Slicensing

‘Slicensing’ is a brilliantly descriptive word used by brand owners, to remind themselves that it is always unwise to grant any licensee more rights than it can fully exploit.

It refers to the practice of slicing up rights i.e. defining each licence according to the true development and distribution capabilities of the licensee.

The opportunity cost of giving too many rights away invariably pains the brand owner, when other potential licensees come along later with viable propositions that cannot be pursued, because the rights are lying idle in the hands of the first licensee.

For example, the following definition would lead to regrets: “An exclusive worldwide licence for interactive games, to be played on all platforms now existing or emerging during the term of the agreement.”

Just as similar wording did in the case of Paramount Pictures’ ten year Star Trek licence with Activision, which began in the mid-1990s with PC, PlayStation, Game Boy and N64 in mind, but without anticipating the emergence of games for mobile, web, plug-in, IDTV etc.

That later prevented Paramount managing the Star Trek brand’s entry into the new markets and the agreement reportedly ended early, with acrimony between licensor and licensee.

Much more sensible to phrase the licence specifically, for example: “A non-exclusive licence for North America and the European Union for interactive games on the platform of mobile telephones.”

That would leave the brand owner free to reach agreements with strong publishers for every other platform and territory.

Naturally, the licensee/ publisher has the opposite point of view. Each would love to receive a broad grant of rights. Maybe even sub-license some rights to expert publishers for each other territory or platform, to lay off some of their costs.

However, licensees will understand that there is little point having rights that you cannot exploit. Also, that the broader the grant of rights, the higher the minimum guarantee of royalties required by the brand owner.

Fair and reasonable allocation of rights by the licensor according to the true strengths of the licensee is good for both parties.