This article was written by Ian Downes, Director at Start Licensing Limited, for The Bugg Report
Up to three weeks ago most people in the UK hadn’t heard of the word furlough. Now it is part of the nation’s lexicon and sadly a lot of people in licensing have been furloughed.
The nation is facing an incredible challenge which of course is impacting our industry. People often talk about licensing being a partnership business. This is the time where this mantra needs to be put into action. Partnership works all ways. Clearly licensees are experiencing huge issues with retailers shutting down, cancelling orders and seeking payment reductions. In turn many licensees are asking rights holders to reduce or cancel royalty payments. Even royalties that have already been earned. Here I think it is important to reflect on the nature of the licensing economy and to flag up that it is a partnership economy where all members of the economy need each other. I think there is a perception that Licensors are OK and have significant cash reserves. I doubt this is the case for the majority of rights holders and certainly not for the licensing agent community. As a licensing agent I rely on income from commission on royalties earned and some flat fees from consultancy work. I am fortunate to a degree that I have worked from a home office from the first day I set up Start Licensing and I have relatively low overheads. I am hoping I can keep calm and carry on. Other agents have higher overheads whilst some rights owners rely on licensing income to fund new productions which in turn support a whole army of creative teams. It is not simply a them and us situation. The licensing economy is a circular one and any changes in it cause a ripple effect throughout the industry.
My personal feeling is that as much as we can we should try to operate the administration of Quarter 1 royalties as per normal but have an individual conversation around what to do regarding Quarter 2. All deals are different but I think it is sensible to see what each side can agree to do in regards to Quarter 2 payments which in most cases will be a Nil Return period. This may impact agreed payments and obligations. It would seem appropriate to review those against the background of market conditions. But also with an understanding that we are all in the same economy.
From my side I am trying to look forward as well. It is difficult to think about new business and engaging with companies to talk about licensing. But I think we have to. As businesses we need to think about ways we can help kickstart the licensing economy and the wider economy at the right time. Everyone will see things differently but for me I am spending my days talking to licensees and licensors regarding ongoing business. I am coupling this with a focussed new business push — talking to people about Q4 2020 and 2021. We have recently started to represent The Ashmolean Museum and I have started talking to licensees about this. We may not do new deals today but we are starting conversations for the future. There are of course some little bits of good news that might give some cause for optimism. Sales of board games and jigsaw puzzles have increased for example; people are consuming more TV, films and computer games — this might help revenue wise for some companies. This upsurge in viewing might create new licensing opportunities in the future. These are small things against the big picture but I think it is important to look for some positives to help build for the future.
Whilst generally few of us knew what furloughing meant a few weeks ago I am rather hoping that over the next few weeks all of us in licensing will understand the true meaning of partnership.
Take care and keep talking.