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The one business strategy that can explode growth without the capital investment

The one business strategy that can explode growth without the capital investment

Super Soaker. Lego. Disney.
What do all of these have in common?(It’s not just toys!)

The answer: Licensing.

The licensing business strategy helped each of these brands turn into household names and raked in excessive profits. What’s licensing? It’s leasing (in or out) your intellectual property assets – patents, trademarks/branding, know-how, solution or software – to other companies in return for ongoing royalty payments.

Lonnie Johnson: The Super Soaker

In 1986, Lonnie Johnson, a NASA engineer, had a spark of genius and went to work in his garage. He ended up prototyping the very first Super Soaker. Little did he know that it would be bigger than his job at NASA, and the beginning of an epic journey.
The rights to the Super Soaker was license Larami, a company eventually acquired by Hasbro, the international toy giant. Over $1bn worth of Super Soakers have been sold to date, and for Lonnie and his company, Johnson Research and Development, this has been a gold mine that has lasted over 30 years. In 2013 Lonnie was awarded $73m in underpaid royalties, and has gone onto create his own Energy Research and Development company on the back of his success.

Lego: From toy bricks to global building block

Then there is Lego, the company that has accumulated a nice portfolio of construction toy rights for everything from cartoon characters to movie franchises. In 1999, Lego in-licensed the Star Wars characters and brand which has grown to 200 million units flying off the shelf in 2012 alone. In the same year with the help of other licenses with Harry Potter, DC and Marvel characters, Lego saw a return on investment of over 1500% and made a sizeable profit of $4bn. It’s no wonder the Lego Movie was so successful, and can demand premium prices for Lego sets that exceed $100. Think of it this way: without licensing, Lego would just be a company that makes plastic toy bricks that are painful to step on.

Disney: A licensing behemoth

Finally, there is a little company called Disney, the Number 1 Licensor in the world. The House of Mouse sits happily on the other side of the table from Lego, Electronic Arts, Hasbro and even food and snack companies across the globe. Even though Disney focuses on making successful movies, it’s their ability to license out the movie titles and characters with ease which drives a world where the movies never end and they become a part of everyday life.
In recent times Star Wars and Frozen have exploded merchandise sales globally and in 2015 licensing brought in $52.5b in revenue.

Licensing requires more imagination than it does capital investment, and is a win-win business strategy for both parties in any licensing deal. Whether you have an emerging brand and would like to diversify your products and services, or you sell a product or service that could use the boost of a well-known brand, licensing is a path to be seriously considered.

 

About Innovateur

Innovateur helps large organisations source new innovations, technologies and solutions from the Asia-Pacific Region. We provide advice and assistance with open innovation programs, licensing, and IP strategy, while also assisting inventors, startups and SMEs with the commercialisation of their IP.