Is it difficult to get a license agreement?
Brochstein: There is a basic deal structure. As a manufacturer if you are interested in the license, you will go to the school itself or if the school has a licensing agent. Collegiate Licensing Company is an agent for a huge number of schools and conferences and things of that sort. There are a couple of other agents out there and a few schools handle it on their own, but you will go to the agent or the school. You will submit an application, which I'm sure they'll have available online, and it will ask you some very pertinent business questions because they have an interest in doing business only with quality companies. You will agree to pay, if assuming your application is accepted, you will agree to pay a royalty, generally it's based on the wholesale price of whatever you're selling. The royalty probably is somewhere speaking broadly 7% to 10% of wholesale, generally.
There is going to be a guaranteed minimum, which basically says that I, the manufacturer, even if I don't sell one piece, I am contractually required to pay the school X amount of dollars and the function of the minimum is to make sure that a manufacturer doesn't just go around taking 40 or 50 licenses and seeing what works, and just abandoning the other ones. So basically it makes sure the manufacturer has some skin in the game.
Are these negotiable terms or is it each school has their terms and that's that?Brochstein: Every term is negotiable, but there is a basic royalty rate that is published. It's like any other business where if you can show that there is a good reason why you should have a lower advance, a lower minimum guarantee and maybe a higher royalty rate. Licensing was once described to me as the attorneys' full employment act.
How long does it take to agree on a licensing deal? Brochstein: It can take anywhere from a couple of months to up to a year. You shouldn't expect to get it done in a week. Collegiate licensing goes on year round. The hook right now is the Final Four and March Madness and all that, but there is collegiate licensing that goes on year round, and it's not all tied to sports. Some of it is just school pride. Walk through the NYU bookstore or the Northwestern bookstores, there's a lot of merchandise on sale there and that goes on, it's a 12-month business. Obviously it spikes, but it is a year-round business.
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