Watch Those Royalty Rates

lvl_mediaguidesCollegiate merchandising is a multibillion dollar industry with clear benefits to many parties. Consumers enjoy the reflected prestige of a college or university brand. Licensed vendors command higher prices and find eager, accessible markets for a wide variety of products featuring the institution’s name, logo, seal, crest, mascot, color, or other distinctive markings.

Colleges and universities potentially win the most: an easy, steady income flow, with human billboards carrying your brand far and wide—free. Students, family, and alumni “wearing the brand” are increasing their emotional connection with the institution, which is obviously good.

However, note that I said colleges and universities potentially win big. First, the institution must control its mark with hawk-like vigilance, either managing licensing itself or assigning this task to a reliable licensing partner. Unmanaged licenses are considered “naked.” I’ll outline in a later blog the far-reaching, cascading negative consequences of a “naked license.” Trust me, you don’t want one.

Right now I want to address an issue of due diligence that can gain–or lose–significant profits for the institution. This is the issue of royalty rates. Too often, an institution negotiates the royalty percentage it receives from licensed vendors for branded merchandise…and then goes on with its business, sometimes for years. Meanwhile, national brands (which likely comprise your top ten licensees for royalty returns) set their prices based on prevailing rates. If the trend is a 10 percent royalty rate but your institution isn’t watchful and still rests at eight percent–well, that’s two percent more profit for those national brands while your school loses out on an automatic 25 percent gain in revenue.

To avoid this loss, it’s imperative that colleges and universities keep current on prevailing royalty rates. Few collegiate income sources are as leveraged as branded merchandising. Careful, consistent oversight and a responsible licensing management partner can insure this income source for years to come.

Odette Shults

Senior Vice President

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