Premium Pricing
Many consumer products we see in retail stores and sports venues display logos of professional sports teams. As fans, we want to proudly identify with our favorite teams and players by purchasing these products. To do this, we are willing to pay a premium for authentic goods with these logos and images. What contributes to this premium price?
It is the cost, or royalty payment, to license a team name, logo or identity of a player. Yes, even highly identifiable colors are part of the game. This article looks at a few licenses associated with Major League Baseball (MLB).
MLB Licenses
Major League Baseball is an organization with thirty teams. It is the oldest of the four major professional sports leagues in the United States and Canada. In 1966, the Major League Baseball Clubs formed Major League Baseball Properties, Inc. (MLBP) as the agent for marketing and trademark licensing and protection. All use of the Major League Baseball trademarks and copyrights on or in connection with products or services requires authorization of MLBP and/or the respective Major League Baseball entities. Examples of licensed consumer goods include products such as apparel, food, collectibles, sporting goods, games and novelties.
The range of royalty rates is driven by the specific types of products offered.
A review of eleven licenses in these areas indicates that the average royalty rate paid, as a percent of product sales, ranges from a low of 6.8% to a high of 8.8%. The lowest and highest individual rates were one and twelve percent. The payment structures also included upfront payments. We were able to identify upfront payments ranging from $10,000 to $100,000 in four licenses.
The range of royalty rates is driven by the specific types of products offered. In one license there was a premium of 1% charged for the use of vintage versus current attributes of former Major League Baseball players. The majority of the licenses have a license term of 1–2 years and all are non-exclusive.
MLBPA Licenses
The Major League Baseball Players Association (MLBPA) also has a “Players Choice” group licensing program. Through individual agreements with each player, the MLBPA holds the exclusive, worldwide right to use, license and sublicense player information. This includes information such as names, numbers, nicknames, likenesses and signatures — otherwise known as publicity rights. For these licenses, the primary product categories include trading cards and collectibles, electronic games and wireless products, apparel and novelties.
…a royalty rate premium of 5% was charged for products sold outside of the baseball stadium…
We found only two licenses that identify the MLBPA as the licensor. A review indicates that the average royalty rate paid, as a percent of product sales, ranges from a low of 7% to a high of 9.5%. The lowest and highest individual rates were five and ten percent. One upfront payment of $60,000 was identified. The range of royalty rates observed continues to be driven by the specific types of products licensed. In one case, a royalty rate premium of 5% was charged for products sold outside of the baseball stadium. The two licenses have a term of one year and each is non-exclusive. One license has two one-year renewal options.
Despite premiums due to licensing increasing fan-related products, many fans continue to say “take me out to the ball game” as the 2018 season ended with game attendance of over 69.0 million.
More Information:
http://mlb.mlb.com/careers/index.jsp?loc=mlbp
http://www.capsinfo.com/content.cfm?capsnav=mlb