We hear and read more and more often about licensing agreements and not only related to the fashion industry but also involving celebrities and sport. It is quite a popular topic mainly because licensing is a proper marketing tool that if used correctly, in most cases, may give companies the opportunity to expand and improve their business, to increase their offer and at the same time boost their awareness.
But what exactly is a licensing agreement and specifically a sport licensing one?
Let’s cut the story short and let’s try to make it simple: we can say that a licensing agreement is a contract between two parties, a licensor (the owner of a brand) and a licensee (a company that produces goods or services). The licensor gives the licensee the rights to use their name and image to produce and sell objects under their name, to promote, and sell them to the market.
Here an example to better understand how it works: I am an incredibly famous athlete/celebrity/brand, known all over the world and with a large base of fans and followers on social media. A perfume company, leader in its sector, is willing to produce and sell a perfume with my name and image because they believe that the market would love it and certainly buy it. This company therefore comes to me (in this case I am the licensor) and asks me to sign an agreement to buy the license of my own brand and have therefore the right to go on with their business project; the company in question is the licensee. If I am interested in the project they proposed me and I believe that the company is a good fit for me and my brand, then we define this business relationship with a licensing agreement. They will thus use my name and image to produce a line of products/collections, they will promote the collection and sell it through their channels, and I will get a fee for that. The fee usually consists in an annual fixed amount of money + a percentage of the yearly income generated by selling the product/collection (called royalty) that can vary over the years.
This licensing agreement can be signed by any type of companies, of any sector and it is signed with very famous and popular “brands”, highly recognized, loved and followed by the public. These “brands” are very often celebrities, famous athletes, or iconic brands in different sectors: we can say that almost any brand with great appeal, recognition and followers could be a perfect fit for a licensing project. This is why licensing agreements are very common and usually a guarantee of great success to expand a business.
Why does a company need or should be interested in signing a licensing agreement and in particular a sport licensing one?
I would love to do a simple test with you: please think about 3 brands in the perfume sector and 3 brands of sunglasses and then think about a couple of sport brands in the same two sectors. I am sure that among the names that immediately come to your mind we can find: Armani, Dior, Prada, Ferrari, Nike, Hugo Boss, Calvin Klein, Gucci… Am I right?
Well, none of these brands are perfume and eyewear manufacturers; they are all licensors that have made a deal with specific companies to produce a collection with their brand. These companies are leaders in their own field, and they produce, distribute, and advertise the brand they have licensed.
By purchasing the license, these companies have indirectly acquired fame, notoriety, appeal, and the audience that follow the brand. All the most famous fashion brands license their brands to perfume, eyewear, underwear, food, back to school, toys companies to produce the licensed collections.
And celebrities do the same. A very famous name that appears everywhere in recent years and has become super appealing even in the world of licensing is Chiara Ferragni, one of the main influencers in the world.
Chaira Ferragni has her own logo and her own collection of ready-to-wear, accessories and shoes that she sells through her ecommerce and retail but she also has some licensing projects in place: the recent eyewear collection with Luxottica and a kids collection with the Italian company Monnalisa; the stock, at the time of the news of the five-year license agreement with Chiara Ferragni, flew on the stock exchange with a + 22%. Just to give you an idea of the appeal that a good licensing agreement can have.
Chiara’s collaborations expand into other sectors, such as food: Oreo by Chiara Ferragni has been a crushing success and she recently signed a license agreement with Dolci Preziosi for the Easter eggs, super popular in Italy.
And what about sport: do licensing agreements work in the same way?
They do indeed: sport is a big area of interest for companies that are looking into licensing as an opportunity to increase their business. Sports licensing works exactly in the same way as in the fashion industry. Famous athletes, teams and brands in different sporting fields that have a huge following of fans are regularly approached by companies looking for licensing deals. Sport licensing is a truly unique business opportunity because companies can count on a huge fan base that has a very strong predisposition to purchase sports-related products that they follow and love.
Some famous examples of sport licensing
I was walking on the street this morning and I noticed a huge adv on a double decker: FIFA 21 Beckham edition is back. David Beckham, a former football player and now a superstar has become a proper brand who has many licensing agreements in place. Eyewear by David Beckham and David Beckham fragrances just to mentioned some of them. Cristiano Ronaldo with his 267M followers on Instagram alone, is another great example of sports licensing: among the various products he sponsored, he also has got CR7 glasses, the perfume, underwear, shoes, socks …
Still talking about football, the ICAM Group owns the license for the chocolate eggs of some the main Italian football teams such as Juventus, Inter, Milan, Rome or again Balocco (another Italian famous food company) is a main sponsor of Juventus but it also produces the Juventus edition of panettone, of the Easter dove and egg. In the toys field, we can mention the giant Lego that owns a licensing agreement with Manchester United and a very recent one with Adidas.
Are there licensing deals in motorsport?
Absolutely yes, even if there are many unexplored opportunities out there to be caught. Some of the most iconic brands in motorsports have been engaged in licensing projects for years. Just think of Ferrari in F1 or Ducati in MotoGP; both companies boast licensing agreements that have lasted for years and span in different product sectors. From toys (Lego, Peg-Perego just to name a few), to sunglasses (Ray-Ban for Scuderia Ferrari is a proper collection) to bicycles, back to school products, till recent electric scooters. The eyewear industry is highly active in sports licensing and we cannot fail to mention Valentino Rossi and his VR46 brand with his Oakley licensing collection.
The number and quality of the brands involved in these projects show us that these are win-win operations for both the parties involved. The owner of the brand can expand his/her/their business in different fields, providing the fans with a wide range of products.
The licensees, on the other hand, enrich their portfolio with a strong and famous brand that give them the opportunity to serve new audiences and to activate a series of promotional activities by leveraging the fame and image of the Brand itself.
Some of the agreements we have mentioned have a duration of up to ten years: one of the crucial characteristics for a licensing agreement to be successful and gain results is also the duration of the deal: these are usually agreements with a starting base of minimum of 5 years. Like any other business, licensing deals can offer great benefits if well-structured and with the right investments in communication.
This is why licensing and sport licensing work, simple isn’t it?
If you are interested in expanding your business and evaluating licensing opportunities, do not hesitate to contact us; RTR is a 360-degree sport marketing consulting company and in addition to the MotoGP sponsorships we also offer consultancy for licensing opportunities and agreements.
Author Bio – Riccardo Tafà was born in Gulianova, graduated in Law at the University of Bologna, and then decided to follow his deep passion for the sport. After attending the ISFORP (public relations training institute) in Milan he moved to England, where he began his career in PR, first at MSP Communication and then at Counsel Limited in London. Soon after that, he moved to SDC, a Belgian outfit headed by Jean Paul Libert, and started working with motorsport: the year is 1991. Following a brief transition to Monaco, where he flanked the owner of Pro COM, a sports marketing agency founded by Nelson Piquet, he returned to Italy and began working in the first person as RTR, a first consulting firm, and then sports marketing company.
In 2001 RTR wins the ESCA award for the implementation of the best MKTG sports project in Italy in the year 2000. RTR also obtains the highest score among all the categories and represents Italy in the European Esca Contest. Over the years he gets some satisfaction and swallows some bitter pills. But he is still here, he writes in a disillusioned and simple way, with the goal of providing practical advice and food for thought.