Licensing: The Next Step for Digital Collectibles
Tags: Branding, Licensing, Collectibles, Intellectual Property, Blockchain

It has been almost a year since non-fungible tokens hit the spotlight, allowing for a new system of digital asset ownership. Since then, we have seen countless iterations of NFT’s being used across games and dapps, particularly in the realm of digital collecting. However, regardless of an increase in use cases, we are yet to see a huge increase in adoption of NFT’s and the underlying technology- blockchain- which enables their creation, purchase, and sale across the world.

Enter licensing and branding, two huge components of adoption, which not only bring trusted and established brands to new mediums but also create access to an entirely new audience for content creators.

Licensing and IP: A Match Made in Heaven

Before we dive into some examples, it’s important to understand both licensing and intellectual property (IP), and how one is affected by the other.

Depending on the circumstance, and the medium, a license (licensing) grants the holder permission and authority to distribute products and merchandise based on the intellectual property of a content creator. This can be in new forms, for example taking a trading card game and creating an animated TV series, or permission to brand your product with their IP.

Licensing: A business arrangement in which one company gives another company permission to manufacture its product for a specified payment. — Entrepreneur.com

One good example is LEGO, who have seen a huge turnaround in recent years thanks to their licensing partnerships and unique character series (depicted below). Thanks to these arrangements, LEGO has gone from complete revenue collapse in 2002 to the second most profitable toymaker in the world, with $4.5billion in revenue in 2014.

Intellectual property is any form of intangible asset. They can include designs, artworks, literary works, music, animations, trademarks, logo’s etc… and these days make up a huge portion of a business's bottom line. For a more holistic understanding of intellectual property (IP), including the types, governance and current protections please check out Blockchain in the Real World #4: Intellectual Property.

Licensing a product, design, or some form of content grants the license holder permission to use or reproduce content which was created by another person or entity. It does not give the license holder ownership over the property itself. Continuing with the above example of LEGO, we can see that, owing to a licensing agreement, the company has produced more than 350 sets of buildable blocks using Star Wars IP to design characters and construction sets, as well as brand their merchandise with the Star Wars moniker.

Still confused? Think of it as a lease agreement. Except, in this case, the property being leased is intangible, rather than a physical asset. Of course, licensing agreements also dictate the exact reproductions and forms the IP can be used in, and are governed by individual contract stipulations. These often include the type of content, the use of branding, as well as geographical locations it can be distributed in.

Why Would I Want to License My Content?

From a business or company point of view, licensing your content is one of the primary ways to build brand awareness. It is also one of the fastest and most profitable ways to build a business.

For example, and according to entreprenuer.com, around 90% of sales (~$144 million) for Calvin Klein Inc. comes from licensing the designer's name to other manufacturers for underwear, jeans, and perfume. The company itself only manufactures one type of product- women's apparel.

The Worlds Most Licensed Properties

To better understand this concept let’s break it down with a few examples of the worlds highest grossing licenses, including the variety of products and use cases that can stem from them. These values are retail revenue from 2015.

Disney- $56.6 Billion in licensed retail products

The portfolio includes Lucasfilm, Marvel, ABC, ESPN, Disney Pixar and Walt Disney Studios. Also titles such as Star Wars, Marvel’s Avengers, Frozen, and Disney Princess. For a full report on Disney licenses click here. PVH Corp- $18 Billion

Owns fashion brands Calvin Klein and Tommy Hilfiger. As mentioned earlier, 90% of income from Calvin Klein stems from licensing their brand to other companies. The Pokémon Company International- $2.1 Billion

The world of ‘Pocket Monsters’ is available in many different forms, including trading card games, video games, animated series and movies (available on Amazon and Netflix), lifestyle products, smartphone apps. An example of their licensing initiative is with Nintendo, who uses the Pokémon world to produce console games.

As you can see, licensing is an incredibly effective way to promote and produce new products, using the existing IP created by another company/entity. It brings with it an already established audience, and often to new products, ideas or mediums.

Moreover, it helps to build awareness of your brand, whilst simultaneously creating a new way for IP to be distributed, and generating new/additional income streams for your bottom line.

What Has Licensing Got to Do with Digital Collectibles?

To understand how licensing is impacting digital collectibles (NFTs), we need to understand a couple of things.

1.First and foremost, how can I own a digital file?

2. For all intensive purposes, non-fungible tokens are a ‘digital file.’

They are purchased, traded and sold using blockchain technology to keep an accurate record of their transactions, as well as verify authenticity, and identify the rightful owner of the token (and thereby the collectible).

3. Owing to these characteristics, we are now able to take products that have always been physical, for example, trading cards, figurines, and merchandise and create new, digital versions of them.

4. Because non-fungible tokens are unique, and easily identified, we are able to create new digital-only versions of characters and collectibles, which maintain all of the inherent characteristics of collecting e.g. rarity and scarcity.

It’s not very exciting to collect something that everyone else already has, but with NFT’s we can create unique token identifiers (like a serial number on a physical collectible) to identify which number character you have, and which series it is from. It also means we can create limited amounts of particular collectibles, and a series may range from common right through to ultra rare.

5. The new world of digital collecting allows for a myriad of new, digital possibilities. For example, rather than a physical collectible sitting on your shelf or hidden from sight, digital collectibles can be displayed in augmented reality, in 2D and 3D. Depending on the underlying token standard, it is also possible to use characters and items in different games and cross-platform- something which we have not seen en masse today.

The ECOMI Collect 3D augmented reality demo

Get to the Licensing Part!

Ok, so now that we understand what licensing is, how and why digital collecting is possible (and why it’s even a thing), we can discuss licensing. As with any other licensing deal, acquiring licenses for NFT’s means that we can produce collectibles and character series based on the IP of another business.

Thus far, NFT’s have been created, and have indeed seen some success, as with Cryptokitties for example. However, they have failed to bring new audiences into the space, and users often require a fundamental understanding of blockchain and tokens to be able to participate. Sure, owning a crypto-zombie is kinda cool, but these characters (tokens) don’t hold any real value outside of the game they are being used in, because people don’t have any underlying attachment to them.

Enter licensing. Rather than creating digital collectibles based on random or unrecognisable games and characters, ECOMI is utilising existing and established brands to create NFT’s across a range of genres. In particular, we are targeting movies and TV, animation and comics, gaming, iconic characters, and digital art.

By creating characters the public already has an intrinsic attachment to (and quite possibly already own in physical form) we are able to utilise their branding and IP to build our own audience and user base, whilst also introducing new audiences to the world of digital collecting.

Moreover, by creating a smart-phone app, we are able to offer it in a familiar and easy to understand manner, without new users needing to understand blockchain for it to work.

From a company point of view, we are helping established brands to break into a new digital market, increasing their bottom line profits without having to physically produce anything new. It is a two-way street, whereby our platform will also introduce new users to brands they may not have been aware of. For example, ECOMI has secured and announced a licensing agreement with tokidoki, an international apparel brand based on the colourful artistic creations of co-founder Simone Legno.

How Are We Acquiring Licenses?

Of course, licensing sounds like a wonderful idea, if you can actually acquire them. Thankfully, one of the core strengths of the ECOMI team rests with our CEO, David Yu, who has been in licensing and branding for more than 20 years.

With more than two decades of experience in the gaming and licensing business, Yu has been involved in licensing and retail, working with intellectual property, and transforming unique gaming and collectible licenses into globally recognized brands.‍

“In all my years of collecting, the demand for collectables has never faded, but they have constantly changed mediums. I believe that digital collectables are only just emerging, and we will see it reach the same popularity as tangible collectables.” — David Yu

Yu got his start in 1997 when he first established Games R Us Ltd. (NZ). He transformed Star Wars and Star Trek memorabilia, as well as various vintage toys and comics, into an entertainment and hobby store for fellow collectors. Later, Yu established Retail Management Group Ltd. (RMG Ltd.) as a supply chain for manufacturing and distribution, from food and beverage to cosmetics products, in Australia, New Zealand, China and other Asian markets.

Some of the licenses currently held by Retail Management Group

Our second superstar team member and head of global license acquisition is Alfred Kahn. His name may not be familiar, however, he has undoubtedly had some impact on your life. Alfred is personally responsible for more than $25 billion in retail revenue, and as founder and CEO of 4Kids Entertainment is responsible for licensing some of the worlds biggest and most established brands, including:

Pokémon

Yu-Gi-Oh

Teenage Mutant Ninja Turtles

Polly Pockets

Cabbage Patch Kids

“During the course of his three-decade career in licensing, Al has stood out as a pioneer in identifying trends in popular culture and adapting them to a global audience. His unique insight has translated into much success, not just for his company, but the licensing industry as a whole.” — Charles Riotto, President of LIMA, 2005

Not only is he responsible for giving Pokémon it’s namesake (changing it from pocket monsters to be more easily adopted in a western audience), he also developed licensing, marketing and brand development programs for other iconic international brands, including:

Nintendo- Mario Bros, Zelda and Donkey Kong

James Bond

World Wrestling Federation

Monster Jam Monster Trucks

Xbox

So it’s clear that we have the team, industry experience, and industry connections to acquire some of the worlds biggest and most popular licenses. At the time of writing, we also have a number of confirmed brands on board to enter the new era of digital collecting with us. I wish I could be more specific, but I guess you’ll just have to follow our journey over the coming months!

ECOMI Collect is due for release in Q2 2019, and brings with it a new generation of kids (and adults) to the fun and joy of collecting. By creating a smart-phone app, we are able to introduce this concept in a manner people are already comfortable and familiar with, without being confused or scared off by the underlying technology. It also allows for new means of distribution, real products, and huge exposure across the world.

Non-fungible tokens may not have been around for too long, but it won’t be long before they’re in every hand (and Secure Wallet) across the world!