By Gary Symons
TLL Editor in Chief
Video gaming is the second largest form of media entertainment in the world, and the fastest growing.
Despite those facts, the sector still lags behind in more traditional licensing vectors like television, books, film and music. According to Deloitte Digital in the chart below, only TV generated more revenue than video games, with $400 billion in revenue compared to $160 billion for gaming.
This week, TLL spoke to Rachit Moti, the CEO of Layer Licensing, who wants to change that. His company has launched a licensing market place that makes it easier to find and close a deal in this sector.
TLL: You’ve said, and I’ve also noticed, that while video gaming earns more revenue than any other entertainment sector, there appears to be less emphasis on licensing. Why do you think that is?
Rachit: Historically gaming wasn’t as well aligned for most IPs. Fifteen to 20 years ago, we’d think of gaming as fringe entertainment. If we look at games today, there are billions of players around the world, and gaming audiences have become much more diverse. On mobile for example, close to 50% of players are women.
On top of that, as the games industry has matured business models have evolved as well and many games have moved to free-to-play, games-as-a-service. Licensing has changed from being fully licensed games, like dedicated movie tie-ins such as 007 Goldeneye or Lord of the Rings, to Live Ops games that regularly licence IPs for different content—like cosmetics or limited time events—to keep players engaged players and as another tool for monetization.
On the game side, there is still a residual scepticism towards working with licensed properties that comes from historical bad experiences. Obviously, those attitudes are changing and we’ve seen real progress and movement and developers having more success with licensed properties. Licensing has become an important piece of the puzzle in gaming and we’re seeing steady growth of 10% year on year for licensing deals and it’s a clear trend that seems likely to continue.
TLL: If a licensing company wants to get more heavily into video game licensing, what should they do?
Rachit: One of the most challenging aspects of video games is its inherently a technology-driven space, so the types of games, the companies that make them and the player profiles are constantly changing. Even the largest licensing teams with the resources to aggressively pursue new and emerging opportunities with limitless resources struggle to keep up.
We’ve noticed a lot of licensors have detailed plans and targets for categories like merchandising and toys, yet gaming is often a reactive process with no real focus or strategy. I think primarily they need to set a strategy of being in games and having people responsible for this too. At Layer, we can help them with this as our work goes beyond matchmaking companies, our team also acts as advisors to help identify where their IP might resonate best in gaming.
TLL: What’s the number one reason companies should focus on video game licensing?
Rachit: Gaming has become a huge sector and already eclipsed the film industry in terms of revenue. Large audiences across all platforms offer constant touch points with licenses and it allows fans to engage more with IP’s they genuinely care about. You only need to look to online behemoths like Fortnite, which continually brings in well-known IPs from around the entertainment space. Travis Scott reportedly earned $20 million including merchandise sales for his in-game virtual concert, so it’s clear games have become big business.
If a company wants to stay relevant and appeal to a modern audience games then interactive entertainment needs to be a component of their strategy.
TLL: How does Layer Licensing’s new platform address the issues around video game licensing?
Rachit: Traditionally licensing was a complex opaque process. Often, it was hard for both sides to discover each other and figure out who is a good fit. Layer matches between both sides in a way that makes games easy to assess and understand for licensors. On the flip side, it makes licensors easy to understand for developers.
TLL: Finding an opportunity is one thing, and closing the deal is quite another. How does your platform handle the contract negotiation phase of dealmaking?
Rachit: We’ve seen so many examples from gaming companies of contracts demanding physical goods insurance, samples and other things that are clearly residual of an agreement written for physical merchandise that simply doesn’t reflect the realities of interactive entertainment with digital distribution.
At the heart of Layer is a set of deal structures that reflects everything that’s relevant to getting most types of interactive rights deals done. Layer’s proposal process is optimised to provide rights holders with everything they need to understand a game and its publisher.
Layer was created from the ground up with games in mind. It’s optimised to be user-friendly for gaming companies, allowing them to put their best foot forward with information that’s going to be relevant and, therefore, at their fingertips, in stark contrast to the frustration of being presented with a form or process that’s not fit for purpose.
TLL: How difficult is the platform to use? Is it something that requires specialised knowledge in licensing law, is it something a layperson could use, or somewhere in between?
Rachit: Layer is a non-technical product built for licensors, game developers and publishers. If you understand the core principles of your industry, you can use Layer. It doesn’t require in-depth technical knowledge but it’s designed with the market in mind. We’re not open access to a general consumer audience because we want protect our licensors.
For licensors, we take in the information that is core to your brand integrity – audience, restrictions, objectives, commercials etc. Similarly, Layer asks game publishers their game audience, game mechanics, monetisation to help best match users.
TLL: How many video game properties are there on the platform now? What are some of the top properties?
Rachit: Layer has close to 70 games at the moment ranging from small independent children’s publishers in Asia to large publishers like Outplay and Stillfront.
TLL: On the other side of the coin, does the platform particularly help smaller game studios find licensing partners? How does it do that?
Rachit: Absolutely. Layer wasn’t built to solely service the top end of the market; it’s designed for small and mid-tier publishers. Smaller publishers are often limited in their resources, but a license can take a game to the next level, and make the difference from good to great.
When scoping different licensing opportunities, it’s often hard to know who you can work with and even afford. If we take racing, for example, how does a mid-tier racing developer with a small team get a brand like Honda or Ferrari, or even know if they’re in the right wheelhouse of working together?
Layer identifies the properties that suit your target audience and the ones that are open to working with you. We’re currently working with 170+ properties that are licensable!
TLL: On another topic, what’s your view on how video game developers will play into the evolution of the metaverse, and particularly metaverse licensing?
Rachit: We’re very excited by the metaverse and the opportunities it presents. The idea of the metaverse hinges on the idea of disparate characters and brands being brought into a shared world. For it to feel real and come to life, we need all the components we love to be there. So fundamentally, licensing is essential and will only become more so as the concept evolves and the ongoing metaverse projects start manifesting into something more tangible.
There’s the same problem to solve here for both sides, to make sure licensors feel comfortable and protected while developers can make immersive new worlds in this innovative sandbox as the metaverse space continues to grow.