What is a licensing business model?
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A licensing business model involves creating proprietary technology, products, or services and then allowing other companies to use these assets under specific conditions outlined in a licensing agreement. This model enables the licensor (the owner) to generate revenue through royalties or fees paid by the licensee (the user) for the right to use the licensed material.
For instance, from Qualcomm explains how their company, having developed essential technologies for mobile communications, licenses these technologies so that others in the industry can produce compatible products using Qualcomm's patented technologies. This approach not only generates steady revenue through royalties but has also helped Qualcomm sustain a powerful position within the mobile technology sector 1.
Similarly, in the fitness industry, describes how his company, NC Fit, uses a licensing model to distribute their branded programs to other gym owners. This method provides NC Fit's licensees access to established and effective fitness programs and the brand's broader institutional support, such as training materials and business tools, enhancing the licensee's market position while providing NC Fit with a stable and scalable revenue stream 2.
The licensing model allows companies to extend the reach of their proprietary technologies and systems without the direct cost of scaling operations, thus leveraging their intellectual property more effectively.
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