SPMA 2P27 Lecture : NOV 21st.docx

• School: Brock University
• Department: Sport Management
• Course: SPMA 2P27
• Professor: Chris Chard

Document Summary

Licensees should consider the following points: royalty rate, advances and guarantees, investments, volume, inventory and pricing, royalty rate. Rates vary from property to property, simple calculation: royalty rate x items sold ($) ie. 8% x ,000 = ,000: advances and guarantees. How does the licensee determine if the guarantee is too much? typically in a negotiated license deal the guaranteed is the minimum. Case study: chl wants a ,000 guarantee from sportz threadz (sports shirts) Sportz threadz thinks they can sell 150,000 units this year. Royalty rate is 5% units are sold for each, 150,000 x x 5% = 37,500. If guarantee is <37,500 it is worthwhile, if guarantee >37,500 there better be other compelling reasons to do the deal. Look at it a different way: 150,000 x x x% = ,000, x% = ,000 / (150,000 x ), x%= 5. 33%