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Licensing

Q: Merchandising rights

I've never had to consider merchandising rights on shows. Now I must and I fear I'm out of my depth. Can you advise?

A: Merchandising (that is to say the sale of merchandise emblazoned with the distinctive logo, title design and/or artwork of a stage musical production) is an art form in itself and if skilfully handled can be a very lucrative source of production income, particularly from sales of such merchandise within the precincts of theatres where a production of the musical is currently in progress. Think of the very clever use of logo designs for blockbuster musicals such as Cats, Les Miserables, The Phantom of the Opera and a great many others. Record sleeves, video/DVD packaging, t-shirts, beer mugs and posters are the most common items of merchandise which come to mind. In principle, there is no reason why merchandising cannot also be set up in relation to a straight play but in practice this is rarely regarded as worthwhile, due no doubt to the usually shorter production life of a straight play and its absence of linkage to the wider public exposure of the music industry.

I assume you are going to be the producer of a stage musical, in which case the first thing for you to do is to engage a graphic designer to design the logo, lettering and artwork. If and when this is universally adopted for all productions of the musical presented or licensed by you in any and all territories, including subsidiary exploitation such as merchandising, cast albums and motion pictures, it will form a sort of livery, the use of which will enhance the reputation of the work and form a valuable marketing tool. You should try to arrange for submission of several alternative designs from which to choose and for copyright in the chosen design to be assigned to you in return for payment of a fixed sum with no subsequent royalties. This would not be unusual for commissioned graphic designs and may be regarded as crucial to a successful merchandising operation.

You should then insist on the chosen design being used in all exploitation of the musical by or under licence from you. Your ownership of the graphic design will be independent of rights in the musical itself, so that even if you were to lose or dispose of your rights in the musical itself, you will still control exploitation of "your" graphics which will hopefully by then have made a substantial contribution to the reputation of the written work.

Sometimes a producer will subcontract the entire merchandising operation to a skilled merchandising agent, either globally or in a particular territory, or possibly even for just a single production. There are a number of such specialist agencies, able and willing to relieve producers of the burden of organising it themselves, bearing in mind the need for such organisation to cover manufacture, pricing, merchandise-selection and sales among other things. In such cases there will be a regular income stream flowing quarterly or half-yearly from agent to producer.

Depending on individual circumstances and contract negotiation, the producer may find himself having to pass on a proportion of his "net merchandising revenue" (as defined after specified deductions) to one or more of the authors/composers and/or production investors but should nevertheless expect to retain at least 40% for himself and sometimes a lot more, even as much, in some cases, as 75%. Occasionally the work of costume and sets designers may be used in merchandising, in which case it would be usual for them to be remunerated for such use on a proportionate basis. Royalty splits are not always based on producers' net revenue but may be calculated on a much smaller percentage of gross sales excluding VAT. Sometimes also a participant's share may be confined to in-theatre sales, or be calculated differently on in-theatre and out-of-theatre sales. All this is a matter for skilled contract negotiation, the relative bargaining power of the parties involved and specialist advice.

First published (online) 10th January 2007