How companies like Apothékary and Simple Modern navigate licensing deals

“I think for us, it was a huge success to even do a partnership like this,” she said. “There’s a real legitimacy factor. Disney reaching out to us re-iterated that we’ve come a long way.”

But behind the scenes, there’s much more that goes into a licensing partnership than putting a logo on the box. In addition to creative back-and-forth, there are legal agreements and insurance protections to hammer out. On the creative side, there are product color palettes and marketing campaigns to design, get approved and push out. Apothékary also delayed the launch of a new product so it could focus on meeting the Disney deadline.

“We always go by when we say yes to something, we’re saying no to something else,” Okusa said. “There are trade-offs in working with a partnership like this because you’re all hands on deck and there’s no backing out.”

Apothékary is among a number of DTC startups that are navigating high-profile licensing deals with the world’s largest corporations. Last week, it announced another partnership with Marvel to tie in with the debut of the “WandaVision” spinoff series “Agatha All Along.” That’s been in the works since February and features a brand-new cognition enhancer product called Mindcraft.

For some companies, licensing can become a massive business driver. Nine-year-old drinkware company Simple Modern has made licensed products a cornerstone of its lineup. Chief Growth Officer Corbin Wallace said less than half of the company’s revenue comes from its IP-branded products. Oftentimes, they’re a second or third purchase for customers. One of the most popular first purchases among new customers is a 40-ounce adult-sized tumbler, frequently followed up by a kid-sized version that has licensed imagery and IP. Then, parents come back to purchase lunch boxes or backpacks to match, Wallace said.

The licensing part of the business kicked off with college sports teams back in 2017. Then, in 2018, a brief partnership with the Oklahoma City Thunder led to a bigger deal with the NBA. Simple Modern, which is based in Oklahoma, attended an opening game with laser engravers to personalize its branded merch sold in the team store. But that day also happened to be the 10-year anniversary of the team relocating to Oklahoma City, and NBA consumer product division executives had come to the game. 

“The team store manager introduced us to the NBA representatives, and we got them some product and they loved it,” Wallace said.

Now, the NBA is one of the many licensing deals Simple Modern has, along with the NFL, the NHL and MLB. It also has deals with major media and entertainment companies like Disney, Marvel and DC. This month, it announced collaborations with Universal, marking over half a dozen new deals the company has entered into so far in 2024.

“Over time, [the licensing strategy] seems to have worked out, so to speak, but it’s really been from the generosity of other people being willing to make introductions and to connect us,” Wallace said. “The analogy we have is that sometimes licensing is like a medieval kingdom, where there’s a drawbridge and there’s a moat – and there are alligators. But then once you’re on the inside, it’s like you’re part of the family.”

From a product standpoint, Wallace said Simple Modern is selective about how it applies its branded deals. Not every product comes in licensed versions — for example, water bottles featuring characters from the kid’s TV show Bluey are the smaller water bottles in 14 and 18 ounces, while Marvel versions come in its 32-ounce versions. “Not all licensing partners will fit with every product because the occasion just doesn’t match,” he said. “You have to have a reason for it to exist.”

Wallace also said that the product itself has to be high-quality enough to attract the brands themselves. “If you have great products and great intellectual property partners and strong distribution, you can have really great outcomes,” he said.

Emily Bardon, leader of the luxury and design practice at law firm Lewis Rice, said that even if smaller companies don’t have much bargaining power against large corporations, they still want to do due diligence in reviewing any licensing contracts. There are also financial, logistical and legal considerations in the agreement, like how the licensor gets paid, audit rights and what happens to unsold inventory. 

“You should still be proactive in reading and understanding the license agreement so that you can make informed business decisions and do your best to mitigate any risks,” she said.

Companies should be clear about the details that they need to include on the product like what kind of logos or branding they can use. Once a product is created, Bardon said, the company that grants the license is likely going to want to review the product — so it helps to make sure everything is used correctly upfront. “Make sure you understand what obligations you have to obtain approval so that you don’t invest a lot of money in a product or packaging that will need to be modified,” she said. 

At Apothékary, Okusa said her team made it a point to check in with Disney or Marvel at key points in the creative process. During photo shoots, someone would send a test shot to Disney before proceeding. “The last thing you want to do is spend $25,000 on a photo shoot and then you send it to them and they’re like, ‘Oh, this is not on brand, or what we were thinking,'” she said. “It’s really important to have that long-term communication around the vision so that you’re not wasting time or money.”

Despite the challenges, Okusa said the partnership deals have helped her team become more resilient.

“We’re not just running the Star Wars partnership, we’re running the company,” she said.