Tuesday, June 25, 2013

The Magic in a Batman T-Shirt: Why Licensing Works

Summer is comic book season in the entertainment world. Blockbuster movies pop up in theaters. Major video games debut at E3. Kids have their comic related clothing. Crossovers dominate the comics market, but mainstream media doesn't notice that unless Superman or Captain America die (again). The interest in the comic characters is arguably highest in the summer, but that interest is often focused on the 'secondary' market, not the source material.

Why? What makes a superhero based TV show or movie so popular? More importantly for our purposes, why does comic related merchandise sell so well every year? I originally explored this idea in an earlier post (See Making Comics Isn’t Really About Making Comics Anymore). Now I'd like to explore the social and emotional aspects of licensing, and those factors can help the independent comic creator.

Disclaimer: Most of my other posts have discussed the legal aspects of the comics industry, but this will be more of a pop culture analysis. While I don't have an anthropology or sociology background, these ideas come from the time that I've spent working and observing consumer behavior as it relates to licensed goods at Central Park Media, Marvel and as an independent consultant.

The Definition of Cool
There is no practical difference between a plain white t-shirt and a white t-shirt with a Batman logo on it. Both of them protect you from the elements and get you into restaurants that have a 'no shirt, no service' sign. But the Batman shirt can cost twice as much as a plain t-shirt. Why? Some might say 'because it's cooler than a plain old t-shirt.' That might be true, but what makes it cool?

A person who likes Batman and owns Batman merchandise gains three benefits that have nothing to do with the practical uses of the items. Those benefits are identity, community and nostalgia.

Personal Identitification: When a person relates to a character or a story, their connection to that brand increases. It could be Superman's morals, Wolverine's rebellion or Batman's determination that we aspire to. It could be the emotional impact of stories like Watchmen or Kick Ass or the wit of characters like Iron Man and Spider-Man. Wherever that connection comes from, a reader sees themselves (or wants to see themselves) in the characters they love. They emotionally identify with that character and on a certain level, the merchandise they wear is an expression of that identity.

Community Acceptance: Humans are social animals. We like to organize ourselves into groups based on some defined characteristic. We are also highly visual creatures. We make decisions about people based on what we see. When we see someone who we perceive to be similar to us, we are more likely to accept them and feel a sense of connection to them, however small that connection might be. This is easiest to see in children. Two boys meet for the first time in the park. Both are wearing Batman t-shirts. "You like Batman! I like Batman too! Let's play!" Now they're friends, very little additional interpersonal screening between them.

Emotional Nostalgia: Merchandise can be a subtle reminder of a past experience with, the power to evoke much of the initial emotions. If you have fond childhood memories of watching Batman cartoons, the Batman t-shirt can act as a kind of artifact. It can bring your mind back to a pleasant event in your life and impact your mood whenever you see it.

Not Just for Comics
It’s a mistake to think that the identity, community and nostalgia concepts are unique to comic geeks and unsophisticated children. Groups on every level of society share the same qualities. They just use different products. A man might express his wealth and status with his Mercedes or his Rolex. A woman can instantly accept or reject another woman because of her Prada handbag or Gucci shoes. A football fan has a connection to the jersey he wore when his team won the Superbowl. The baseball fan has his signed glove. In a larger sense, consumer products on every level use logos to evoke emotional responses in order to sell goods and services. Starbucks, Apple and Nike are universal examples of logo and merchandising power.

The Cure for Oversaturation
With all the merchandise, logos and product placement in our society, why would an independent artist want to add to the wall of noise by selling his own stuff? The answer is evolution.

There was a time when certain characters, logos and stories were popular with a small, but passionate audience. Success and mainstream over time acceptance elevated those properties into the icons that we have today. Now they have become diluted and altered. The sense of community they created has extended so far that it covers almost everyone. Ironically, the wide appeal of a character all but eliminates the original connection the first fans had to it. (See Ninja Turtles: From Parody to Property) People inevitably seek out new characters and icons to identify with. They look for smaller, more passionate communities to connect with. The independent artists of today can create the icons of tomorrow if they decide to extend their work beyond the page and into everyday life.

The Power of Story
How does an artist create an iconic character that translates into a successful licensing property? Two of the keys are appeal and evolution. Appeal comes from good stories. No matter how unique and merchandise ready your character might be, without great stories readers, won't identify with the character, connect with other readers or feel any nostalgia for the property. Evolution comes from a consistent relationship between the character and society. Comic book icons like Superman and Batman are more than 70 years old. Each one has changed with the popular culture, and target audiences, to create identification without losing the core concept of the character. The image is what goes on the item for sale, but it is the story that makes the property successful. (See Image and Story: The Role of Copyrights and Trademarks in Comics).

I'm planning to launch an on demand independent merchandise platform for comic creators this year (See Do You Want to Create Merchandise for Your Comics?). My most successful partners will be the ones who can capture the magic of merchandise in their characters and extend their popularity far beyond the comic book page.

Have fun.


Tuesday, June 11, 2013

Eternity is a Long Time: License Terms in Comics Contracts

Western society is focused on the present. In business and in life, most of us are concerned with what's happening right now. Little thought is given to long term implications and outcomes. This can be a mistake, especially when it concerns your original stories and characters. A prudent creator will consider the length of time that their property is tied up when considering any deal.

How Long Is This Going to Take?
In the language of contracts, the Term is the length of time that a contract will be in effect. So if you license the publishing rights to the Greatest Comic Ever (GCE) for three years from the execution of the agreement, and the contract is signed on January 1, 2014, then the rights revert back to you on January 1, 2017.

In some cases, the starting and ending dates can be manipulated so that three years isn't really for three years. For example, if you license GCE for three years from the date of first publication of the book, you're looking at a longer deal, since GCE might not come out months or years after the contract is signed.

Forever and Ever, Amen
There are two types of terms in comic book contracts, finite and infinite. A finite contract has a term that lasts for a certain amount of defined time. Like the example above, the term could be months or years, but sooner or later, the rights revert back to you.

With an infinite term, there is no practical end to the license. You could die, humanity could be destroyed in the zombie apocalypse and the earth could be eaten by the sun, but as long as there are lawyers around the contract is still in effect. You can tell a license is infinite if the term contains words like perpetual or in perpetuity. Also, if you can't calculate when the term ends, there is a good chance that it never will.

There are also modifiers to standard term language that can make an infinite term look like a finite term. An in use license could be written so that as long as the licensee is actively using the license, then the license is still in effect. This is part of the difference between the X-Men and Daredevil movie franchises. Fox keeps actively making films with the X-Men universe, allowing it to keep the license. Daredevil reverted back to Marvel because Fox made no use of the license after the 2003 film.

An automatic renewal clause can be placed in term language so that the original term continues to restart as long as certain conditions are met. For example, I have seen publisher's contracts where the license term was valid as long as the book was in print. In today's world of internet comics, a book will always be in print if the book can still be downloaded, making a finite license infinite for that purpose.

Also, a license can convert from an exclusive license to a non-exclusive license (See Addition by Division: Separation of Licensing Rights for Creator Owned Deals) after the initial term ends. This can provide some protection for both parties upfront, but creates complications later on.

Think About the Future
Publishers have an inherent interest in holding rights for as long as possible for several reasons. First, it might take a considerable period of time before a property reaches its height of popularity. Wolverine has been a benchmark of popularity for the past ten years, but its celebrity status in comics has been solid for the past twenty years and it languished in relative obscurity for years after his first appearance in 1974. Second, IP assets, like characters are not perishable and they don't take up space. They are mental concepts that can be stockpiled at little cost. Finally, characters can prove to be powerful assets to whoever holds them whether the rights are resold as movies or games, or if the characters themselves used as assets to generate investment income.

The risk that a creator runs into in this scenario is signing away the rights to a Property for too long. What too long means will differ from one person to the next, but it is generally a mistake to sign away rights forever if the benefit you receive doesn't match what you're giving away (See Get What You Give: Rights and Revenue for Creators)

Not every Property is going to be as popular as Superman seventy five years after it is created. Your personal situation might prevent you from making demands about the length of your contract term (See David vs. Goliath: Negotiating Power in Comic Book Contracts). But anyone getting involved in a creator owned deal or some other type of licensing agreement should consider the length of the term in their contract term and strive to maintain some control of the property in the long run.

Have fun.


Monday, June 3, 2013

Your Slice of the Pie Part II: When Do You Get Paid?

I haven't written anything about comics in a few weeks because I've been working on creating a independent artists merchandising platform (See Do You Want to Create Merchandise for Your Comics? ). I'm still testing the feasibility of that business, but I'd like to take a break from that and discuss the ways time impact a contract. This essay will focus on the most important short term impact; the time it takes for you to be paid.

Payment Timing

The most important thing to understand about working with a publisher is that payments are traditionally paid in lump sums at specific periods during the year. For instance, let's say your publisher reports sales on a quarterly basis (4 times per year) and pays royalties thirty days after each reporting period. Let's also assume that your new book hits the stores on January 1, 2014. This means that you'll see your first report on March 31st, 2014 (or the first business day after that) and the earliest that you'll see the first check is April 30, 2014. Payment cycles can be monthly, quarterly, bi-annually or annually. The rise of online sales can speed up the reporting process to almost real time, but the publisher might still delay payment for various financial reasons.

Not So Fast

Keep in mind, the earliest point where you might get paid won't always be the day you get the money. There are several factors that contibute to payment delays that have nothing to do with negative intentions from the publisher. A delay in payment can occur:

  • if the publisher pays you any advance prior to the release of the book (See Your Slice of the Pie Part I: Net and Gross Profit). In this case, you won't be paid until your percentage of royalties exceed the money you were given up front.
  • if the cost of producing the book and deducted from the gross sales exceed the actual sales, then you won't get paid until sales exceed costs (See Your Slice of the Pie Part I: Net and Gross Profit)
  • if the publisher only pays royalties after a certain threshold is reached (normally $50 or $100) then you won't be paid until the pay cycle where your share of the royalties crosses that threshold
Watching the Clock

When you are thinking about the practical effects of payment timing there are two things to keep in mind. First, don't expect to see immediate payment for a new book unless there was an advance up front. Very few independent artists rely on just creator owned book sales to make a living, but it's worth pointing out that you don't want to count on paying February's rent with the money from January's book sales. That money might not come until April or May. The solution to this is to supplement your creator owned income with work for hire gigs (See Entertainment Contracts 101: Creator Owned vs. Work for Hire) that at least in theory are paid much faster.

The other thing you want to avoid is forgetting about your royalties entirely. In some extreme cases (large deductions from gross, annual reporting and rolled over payments), years could pass before sales reach a point where you start to collect royalties. In the majority of cases, the publisher will just send you the money even if you don't keep track. This is a nice surprise (the industry equivalent of finding money in the pocket of an old coat) but you don't want to get into a situation where you forget and the publisher forgets and you never get paid for your work.

While I often advocate for creators to negotiate changes to their deals, payment timing is something you need to understand not try to negotiate. The payment systems of most publishers are tied to their accounting systems and their overall business operations. It is worth asking for a change if the publisher seems flexible, but unless you are Stan Lee most creators will not be in a position to get this change (See David vs. Goliath: Negotiating Power in Comic Contracts). The best option you have is to set up some kind of long term reminder of the payment terms of all your books at the beginning of the deal.

Now that we've explored the short term effects of time on creator owned deals, next week I plan to look at the long term effects of tying up intellectual properties and the not so philosophical concept of eternity in the comic book business.

If you have any questions, please feel free to ask.

Have fun.