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Contracting

Contracts Steady With 2- and 3-year Terms Dominating

According to TLL’s Annual Licensing Business Survey, contract lengths remain steady. Two-year terms were the most common (40% of respondents), followed by three-year (27%) as well as four- and five-year (13% each) terms.

Approximately 80% of respondents reported that their average contract length was unchanged from the previous year. Of the remaining 20%, a significant minority said that their newly signed licensing agreements in 2017 had longer contract terms than those signed in 2016.

Contract term lengths vary depending on the type of brand being licensed (entertainment properties tend to have shorter term lengths than corporate brands) and the product category (in the same way, publishing deals tend to be longer than collectibles deals). Controlling for these factors, however, the slight uptick in contract length implies greater stability and willingness on the parts of licensors to work with selected partners longer—and as many licensees noted, more closely.

Compared to the Survey’s findings for average contract lengths in 2016 and 2015, four-year terms appeared with much greater frequency in 2017. In both 2016 and 2016, three years was the most frequently cited contract length term by over half of respondents.

The most common contract lengths for the period of fewer than two years was either one year or a fractional term such as 18 months. Conversely, for contract terms greater than five years, the most common terms lengths were 10 and 20 years.

Internationally, reported average contract term lengths did not differ significantly from those in the U.S./Canada.


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