Legal framework needed to support licensing

While licensing industry is growing by leaps and bounds, the bottlenecks including weak legal framework are holding back genuine players in the field, says Saugato Bhowmick, Senior Vice President – Consumer Products, Viacom 18. 

Are kids’ channels driving the licensing industry?

Kids’ channels grow their brand franchises through not just TV viewership led advertising revenues, but also through consumer products that bring these brands alive in the life of kids and consumers. It thereby gives an opportunity to the consumer to experience the brand and the character outside of the television experience and living it in their own life.

Besides being a profitable proposition, such licensing can build products not just on TV, but also transport the kids or the real consumers to the world of their favourite cartoon characters. L&M serves as an excellent strategy to surround the consumer by the brand while being a revenue generating opportunity as well. This is a model that is much accepted and practiced by a lot of television networks across the world.

What is the scenario in the Indian context?

The market for kid’s licensing is 20 million USD plus in India. Yet in India, the licensing industry is very premature and is just beginning to take off whereas in China, the market has largely evolved and developed over a period of time.

Why should a brand license out its IP rather than manufacturing its own?

The world of licensing is far more profitable as the brand owner does not actually produce the goods, but licenses the brand to a manufacturer. The licensee produces and distributes the stock while sharing some percentage of revenue with the brand owner. The owner supports the existence of the brand by supporting and promoting it on digital, on-ground and on-air. The potential of profitability is huge as there is no manufacturing cost, supply chain cost, retailer’s margin or distribution cost involved in the process of licensing out the brand.  

What all are the hurdles for a licensor while operating in India?

The biggest issue is of counterfeiting and parallel imports which are curbing the growth of this industry. Weak implementation of IP protection laws is adding to it. The revenue earned by the manufacturer is eaten up by the fly-by-night manufacturers who come up with sub-standard products. There is a need to work towards a legal framework that supports the brand owners.

In the West, IP protection is a key part of the L&M industry and the laws related to IP infringement are stringent. That level of efficiency is yet to come through in India. This leads to reduced number of genuine licensees thereby reducing the available options with licensors and hence decreasing the competition.

The inability to maintain high quality all the time is again a challenge as sometimes market forces don’t allow us to charge the right amount of fee in lieu of the brands built  with years of hard work. As a result, brand owners are not able to recover the investment made.

In India, we do not have many licensees across each category which reduces the options for licensors. Be it Disney, Turner or Warner Brothers, all are left with a selected set of licensees.

How is eCommerce aiding this industry?

L&M is a very urban and metro oriented concept as maximum purchasing power resides with the metro cities. Modern retail helps to cover and create brand experience in metros and the sub-metros i.e. the top 20 cities, whereas eCommerce has wider reach. Via digital retailing, nearly 400 towns of India become immediately accessible as more than 50 per cent of revenue of eCommerce sites comes from small towns.  

What future do you see for licensing in India?

In the next 5-7 years, Licensing and Merchandising market is going to increase exponentially through eCommerce. A lot more brands are expected to enter India within different categories including apps, videogames, amusement parks, comics, Real Estate etc.