Art Licensing Editorial: Pros & Cons in getting an Exclusive License

An exclusive licensing agreement is when an artist gives a manufacturer the exclusive right to license all their art for a particular product category or categories. This type of agreement is different from most agreements when an artist agree to license one or more pieces of art to a manufacturer but allows the artist to license different art to other manufacturers that produce the same type of products. Exclusive licensing means that the artist cannot license ANY of their art in that category to another manufacturer even if the manufacturer they have the agreement with does not produce all the artist's art on their products.

More and more manufacturers that license art seems to be changing their business plan from using non-exclusive artists to exclusive artists. The reason is to not only reduce the amount of paperwork involved in making MANY individual licensing agreements but more importantly to differentiate themselves from their competition. If the manufacturer is the only company with exclusive artist's work on a particular product, retailers are forced to buy from them if they want that artist's work.

Fabric manufacturers that license art usually offer only exclusive licensing agreements to artists. However, some use non-exclusive artists for special clients when those clients want designs that are limited to them and are not in the manufacturers general product line. There are other manufacturers that use exclusive artists including C.R. Gibson and recently Evergreen Enterprises, Inc.

Last November, Evergreen announced that they now have exclusive licensing agreements with artists for their decorative flags, floor mats, and mailbox wraps. To find out more on why they are using exclusive artists and the biographies of some of Evergreen's exclusive artists David T. Sands, Annie LaPoint, Andrea Tachiera, Nancy Mink, and Jim Shore, read "Behind the Business: Evergreen's Exclusive Flag Artists."

C.R. Gibson has been using exclusive artists for years. Recently they teamed with One Coast sale and marketing agency to launch an advertising campaign "Brand's New Day" and announce their new exclusive artists Cid Pear, Dena, Emily Green, iota, Jessie Steele, Jill McDonald, Lolita, Michael Healy and Susan Winget. Read "It's a Brand New Day at C.R. Gibson" to find out more.

There are many factors to consider before entering an exclusive licensing agreement. Below is what it takes to get an exclusive licensing contract with a manufacturer and what the pros and cons in doing so.

Getting Exclusive Licensing Deals
When artists create art that is sought by consumers, they may be offered exclusive licensing deals by manufacturers. Artists need all or at least some of the following to be considered as an exclusive artist.

• Have a robust body of work that is suitable for the manufacturer product(s).

• Have an unique art style different from the exclusive artists already licensed by the manufacturer.

• Have a proven track record that her/his art sells products for the manufacturer product category and/or other categories.

• The artist art style is recognized and sought by consumers so that they purchase the products. Examples are Thomas Kinkade, Mary Engelbreit, and Jim Shore.

Pros of Exclusive Licenses
Artists consider accepting exclusive licensing deals when they think the arrangement extends their brand and provides a respectable amount of money from advances and royalties.

• Exclusive licenses could be a lucrative arrangement when the manufacturer has a large distribution of their products.

• It guarantees a certain amount of art to be licensed for the term of the contract. This could be important when the economy is poor and licensing deals are hard to acquire.

• Being an exclusive artist gets more exposure of the artist's work. Manufacturers tend to showcase exclusive art brands via their websites, blog and other social media besides advertising in trade publications and on the internet. Note: Non-exclusive artists receive little and sometimes no recognition of their art from many manufacturers.

C.R. Gibson's advertising campaign "It's a Brand New Day" is an example on how exclusive artists get brand recognition. During the January 2012 Atlanta Gift Show, C.R. Gibson constantly posted press releases on their facebook page and on the Atlanta Mart blog announcing It's a Brand New Day and artist signings in their showroom. And on their blog, C.R. Gibson has posted videos of their exclusive artists Susan Winget, Michael Healy, Lolita, iota, Jessie Steele, Jill McDonald, Emily Green. Dena, and Cid Pear. To learn more about these artists, see product art, new product releases and their relationship with C.R. Gibson, view Susan Wingets video first on "C.R. Gibson Video - Susan Winget." The links to the other artist videos is at the bottom of the post.

• Because of the greater visibility of the artist's art, it produces an increased potential in licensing to other product categories.

Cons of Exclusive Licenses
Artists that have exclusive licenses to a manufacturer(s) are tied to the manufacturer for the length of the contract. If manufacturers do not have the success in selling product(s) with the artist's art, the agreement could be a disaster. Below are some reasons why an artist may decide to decline an exclusive licensing agreement with a manufacturer.

• If the manufacturer does not have a large enough distribution of their products they cannot sell enough products to make an exclusive license profitable to the artist.

• If the manufacturer does not produce a large enough quantity of products, it may not be profitable.

• If the royalty rate is not high enough, it may not be profitable.

• If the manufacturer does not guarantee to produce enough of the artist's work on their products, it may not be profitable.

• If the product category has many manufacturers and licensing to them potentially generates more revenue for the artist than signing an exclusive license to one manufacturer, it may be better to decline an exclusive licensing agreement.

* If the manufacturer does not offer advertising and brand visibility to enable the artist to extend her/his brand, and that is important to the artist than the artist may decline an exclusive licensing agreement.

Impact on Non-exclusive Artists
The increase of manufacturers using exclusive artists could be detrimental to non-exclusive artists in getting licensing deals. If too many manufacturers decide that using exclusive artists is a good business model to maintain their competitive edge, it could significantly reduce the number of manufacturers that license art to non-exclusive artists. Of course, it depends on whether manufacturers use only their exclusive artists or they also license art from other artists. I guess that only time will tell. What do you think?

Make sure that you read the comment to this article for important information about exclusive licensing agreements from attorney Kyle-Beth Hilfer, P.C. !

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