Licensing income rivals sponsorship as the No. 2 national revenue stream, behind television, of course, for the major sports properties. Manufacturers pay royalties based on the wholesale price of merchandise sold to retailers. Most licensing deals involve a minimum royalty payment, with manufacturers paying a royalty over and above the minimum once they have sold enough product to offset that payment. Some licensing contracts also include marketing requirements, compelling the licensee to buy advertising with teams or on television.
Standard royalty structures:
Toys and games: 4% to 7%
Apparel, gifts and novelties: 10%
Premium apparel (on-field): 11% to 12%
Player-identified apparel: 14% to 15% (split evenly between property and players association)
Trading cards, video games: 14% to 20% (split between property and players association, favoring players association)
Rules governing use of player likenesses, active or retired, vary from league to league. Unless a manufacturer wants to develop a product around one or two specific players (in which case the company would have to sign a deal with the player directly), manufacturers obtain "group" licenses giving them rights to all players from a particular league.
With the NHL and MLB, those licenses must be obtained directly from the respective players associations, whereas the NFL and NBA have deals with their players associations so that licensees can get player rights directly from the league. Rules governing retired players are similar, with alumni associations representing the rights of most retired players. However, some retired players have their own representation.
Source: SportsBusiness Journal research
