Character merchandising through a licensing arrangement can be a quick way to generate additional revenue globally through a variety of branded consumer products such as toys, stationery items, home furnishings, publishing and even food products. Often the brand owners may have several hundred licensee partners globally distributing the branded character merchandise. Licensors often find that managing a large portfolio of licensees can be difficult in terms of monitoring the incoming reported revenues.

Furthermore, many licensees may hold various license agreements with multiple brand and IP owners. Differing reporting requirements from one license agreement to another could lead to inaccurate reporting by the licensees. From our experience of royalty audits throughout the world, we have uncovered significant under-reported revenues due to clerical errors, accounting mistakes or contract mis-understandings. In majority of cases, the additional revenue identified by us and collected by our clients far exceed the cost of the audit, thereby rendering the whole audit programme a self-financing exercise.

We recommend that all licensors exercise their right-to-audit clause in their license agreements at least once every two to three years for all their key licensees.