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From Duck Calls to Licensing Gold: VP of A&E Discusses Product Licensing Program

A hot TV series often leads to lucrative product licensing opportunities. The window to maximize a popular television series via a licensing program, however, can be short. A sophisticated licensing program gives the brand owner the agility to leverage fast-moving opportunities. 

This article discusses how the in-house legal department at A&E Television Networks, LLC ("AETN") innovated its product licensing program. Collaborating with its Consumer Products Division and outside counsel, this innovation turned the hit show "Duck Dynasty" into a licensing powerhouse, generating over $400 million in retail sales, producing over a thousand licensed products, and earning AETN a 2014 LIMA Licensing Excellence Award for Best Entertainment Brand Program and Best Overall Brand Program.

Identifying Issues    Darci Bailey, A&E general counsel

In 2012, legal support for the Consumer Products Division was assigned to Vice President and Associate General Counsel Darci Bailey. AETN's Consumer Product business comprises all digital distribution, video-gram sales, e-commerce, gaming and merchandising of programming assets worldwide. The focus on this article is on the merchandising component of that business. Bailey recognized that the current licensing process frustrated both the business and legal teams and that licensing opportunities were sometimes unexploited. "At AETN, we had an experienced product sales team and talented lawyers drafting our licenses, but completing a license deal could take months, when the marketplace demanded that the deal be done in a week. With limited internal resources, we needed to figure out how to do get the deals done quickly while minimizing risk, maximizing sales, maintaining consistency across contracts and pursuing corporate objectives." 

Bailey concluded that her new team could streamline and innovate the licensing process to better support the Consumer Products Division. "This was my first opportunity to lead a transactional group as an in-house lawyer," stated Bailey. Despite leading several other global practice groups at AETN such as litigation, intellectual property and employment, this was her first foray into supporting a revenue-generating team. "My litigation training taught me to analyze all aspects of our internal processes and to seek input from others. Together we set out to find every opportunity to innovate," stated Bailey. "Our next step was to solicit feedback from Kate Winn, SVP Consumer Products, and AETN finance." The final step was to work with outside counsel to identify areas in which we could improve the licensing program. "Often the best way to get the latest practices and truly compare your methodology with others, is to use well-informed and industry-leading outside counsel," stated Bailey. "It also helped to have supportive management, who allowed me to explore solutions, trusted my judgment and recommendations, and had confidence that my strong understanding of AETN's business and strategies would help to create the desired result."

Darci's team identified the following areas for potential improvement: 

  • More Uniformity and Better Control of the License Negotiation. Historically, many of the licenses executed by AETN were drafted as "one-off" deals or were developed by the licensing partners, which made the drafting process time-consuming and risky given the possibility of inconsistent deal terms. "I noticed many different drafting styles of the various license agreements, which indicated that the attorneys were drafting alone in their silos, which often led to lack of uniformity in terms" stated Christian Palmieri, a member of Bailey's team. "[A]lso, AETN would allow the licensee to use its contract, which meant the AETN attorney was forced to take considerable time to redraft and negotiate on points that, in our opinion, should be standard and not subject to negotiation."
  • Managing Data. Without a proper data management system, AETN often could not take advantage of fast-moving opportunities. Darci continued: "There was no quick way to determine, for example, the term, territory, and permitted distribution outlets for a 'Pawn Stars' license. We needed a database whereby one could quickly search prior licenses so that we could respond to our business team in minutes, not hours or days, and also quickly identify where there was an opportunity to do a new license."
  • Better Pre-Contract License Analysis and Strategic Planning. Sometimes AETN unwittingly granted too broad a grant of rights to licensees, which meant a subcategory of the license product could not be exploited by a different licensee. For example, a license for "jewelry" arguably encompassed costume jewelry and fine jewelry, when in reality the "jewelry" licensee may have considerable experience as a costume jewelry licensee but no experience exploiting a fine jewelry license.

AETN's Updated Licensing ProgramDuck Dynasty merchandise

After studying the current licensing model, Bailey and her in-house team and outside counsel began the task of modernizing the AETN licensing program, which ultimately provided the support for the "Duck Dynasty" merchandising phenomenon as well as thousands of other licensed products. Some of the notable elements of the new licensing program are: 

  • Master License, Standard Term Sheet and a Licensing Database. Bailey's in-house team, with the assistance of outside counsel, created a master license agreement that became the starting point for all product licensing deals, along with a standardized term sheet that easily converted into schedules for the final license. The scheduled terms then would be inputted into the new license database. The licensing process became more "streamlined and much more efficient," according to Kate Winn. "In hindsight," added Winn, "we would not have been able to… maximize the [Duck Dynasty] opportunity if we were working without a master license agreement."
  • Simplified Accounting and Reporting. The master license included standard dates and procedures for receipt of royalty payments (e.g., payments received quarterly on the same dates via a uniform payment method). The finance department now easily could review data and forecast. The master agreement also required licensees to transmit sales and other reporting data in a uniform manner, giving AETN more coherent and timely data.
  • Real-Time Data. With the new database, AETN could instantly search the business details of existing licenses (e.g., grant of rights, territory, scope, term) and respond quickly to the sales team when new opportunities arose as well as identify licensing opportunities to pursue. According to Winn, "licensing opportunities are time sensitive in nature, so being able to execute contracts quickly is one of the keys to success."
  • Stronger Negotiation Posture and Better Communication. Using a standard license as the starting point gave AETN a stronger negotiating position. The master license also expedited the review process, since the starting point was always the same. The new formalized process was actually embraced by AETN licensing partners. Winn continued: "Once we walked them through the boilerplate, [the license partners'] response was extremely positive because they saw that the deal drafting process was much faster and more efficient, which left us all more time to create products! The clarity also has benefitted the process because our licensees have a better understanding of our expectations."
  • Increased Granularity. The combination of the new template and data compilation allowed a "deeper dive" at many levels, including product types, distribution outlets, territory, and Internet rights. With all the necessary data readily accessible, AETN now could "slice and dice" the bundle of rights and better exploit each product category. For example, "gaming" rights became video games, mobile games, online games, board games, and casino games.
  • Human Efficiency and Lower Cost. "One of our goals was not only to create a better licensing program, but to do so using fewer attorney hours, which is a limited resource in-house," stated Bailey. The new system allowed the business team to perform conflict checks with current licenses and prepare term sheets before counsel becomes involved in the deal.

How Did AETN Do It? A Collaborative Effort 

From inception, Bailey and her team made sure that all stakeholders were involved in creating the master license. Her legal team held meetings with all members of the licensing program, including the Consumer Products team, the comptroller, and the finance and sales departments, and reviewed with them the working template and requested feedback. "It's just smart practice to seek input from everyone involved in a sophisticated business and finance operation. All the different perspectives, pressures, needs and goals helped us to create the best product." Winn added, "The development process of the master license was extremely collaborative with my team and me, so we were able to have influence and express concerns as the document was being crafted." Additionally, "The accounting department was thrilled to have input on how and when royalties would be paid," noted Palmieri. The AETN team also worked in tandem with outside counsel in drafting the master license to incorporate best industry practices.

All the stakeholders ultimately embraced the new licensing process, which all preferred over an ad hoc, informal procedure. As stated by Winn, "we were initially unsure of how licensees would respond to what appeared to be a lengthy agreement … we had concerns about scaring away potential partners but the legal team helped us to communicate to the partners why the master license was a positive move for all of us." After working with the new licensing program, "all involved noted with appreciation that that the new process resulted in very few redlines compared to the old process and that more licenses were being negotiated and executed faster than ever before," stated Palmieri.

The collaborative effort meant that various AETN stakeholders felt like they owned the new license program, which raised morale and forged a valuable connection between the AETN business, accounting and legal teams. The connection grew even stronger when the "Duck Dynasty" licensing program became an immense success. "I think the new process built a much stronger bond between the AETN business stakeholders and the legal team that supports them. We listened to their needs and created a program that satisfied those needs, which ultimately led to the most successful licensing program done by AETN to date. Without these innovations and Kate Winn's leadership, we could not have generated as much revenue from such a merchandising program," added Bailey.  

Final Considerations 

The revitalization of AETN's licensing program is the epitome of what today's lawyers are asked to do for their clients: How can I make this transaction more efficient, more favorable, less expensive, and less risky? Often, the legal department or outside counsel is perceived as the "No" department. In the case of AETN's product licensing program, however, the lawyers worked alongside the business team to proactively innovate.

From the outside counsel's perspective, my job was to work with AETN to identify areas of improvement and to help create an optimal licensing program that also needed less attorney hours to operate. Ironically, my job was to eliminate my job! (Fortunately, I am still called upon to work on sensitive deals and sticky negotiations.) As this case study suggests, besides the expert handling of matters, in-house counsel truly appreciate outside the efforts of outside counsel that combine legal and business acumen to create value for the company. "From my first conversation with Monica about perhaps innovating our licensing program, until Winn's shining achievement of two LIMA awards, Monica understood our needs and was willing to explore the problems and solutions along with us, at our pace and attuned to our corporate culture," stated Bailey. "While such a task can result in less work for the outside counsel in the short run, it produces a more lasting attorney-client relationship in the long term and, in this case, very interesting "Duck Dynasty" paraphernalia in my office!"

Darci Bailey leads several global and multi-platform practices at AETN and currently serves as key legal counsel to senior management, both domestically and internationally. Throughout her tenure with AETN, Ms. Bailey has advised on corporate strategy across five global practices, including litigation, intellectual property, employment, consumer products and compliance during a time of major expansion, including the acquisition of Lifetime Entertainment. The author gives special thanks to Ms. Bailey and AETN for participating in this article.

About the Author

Monica B. Richman is a partner at Dentons US LLP. She has created a leading practice as intellectual property counsel to clients who include many of the world's biggest names in entertainment, fashion and financial services. Her specialties include licensing, commercial contracts, and intellectual property development, protection and management.

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