🇺🇸United States

Royalty under‑collection and missed renewals in brand licensing

4 verified sources

Definition

In brand asset licensing, fragmented contracts and manual, spreadsheet-based royalty reporting lead to royalties being under‑reported, reported late, or not billed at all. Licensors also routinely miss contract renewal windows, losing entire licensing streams until issues are detected and renegotiated.

Key Findings

  • Financial Impact: McKinsey cites poor contracting practices (including licensing) driving 10–20% higher total costs; industry contract‑heavy businesses report ~$200,000 per year lost from missed renewals alone, with additional millions in missed or delayed royalties across portfolios.
  • Frequency: Monthly
  • Root Cause: Contracts, amendments, schedules and royalty terms are scattered across PDFs, shared drives, email and legacy trackers, forcing manual clause interpretation and spreadsheet reporting that create blind spots, royalty leakage and missed renewal deadlines.

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Marketing Services.

Affected Stakeholders

Brand licensing managers, Brand asset managers, Legal counsel (contracts/licensing), Finance and royalty accounting, Sales and partner management, Revenue operations

Deep Analysis (Premium)

Financial Impact

$100,000 - $250,000 from compliance violations; potential content removal; license renegotiation costs • $100,000 - $250,000 from missed brand licensing renewals; potential franchise termination • $100,000 - $250,000 from property-level royalty under-reporting; brand compliance visibility gaps

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Current Workarounds

Analytics manager aggregates store-level data from POS; manual consolidation in Excel; identifies royalty variances via pivot tables • Analytics manager collects manual reports from each property; consolidates in Excel; identifies trends via pivot tables • Analytics manager exports sales/usage data from multiple systems; reconciles in Excel; creates manual pivot tables for royalty trending

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Excess manual administration and rework in licensing operations

McKinsey research attributes 10–20% higher total contracting costs to poor contracting practices, including manual, fragmented licensing processes; in contract-heavy environments, this translates into significant six‑ and seven‑figure annual labor and overhead overruns relative to optimized operations.

Cost of poor quality from misapplied rights and brand misuse

Industry analyses of contract and revenue leakage show that misinterpretation of pricing and terms, including rights-related clauses, drives systemic errors that affect 42% of companies; for licensors this manifests as product and campaign rework and write‑offs that can easily reach six‑figure annual totals in large portfolios.

Delayed royalty collections due to manual reporting and disputes

Research on revenue leakage in recurring and contract-based billing shows widespread billing errors and unresolved disputes that delay or forfeit revenue, with 42% of companies affected and recurring billing inaccuracies accumulating into substantial revenue and cash flow losses over time.

Lost licensing and campaign capacity from rights bottlenecks

McKinsey’s finding of 10–20% higher contracting costs from poor practices implies a material portion of staff time lost to low‑value rights clarification and document chasing; across large licensing and marketing departments this equates to hundreds of thousands in annual opportunity cost and constrained throughput.

Regulatory and contractual non‑compliance exposure in licensing

Analyses of brand licensing operations highlight non‑compliance and disputes as recurrent, expensive outcomes of fragmented rights and royalty management, with McKinsey’s 10–20% excess contracting cost band incorporating the impact of disputes, remediation, and associated advisory and legal spend.

Under‑reported sales and unauthorized asset use by licensees

Industry revenue‑leakage research notes that failing to bill for all services or products and unresolved billing disputes can lead to complete revenue loss on affected transactions; in licensing portfolios with significant sales, even a small percentage of under‑reported or unauthorized activity can translate into millions in lost royalties over time.

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