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Editorial

Coming Up With a Number

One of the most common questions The Licensing Letter receives is about our numbers: Where do they come from? And how accurate are they? First, it is important to note that it is practically impossible to state with absolute certainty the precise amount of licensed retail sales in any given year and/or territory.

That being said, TLL works to ensure that growth rates and percentage shares of licensed retail sales are as accurate as possible. Our numbers are somewhat more depressed than those we expect to find in “reality” in part because we are working from historical figures.

We suggest that you consider the licensed retail sales figures to be a minimum amount, as opposed to a cap, in any given category. Growth rates (or declines) and share breakdowns are considered to be high confidence figures.

In general, there are several ways to measure the amount of and growth in licensed retail sales. TLL uses a mix of the below, where it is appropriate, as enlightened by our experience, and together with our Annual Licensing Business Survey and interviews with industry leaders to generate our retail sales, royalty rate, distribution channel, and all other figures.

  • Working backwards from royalty revenues or gross sales. That is, looking at a licensor’s, agent’s, or licensee’s revenues and calculating retail sales based on that number. To generate an industry-wide figure, one would tally the largest companies in any given space and adjust that figure accordingly.
  • Estimating licensed sales based on total category sales. For example, one starts from total apparel sales and figures out how much of that total is licensed.
  • Certain companies will reveal their own tally of a brand’s sales at retail, usually a combination of licensed goods as well as products that companies manufacture themselves. Instead of looking at companies, one would look at individual brands’ licensed retail sales.
  • Through the annual Survey, we ask leading licensors, licensees, agents, and consultants to share their individual business experiences and estimates. These responses are aggregated to create a broadly agreed-upon picture of the licensing business.
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