As your business grows, so does your bank of content and often it will include an online course or a trademark (or six). If you have ever asked the question or been asked about licensing your content, you will want to read on to learn the basics.
Licensing your content can be an awesome way to spread your message far and wide (and make income in the process), but making sure you are protecting your intellectual property is vital.
First things first, what the heck is a license agreement anyway?
A license is an agreement between two parties that grants one party (the licensee) the right to use certain intellectual property owned by the other party (the licensor) in exchange for compensation.
The intellectual property that is licensed can include patents, trademarks, copyrights, trade secrets, and other forms of proprietary information. Typically in the online coaching space, this would be copyright (content) or trademarks (names of programs or products).
Here are 5 basics to understand if you are thinking about licensing:
1. There are two main types of licenses, including:
→ exclusive - which gives the licensee the “exclusive” right to use the content - meaning if you offer Person A the right to sell or use your online course, you can’t offer it up to anyone else
→ non-exclusive - multiple licensees can exist - you can offer Person A and Person B, C, etc. the right to sell or use your course in their business
When thinking about licensing, it's important to choose the right type of license for your content based on your business goals and the type of content you're licensing. Typically a non-exclusive license would be more common.
2. Negotiating terms: You are in charge!
If you are licensing YOUR content, your trademark, your hard work…it’s important to negotiate terms that are favorable to your business. This includes determining the length of the license, the geographic territory in which the content can be used, and any restrictions on how the content can be used.
3. Royalties: The amount you will be paid for licensing your content is called a royalty.
This is typically a percentage of the revenue generated from the use of the content. However, there are a few different types of royalties to keep in mind:
→ Gross Revenue Royalties: This is based on the gross revenue generated by the licensee's use of the licensed content. The licensor is paid a specified percentage of the total revenue generated by the licensee.
For example: I license my course to Person A and they sell 100 spots, upon cart close, I will get 20% of the gross revenue.
→ Net Revenue Royalties: This type of royalty is based on the net revenue generated by the licensee's use of the licensed content. The licensor is paid a specified percentage of the revenue generated by the licensee after deducting all expenses.
For example: I license my course to Person A and they sell 100 spots, upon cart close, I will get 20% of the net revenue after deducting all expenses (and those expenses should be outlined in the agreement so it’s clear what is agreed to).
→ Unit Royalties: Based on the number of units sold by the licensee. The licensor is paid a specified amount for each unit sold that incorporates the licensed content.
For example: I license my course to Person A and during the course of six months they sell to 50 people. I will get $250 for each spot sold.
→ Minimum Guarantee Royalties: This is a minimum guarantee payment to the licensor, regardless of the actual revenue generated by the licensee's use of the licensed content. The licensee agrees to pay the minimum guarantee amount even if the actual revenue is lower.
For example: I license my course to Person A and I get $20,000 regardless of what they sell (and it could be more or less).
4. Intellectual property rights: Licensing your content often involves transferring some of your intellectual property rights to the licensee - such as the right to use the trademarks that YOU own.
It's important to understand what rights you're giving up and to retain the rights that are critical to your business.
This is especially important for things like a certification where you may be granting your students the right to license your content and trademarks - you need to be the one to set rules around what that looks like.
5. Contract terms: I saved the BEST for last!A licensing agreement should be set forth in a written contract that clearly outlines the terms and conditions of the license. It's important to review the contract carefully and make sure you understand it!
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There you have it! These are some of the key things that coaches and online biz owners should know about licensing their content. Got questions? Feel free to leave a comment below!