There are many reasons for an intellectual property (IP) owner to grant a license. The most obvious one is to generate revenue from the guarantee and royalty payments. But licensing also can serve a number of other purposes. Among them:
- Marketing support for the core business. For a television show, movie, children's book or sports franchise, the retail display and proliferation of licensed products doesn't only generate product sales, but it also promotes the core property.
- Extending a corporate brand into new categories, areas of a store, or into new stores overall. Licensing represents a way to move a brand into new businesses without making a major investment in new manufacturing processes, machinery or facilities.
- Trying out potential new businesses or geographical markets with relatively small upfront risk. By licensing its brand to a third-party manufacturer, a property owner can try new businesses, or move itself into new countries with a smaller upfront investment than by building and staffing its own operations.
- Maintaining control over an original creation. Licensing represents a way for artists and designers to profit from their creative efforts, while maintaining control over how they are used.
The most obvious benefit to a manufacturer or service provider the licenses a brand, character, design or other piece of intellectual property is the marketing power it brings to the product. It can take hundreds of thousands or millions of dollars to build a brand from scratch, and licensing represents a way for a manufacturer to take advantage of all the brand building and image building that has gone on before.
- Moving into new distribution channels. Taking on a license might help a manufacturer whose brand has been marketed in, for example, mass merchandise outlets to market a more upscale, high quality line in specialty stores or department stores that wouldn't carry the lower end products.
- Reducing in-house costs. A manufacturer who licenses artwork or designs to be applied to hoe textiles, wall coverings, housewares, or on apparel has less reliance on inhouse art staffs that wold otherwise need to be maintained.
- Enhancing authenticity and credibility. The publisher of a car-racing videogame might license a host of well-known automotive brands and car models to lend legitimacy and authenticity to the game.