition is and if it's worth it to you.

What else, what else...

You're doing the right thing by reaching out to the band manager and legal group. The decision will probably need to come from the band manager and the band members (represented through the manager), and the details and structure of the deal itself will be a discussion with the legal group. I think the band manager is your main go-to for this ball to get rolling, though. It's possible that nobody has asked them about this, and that's why they haven't been able to point you in a clear direction.

I'd suggest you just talk up the manager, talk about how you love the band and think it has a strong following, and product X would serve their fans well. You'd like to make a deal where you can use their images to sell these products ("official merch"), and pay them a royalty based on a % of revenue or gross margin. Explain it's no risk to them since you'll be paying for all of the designs, the marketing, the inventory, etc., and they'll get a cut since it's their IP. Keep it simple at the beginning, and you can get into the specifics as the manager asks you questions.

If they do have experience, they'll probably just come out and set their expectations in terms of a minimum guarantee and royalty rate.

loopline · Nov 20, 2018

Check-1-2 said:
Whaddya know, something I can actually advise on!

At the very basic level, a generic licensing agreement is going to consist of a few things:

1) Minimum Guarantee (MG)
2) Royalty Rate
3) Term Length

A minimum guarantee is exactly what it sounds like. You guarantee that the licensor will receive a minimum amount of money from this arrangement. Some places will require all, or a portion, or that money up front, but I would advise you to walk away from anything of that nature unless you're talking with a seriously big player. It simply introduces too much risk to your venture, and you can argue that you need that money for product development, marketing, and reserve funds. In fact, you should aim to negotiate the timing of your royalty payments (quarterly), beginning 6-12 months AFTER your agreement goes into effect to give you time for development, testing, and marketing. I would also suggest you don't mention anything about an MG unless they bring it up.

A royalty rate is probably going to run between 3% on the extremely low end and 20% on the very high end, with 8-15% being pretty standard. That's at least for toys, which is what I'm more familiar with. I don't know how it would be for licensing a band's images, but I assume it's similar.

Term length is generally 1-3 years, and since you have no experience, 1 year with a renewable clause is probably what you should plan to negotiate for.

Now, there are exclusive and non-exclusive licensing agreements. Exclusive means that you, as the licensee, are the ONLY entity that can use the images/sounds/video/whatever. These can be region-specific. For example, you could have exclusive licensing rights for California, North America, The Americas, etc. You can also have something like "Exclusive licensing rights for every country EXCEPT X, Y, Z." It can get as granular as is necessary to get the deal. Exclusive rights will be more expensive and likely more strict. You'll need to weigh what your expected level of competition is and if it's worth it to you.

What else, what else...

You're doing the right thing by reaching out to the band manager and legal group. The decision will probably need to come from the band manager and the band members (represented through the manager), and the details and structure of the deal itself will be a discussion with the legal group. I think the band manager is your main go-to for this ball to get rolling, though. It's possible that nobody has asked them about this, and that's why they haven't been able to point you in a clear direction.

I'd suggest you just talk up the manager, talk about how you love the band and think it has a strong following, and product X would serve their fans well. You'd like to make a deal where you can use their images to sell these products ("official merch"), and pay them a royalty based on a % of revenue or gross margin. Explain it's no risk to them since you'll be paying for all of the designs, the marketing, the inventory, etc., and they'll get a cut since it's their IP. Keep it simple at the beginning, and you can get into the specifics as the manager asks you questions.

If they do have experience, they'll probably just come out and set their expectations in terms of a minimum guarantee and royalty rate.

Thanks for this. Your percentages are on par with what Ive found in research.

In the current case, one person in the band told me that there is already a merch company with an exclusive license. the legal group told me that there are multiple people with licenses. The band manager told me today that they talked to the merch group and the merch group won't allow any one to have a license.

There is mixed info, and the band manager will not give me the contact info of the merch company. so I don't really know what to believe, so I thought my next move is to side step the issue. So here is a question in regards to that.

If we are talking merch (and I know "it depends is the answer, but Ill ask any way due to insights potentially arising from it) does that typically mean, if its an exclusive license, that its physical goods? Meaning I was going to try and pitch iOS and Android stickers. Which is obviously a digital good, so do you think that a merch license may not cover that, especially if its been around for a bit?

Also is there a typical way to get ahold of the right people, I mean do you have a place you start, or just take it from any angle you can?

Check-1-2 · Nov 20, 2018

Great questions.

A "merch license" can be broad, or extremely specific. It can be a license to sell branded hoodies only, or it can be all clothing items, or it can just be exclusive rights to the entire brand for any type of merchandise. It really depends on the deal, but anything is possible and negotiable.

It sounds like you're hitting a bit of a wall with these guys. In my experience, it's pretty easy to find the right person to talk to, but I'm also dealing with more established IP's than you. I've searched for the "licensing manager" of a given company on LinkedIn and then backed into their phone number or e-mail some other way, or get their name, call the general line, and ask to be redirected. That's worked pretty well for me getting in front of the right people, but these businesses have dedicated licensing managers, so it's a bit different.

You're in a tough spot. You can keep pushing, but it could also be time to move on to the next brand.

Obtaining Merch Licenses from Brands

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