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Use IP Licensing to Diversify and Scale Your Business

You may have heard of the Walt Disney Company—but do you know how it became the global entertainment powerhouse it is today? The company’s direct-to-consumer (D2C) and content licensing businesses are only parts of the story, as it also receives a significant amount of royalties from licensing their IP for use in consumer products and merchandise sales.

What if Disney was nothing more than an animation? Imagine a world without Disney movies, theme parks, or the Disney+ streaming service. There are no Disney school supplies or toys—only cartoons. Yet, Disney has now evolved into a brand that can be seen, touched, and felt, with services that go beyond the creation of animated films. Disney's intellectual property has a massive fandom and is currently valued at $165 billion as of June 2023.



Then there's Harry Potter, the famous book series. Sixteen years may have passed since the series ended, but the fandom is as strong as ever. The IP has now expanded to include movies, theme parks, toys, and games, with a total value of $25 billion.


 
Thanks to their scalability, the products of IP have become an integral part of our daily lives. This method of expanding and monetizing your intangible IP into physical products is what we refer to as licensing or merchandising.


PART1. The definition and characteristics of IP licensing

What is IP licensing?
You can think of intellectual property (IP) as a concept that goes far beyond copyright, which primarily protects creative works. It can be broken down into two key parts. The first is the OSMU (One Source Multi Use) strategy, which connects different types of media and genres using copyright. The second is licensing, which turns industries into marketable products by leveraging trademark rights. 

In that sense, IP licensing is how you can earn revenue by using property rights associated with your intangible assets in different ways. This kind of business model involves turning famous figures, characters, games, and other things into unique licensed products. It builds on one principle: to be commercially scalable, intangible value needs to be turned into something tangible. Why? Because your IP can have a bigger impact when sold as a physical product.



While IP licensing used to be more common in the publishing industry, it has recently spread to other industries and genres. You can find it in food and drink, fashion, beauty, retail, movies, dramas, webtoons, web novels, management games, and more. Interestingly, the manufacturing industry is especially focused on protecting intellectual property (IP). That's because nowadays, consumers are craving products that come with a compelling story and captivating content, unlike in the past when they simply cared about the product itself.


Storytelling: How you can form a fandom through licensing
Storytelling is an effective tool for attracting fans and selling products when licensing or merchandising your IP. The story behind an IP is not just what makes it unique—it's also what draws fans in and, in the end, unites them together. In other words, brands that want to expand their influence need two things: marketability and storytelling.
 
In particular, fandoms can quickly flourish around IPs with beloved characters. A character's unique appearance, likable personality, special ability, compelling backstory, or relationship with other characters can all help endear them to the audience and turn them into fans. As a result, storytelling that delves into the characters' humanity is a great way to build a fandom.
In this sense, IP licensing is a component of the fandom business. Because your fandom is made up of loyal customers, activities that target fans can be linked to profits.
 
Once you've built a fandom through storytelling, you can start exploring options for diversifying your revenue model. The dictionary definition of IP may be "intellectual property," but these days, you can also use it to describe the scalability of content.


The advantages of licensing
"Scalability" is the most important keyword when it comes to IP licensing. But what else sets it apart?
 
01 It can grow with generations
Many members of the MZ generation, encompassing those born from the early 1980s to the early 2000s, will feel nostalgic for the idols and characters who shaped their childhoods. Today, these IPs live on as content and products, capturing the attention of adults who now have increased purchasing power. The Simpsons (1987), Aladdin (1992), Pokémon (1997), Spongebob (1999), and Pororo's Loopy (2003) are all examples of IPs that evoke such nostalgia.


02 It drives the formation of fandom
Some characters—and their fandoms—have come to life thanks to internet memes. The growth of fandoms shows that there is a clear demand for such character IPs, with licensing following as a natural result.
In a fandom business, customers are more than just people who buy products—they are the driving force behind a company's long-term growth.
 
03 Scalability improves your market value
When content IPs achieve success as products, it opens the door to collaborations across industries.
That's because content IPs—especially characters—allow for easy collaborations with different partners and users. Why else would companies in the food and beverage, fashion, beauty, and retail sectors be actively creating and growing their character IPs?
 
When licensing meets commerce, scalability goes through the roof. Just look at the case of GFFG, a Korean company in the food service industry, and the character they developed for their donut brand, Knotted Sugar Bear. After the company launched products using the character IP, they reached record levels of growth for their industry. By diversifying its portfolio with commercial products, the brand also became more attractive to investors, resulting in approx. $23 million (30 billion KRW) in investments in 2022.
 
04 Partnerships enable you to create synergy
Just like a culture may evolve through contact with other cultures, content IPs can expand their impact via partnerships. Cross-industry partnerships bring character IP fans to brands as new customers, while character IPs may expand their reach by providing unique experiences to existing fandoms.
 
In the gaming industry, for example, introducing a character with an existing core fandom into a game attracts those fans as new players. The meeting of old and new characters inside the game's world delivers a fresh experience for both fans of the game brand and the character IP.
 
05 It is possible to buy, sell, and trade IP licenses
The Las Vegas Licensing EXPO, Brand Licensing Europe (BLE), China Licensing EXPO, and Hong Kong Toys & Games Fair are just a few of the global fairs and expos where IP licensing rights may be bought and sold. MIPCOM (Marché International des Programmes de Communication) and MIPTV are two global broadcast content markets where IP video rights are traded. Then there's the Kidscreen Summit, where character IP animation is discussed, as well as character IP markets like the New York Toy Fair and the Spielwarenmesse in Nuremberg, Germany.
The Korean drama "The Good Doctor" and MBC's "King of Mask Singer" have also sold their broadcast program formats overseas, and not just the content itself.

As a result, several companies are eager to acquire IPs with a large fandom, making it essential to secure original IPs, particularly in content-based enterprises. Whether the IPs are produced internally or purchased from external sources with existing fandoms, we can view this as a testament to the marketability of source IPs.
 

PART2. Developing a Fandom Business With IPs from Creators & Companies
IP licensing may be found in a variety of industries, including online novel and webtoon platforms, distribution, gaming, and entertainment. But that doesn't mean it's easy for everyone to scale their IPs.
 
Many IP holders are finding it difficult to scale
For small businesses and creators (personal brands), content production will often be the top priority. Even if they have an IP and the money to start licensing, they might hesitate to compromise the quality of their content by rushing into commercialization. As a result, scalability takes a back seat to their commitment to delivering high-quality creative work.
 
When you turn a digital brand into a physical product, it can give fans of the IP an authentic and fresh experience through value extension. For this reason, IP holders* who want to try their hand at licensing will start by producing merchandise and goods which has a low barrier to entry.
(*IP holder:The person who owns the IP. In the context of this article, it refers to the corporate brand or creator that owns the IP.)
 
At this stage, the IP holder will face two problems.
First, IP holders who produce their own merchandise or goods may find it difficult to maintain inventory. Generally, the IP holder has to pay for all the costs and work of keeping and distributing the products. As a result, companies with a strong background in production, marketing, and transportation can afford to start licensing their IP.
 
The primary focus of IP licensing is to produce and sell products.
These days, when people mention IP licensing, the first thing that'll come to mind is often merchandise and goods, simply because a lot of creators and companies don't know of other ways to extend the value of their IP. But behind any type of content, you'll need a brand story—as well as a vision for how to scale while leveraging both tangible and intangible assets.
 
Several companies have emerged to address these issues by providing the necessary solutions, infrastructure, and consulting services.
 
 
Empowering businesses to license their IP with IT solutions and consulting
When it comes to content IP, creators and businesses usually create merchandise to bring their content to life in the form of a physical product. Whereas in industries such as food and beverage, fashion, beauty, and retail, companies take a different approach—they leverage content and storytelling as a business strategy through collaborations with IP holders. Regardless of your industry, IP licensing can be a powerful growth strategy.
 
However, while IP holders may be confident in their ability to create compelling content, they may face difficulties in effectively commercializing their IP assets. This transition from "content creation" to "business" presents its own set of challenges.
 
This is where IT solutions and consulting firms that assist businesses with IP licensing can come in handy. Their role is to recommend strategies for IP holders to enhance the intangible value of their brand. For a branded IP that is looking to merchandise, it could mean collaborating with a gaming company as a character in a game or introducing membership (fan club) benefits by gathering scattered fans in one place.
 
IT solutions, such as a SaaS platform builder, can also help IP holders manage their inventory by providing a streamlined "fulfillment*" system for crowdfunding and eCommerce, reducing the burden of warehousing and shipping.
(*Fulfillment:This does not just refer to logistics outsourcing, but rather a logistics system that efficiently manages the entire process from when a customer orders a product to when they receive it.)
 
For example, the Korean content creators Song Eun-i and Kim Sook have spent eight years building a fandom with their self-produced podcast, VIVO TV. After adopting the SaaS solution b.stage to create their own platform, they also consulted with IP experts from the same company to develop official merchandise. With b.stage's built-in fulfillment system, the two creators were able to sell and ship the merchandise to 208 countries. The story of VIVO TV shows how brands with IP can leverage the expertise of companies specializing in the fandom business to extend the value of their IP.



Key considerations for IP licensing
Here, we will address common misconceptions surrounding IP licensing and shed light on operational conditions that may not be widely known to IT solutions and consulting groups.
 
01 Character IPs are not the be-all and end-all of IPs
The first thing that comes to mind when you think of IP may be characters, but it goes far beyond that. You can also license entertainers, brand logos, content, product images, and brand slogans. For example, New York City's rebranded slogan from 2023, "WE♥NYC," also falls under the umbrella of IP. So, it's worth having a look at what kind of IP your company already owns—you may stumble upon a goldmine.
 
02 Licensing goes beyond merchandising
Developing branded merchandise is great, but you can also extend your IP beyond physical products. For example, you can collaborate with credit card companies to create cards using your IP, work with an airline for aircraft wrapping, or even introduce your brand in a game—anything is possible.
 
03 Supply should never outpace demand
While an IP with an established fandom will generate demand, be mindful of oversupply. To maintain the value of exclusivity, you can create limited editions with a fixed quantity or limit the duration of sales. This way, you preserve the appeal of scarcity, creating a sense of value and urgency among fans.
 
04 Know your target audience when engaging in any collaborations
When collaborating across industries, it's best to target a similar audience. If you use an esports star as an IP, for example, you can plan and create content that combines esports and K-Pop, as the two industries have overlapping fandoms. If you know your audience well, you can align your strategies to resonate with them—maximizing the impact of your collaboration.
 
 
The top three methods for scaling your IP licensing business are content IP, owned platform, and commerce.
Once you have built your core content around your original intellectual property (IP), the key to growing through licensing is to build your own platform with features for commerce.
 
■ Content IP
The people who love the IP (or product) will be the main customers for your licensing venture. These dedicated fans are always eager for new content associated with your IP—and continuously creating new content does indeed play a role in nurturing and expanding your fandom. But to generate consistent revenue from your content, you'll need more than just IP. This means you'll need to explore additional avenues for monetization, such as merchandising or collaborations.
 
■ Owned platform
Your content can only be as powerful as the space in which it lives and grows with your fans. In other words, you'll need the right environment for your content and fandom to flourish—making the choice of the platform very important for the success of your IP licensing venture.

Most content these days is published on major global platforms. We use Instagram, Facebook, and Twitter to stay connected and up to date on the latest news. We watch and consume content through live streaming platforms like YouTube, Twitch, and AfreecaTV.

By all means, you should use the major platforms for all they're worth to generate more traffic. However, building your own platform is necessary to stay in control of your online presence. Having your dedicated platform allows you to bring together your loyal fans in one place, where they can watch your content, engage with you, and buy your products. Such an exclusive platform enables two-way communication and targeted content for highly engaged fans, fostering a strong sense of loyalty and connection.
 
■ Commerce
Commerce is a way for brands to generate direct revenue. As a result, combining a content IP that skillfully harnesses storytelling with a platform that unites your devoted fans is a powerful strategy for scaling your IP licensing efforts. With the assistance of IT solutions and consulting, you can implement a comprehensive fulfillment system that consolidates inventory management, warehousing, global payments, and shipping into a single, streamlined process.


This concept aligns with the notion of the "creator economy," where creators can sustain themselves through their work, and the emerging "fandom business," which revolves around building a business centered on fan communities. IP licensing doesn’t just grant you entry into the creator economy—it also allows you to start a fandom business at the same time. With such a dynamic synergy, creators like yourself can monetize your IP while nurturing a passionate fandom.
 

These days, everyone says you should create "your own content." The same is true for owning your IP, whether you are a personal or corporate brand. But while content may get people's attention, you won't be able to monetize by just uploading content alone. No matter how compelling your content is, you need to explore additional avenues for monetizing your work. When it comes to IP licensing, a successful strategy you can follow is to leverage your original IP on an owned platform that supports commerce.
 
Just look at Disney—the current super IP that started out as a content IP, but has now permeated every corner of the globe. As an IP holder, licensing could be the key to scaling your business and ensuring long-term growth. Wouldn't it be great to see your content's impact soar to new heights, all fueled by the support of your fans?
:반짝임: Kim Sook and Song Eun-i's VIVO TV, Osaka544, the owners of an IP licensing business leveraging the SaaS platform builder b.stage.

[Reference]
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