Brand License Deals Thriving in Location Based Entertainment

allisonhushek
May 29, 2024
4 min read

Brand License Deals Thriving in Location Based Entertainment

By Allison Hushek on May 29, 2028

LBE Defined. It’s not a new concept for a Studio to license its brands to licensees whose core business is hosting experiences. The World Poker Tour offered its first poker cruise for avid poker players and cruise aficionados years ago. What is new is the appetite to experience life-enhancing, story-telling interactions since the lonely, ho-hum days of the pandemic. Consumers more than ever want to engage in experiences with the brands they love. Location-based entertainment (LBE) offers them that opportunity to get out of the house and participate in escape rooms, amusement parks, immersive walk-throughs, VR cafes, interactive entertainment centers, themed restaurants or hotels, 4D films, enchanting concerts and theater experiences, and monobranded retail stores.

Everyone Benefits. Consumers are having a great time, and licensors and licensees are profiting. The global LBE market size is projected to reach USD 19.1 billion by 2030 from its value of USD 3.4 billion in 2023, at a CAGR of 28% during the forecast period, according to a study by MarketDigits (Yahoo Finance, December 20, 2023). Brand owners may elect to get into the business of hosting these experiences themselves to reap 100% of the revenues. Sometimes this works, and sometimes it’s a flop. Just because a business does one thing well doesn’t mean it can do all things well. From an efficiencies of business standpoint, I believe there’s a highly symbiotic relationship between licensors and licensees that reduces risk, boosts brand recognition and still allows for plenty of revenue to go around.

License Agreements. Studio license agreements are notoriously lengthy. Understandably, there’s a need to protect intellectual property rights (IPR). After filtering through the multiple “Whereas” paragraphs and Definitions sections, the common clauses in LBE license agreements are:

Licensed Property: A clear outline of what intellectual property (IP) is being licensed, ranging from text descriptions to images, including the right to withdraw certain elements in the future, with a reservation of rights for all other IP owned by Licensor. A lot goes into making a movie or a television series, including a multitude of agreements governing IP; there will be times when a Studio needs to withdraw an element of the IP granted due to adjustments in such agreements or publicity matters.
Grant of Rights: A grant of the Licensed Property for a duration of time (term), in a particular area (territory), in authorized channels of distribution (e.g., theme parks category and the marketing thereof). This may include naming rights, merchandise rights, food & beverage rights, strolling character rights, and exclusivity rights. Excluded rights will be reserved or restricted (e.g., perhaps the music in the underlying movie wasn’t cleared for LBE uses, or the talent have stipulations, residuals or royalty splits to consider; or maybe the Studio has an interest in protecting its IP against artificial intelligence / machine learning uses).
Approvals: A description of Licensor’s approval rights over uses incorporating the Licensed Property, including the exact process of such approvals (e.g., in writing, within a certain number of days). This may include approval over investors, budgets (e.g., operating, marketing and refurbishment), key staffing and vendors (e.g., park operators, designers, architects, construction companies), development and opening day schedules, and third-party competitor exclusions (e.g., an immersive walk-through experience of well-known NBC television shows isn’t going to want CBS shows included nearby or CBS-related investors involved in the project). Approvals aren’t meant to be onerous to licensees; Studio LBE teams are well-staffed with creative folks whose jobs are to ensure optimum experiences for consumers, so trust they know and love the brands and have a vision for the LBE centered on consumer enjoyment and safety.
Consideration: A combination of up-front fees (e.g., development fees) and minimum guarantees (MGs), with royalty splits for revenues above the MGs, wherein the Licensee generally receives the higher percentage because they take on the costs of the project. Milestone deadlines will be included, and penalty fees may be instituted and termination rights triggered for failure to meet such milestones. The longer the Licensee delays, the more the Studio becomes anxious the project won’t launch on time; wherein the Licensor may want to grant similar IPR to another licensee who can meet the Studio’s forecast.
Samples / Complimentaries: A list of free items Licensor has the right to for trademark purposes, employee perks and consumer giveaways. This may include a certain number of free visits to the LBE per year, including travel.

Conclusion. We’ll be seeing a lot more LBE deals being made in the future. The priority for Studios is to partner with quality licensees with core businesses in the particular LBE channel who can meet milestone deadlines and deliver incredible experiences to consumers while protecting the Licensor’s valuable brands. Remember the old days when we begged our parents to take us to the arcade and drop us off with a Ziploc bag full of quarters? I look forward to experiencing that joyful, elated feeling when I visit my favorite branded-LBEs in the 21st century with friends and family.

Playbook Law is a solo firm providing General Counsel Services for Startups and Interim In-House Counsel for Established Companies in the Technology, Gaming, Entertainment + Sports industries.

This blog is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney-client relationship.