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Chapter 7. Licensing > Content Licensing - Pg. 216

Licensing · · · · · 216 New sources of revenue with minimal investment. Licensed products provide free advertising and marketing ("brand extension"). Expansion of the property and its creative assets. Trademark becomes stronger through use in more classes (see Chapter 5, "Trademarks"). Having several licenses in production can minimize cash flow volatility (rather than being de- pendent on revenue from only one product). Overexposure of property. Inferior licensed goods can erode the value of the property. International enforcement against piracy and gray marketing is difficult and costly. Inadequate control over use of trademarks can lead to loss of trademark status. Risks to the licensor: · · · · Benefits to the licensee: · Brand recognition. · Pre-built audience. · Synergy with advertising/marketing budget of all other uses of the property. Risks to the licensee: · Usually must pay a minimum guaranteed royalty (the "guarantee") no matter how much money licensee earns. · Licensee assumes production and distribution/marketing risk for the product. · Licensee suffers from piracy and gray marketing issues as much as licensor.