Luck is Not a Strategy
There are two times in a man’s life when he should not speculate: when he can’t afford it and when he can.
—Mark Twain, Following the Equator: Pudd’nhead Wilson’s New Calendar
When publishers set out to create a product, they normally do the research necessary to determine in advance the size and receptivity of their primary market to the product and plan on selling it through their usual channels of distribution. They also determine the minimum investment they will need to return a profit in an acceptable period of time. But unless they have had some international experience or have company-owned operations overseas, they may not have built into their business model incremental revenue from co-publishing or licensing deals in foreign markets. This is especially true for publishers with large domestic markets, like North America, where additional revenue from other markets may not have a significant impact on a product’s P&L, or at least not enough for the effort of creating a foreign-market version to appear on management’s radar. I know several successful mid-size U.S.-based companies that do not give a second thought to international markets and have yet to attend an international book fair. However, whatever their main market, publishers should not overlook the potential value of product licensing. Almost every product’s earning potential should provide revenue from licensing, for no other reason than if the initial publishing plan falls short of forecast, licensing could end up filling the gap.
Licensing, or the buying and selling of IP rights in the form of published products, is the foundation for co-publishing deals and partnerships. Why one product has more success in some markets than in others is a function of culture, trends, and sometimes the inexplicable. Publishers or content providers on the selling side look for compatible buyers who have the ability to maximize the potential of their products in a new market. A content provider can improve the odds of selling a product in other markets by identifying unmet market needs—and then aligning itself with a partner who is in the best position to address those needs with a local version of its product.
The nature of licensing assumes that the licensor and the licensee have mutually beneficial goals. The seller’s, or licensor’s, primary goal in licensing is to establish a presence in markets that it cannot easily reach through its normal distribution channels, and to generate revenue from a sunken investment in a product without incurring the additional sales and marketing costs in unfamiliar territories where it has neither the means nor the expertise to sell its product on its own. By licensing its product to a publisher in another market, it shifts the burden of adapting, translating (if necessary), producing, marketing, and selling to the licensee. If the right partner is identified, the licensor benefits from the local partner’s understanding of, and ability to serve, its market. The revenue, in the form of royalties that the licensor receives from this relationship, goes right to the bottom line.
The licensee, on the other hand, is able to take advantage of the IP holder’s “vision” in bringing the product to market in the first place and can benefit from the investments already made in conceiving, writing, and developing the product. At the same time, the licensor must rely on the licensee to make any incremental investment necessary to launch the product into its market successfully and, in so doing, to generate revenue from a market that was previously inaccessible to the licensor.
