Behind the BlueSky Brands-Winterthur-NWF Catalog Licensing Deals
The BlueSky deal was both an acquisition and a licensing deal. The assets were acquired just as they would be in any standard asset deal. But in addition, a licensing agreement was struck. Although common in many industries, licensing agreements are uncommon in cataloging.
In an exclusive merchandise licensing agreement, the licensor retains the right to limit the licensee’s rights to the specified merchandise only, as well as the right to approve any changes in that merchandise. The licensor often has the right to approve not only all licensed merchandise, but also all related packaging and advertising materials.
Although payment terms were undisclosed, expect a lot of money flowing from BlueSky to the nonprofits. For such organizations, a fairly predictable cash flow without real investment risk is a Godsend, especially since it has become tougher for both nonprofits and for-profits to generate respectable profits and ROI in recent years. They all labor under the same severe expense increases in postal and parcel shipping rates. So it’s not unusual today to see a nonprofit cataloger, even ones with revenue of $25 million to $50 million, to post losses. Most trustee boards find this lack of ROI and risk profile unacceptable.
Future installments of this column will explore some other reasons nonprofits establish licensing agreements with larger, for-profit direct marketers. And if you compete in the gift, home, apparel or bedding categories, you’ll want to follow our analysis, because such deals will result in greater competition for you.
As for BlueSky, the company’s goal is to grow and improve its own EBITDA. And the most direct path to accomplish this is to leverage its economies of scale against the two nonprofits’ catalog businesses. NWD has 328,000 12-month buyers, WD has 307,000.
Parts of the NWD and WD catalog lists are widely used by a broad spectrum of home, decorative and gift mailers, as well as some apparel and other nonprofits. BlueSky’s The Paragon also uses these lists, which tells you there is already list synergy within the newly expanded BlueSky family.