What is Licensing Revenue

Licensing revenue is income earned by a company for allowing its copyrighted or patented material to be used by another company. Some examples of things that may be licensed include songs, sports team logos and technology. Any time a company's licensed intellectual property is utilized by another entity, that other entity has to pay a licensing fee to the originator of the licensed item they're using. Money collected from those fees by the owner of the licensed item is licensing revenue.

BREAKING DOWN Licensing Revenue

Licensing revenues are a significant source of revenue for several publicly traded companies. For example, a major source of income for the publicly traded company Dolby Laboratories is the licensing of its technology to consumer electronics manufacturers such as DVD player manufacturers. Other groups that rely on licensing revenues are the National Basketball Association, National Football League, National Hockey League and Major League Baseball. These organizations grant permission to third parties, such as apparel vendors, to use teams' logos in video games, on clothing and other merchandise. The vendor keeps part of the profit for its role in producing and selling the apparel, but the sports association also earns money in exchange for granting the vendors the right to use the teams' logos. In 2010, the MLB sold licensed merchandise worth approximately $2.75 billion.