Licensing vs. distribution vs. co-production vs. merchandising

These four terms overlap but describe different relationships. Licensing is permission to use IP. Distribution is getting finished content or products to buyers. Co-production means investing in and sharing ownership of a new work. Merchandising is making and selling products based on IP, which is usually done through a license.

Key terms

Licensing: Granting permission to use IP under defined terms, in exchange for payment.
Distribution: Delivering finished content or products to customers, retailers, or platforms in a territory.
Co-production: Jointly financing or producing a new work and sharing its rights and revenue.
Merchandising: Creating and selling physical or digital products featuring characters or artwork.
Sublicensing: When a licensee grants some of its rights onward to a third party, only if the license allows it.

How the four models differ

Licensing is the umbrella concept. The licensor grants rights; the licensee pays and follows the rules. The licensee takes on the business risk of making and selling.

Distribution is about moving finished goods or content. A media distributor might license the rights to release an existing anime on a streaming service or on Blu-ray in North America, then handle marketing, subtitles, and delivery. In media, distribution rights are usually obtained through a license, so the two often go together. A product distributor, on the other hand, may simply buy finished licensed goods from a manufacturer and resell them, with no license of its own.

Co-production means putting money (and sometimes creative input) into making a new series or film. In anime, this often means joining a production committee. Co-producers typically share ownership and revenue rather than paying royalties, and they carry more risk because they fund the work before anyone knows if it will succeed.

Merchandising refers to the products themselves: figures, apparel, stationery, accessories, food collaborations. Most merchandising by outside companies happens under a consumer products license (see 3.2).

Choosing the right model

The right model depends on your goal and appetite for risk:

Want to put characters on your products? You likely need a merchandise license.
Want to stream or release an existing show? You likely need a media license and may act as the distributor.
Want to sell licensed goods made by someone else? You may only need a distribution or wholesale agreement with the licensee.
Want a stake in a future hit? You may explore co-production, which needs significant capital and legal support.

Example

Three fictional companies are interested in the series Starlight Paladins:

Moonfox Apparel signs a merchandise license to make T-shirts and pays royalties on sales.
Northstar Media licenses streaming rights for Latin America and distributes the show through a local platform, handling subtitles and marketing.
Crescent Pictures invests in the sequel's production committee, gaining a share of the sequel's revenue and a say in how certain rights are handled.

A fourth company, Pinecone Retail, simply buys finished Moonfox T-shirts at wholesale for its stores. Pinecone needs no license, because Moonfox holds it.

Common mistakes

Assuming a reseller needs its own license. Buying and reselling authentic licensed goods usually doesn't, but check your agreements.
Assuming a licensee can pass rights on. Sublicensing requires explicit permission.
Treating co-production as a cheaper license. It is an investment with different risks and rewards.
Mixing up media and merchandise rights. Streaming rights don't let you make products.