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I'm in the middle of negotiating a licensing deal where I will gain merchandising rights to someone else's IP and use it to make a product.
I'm seeking ways to make an attractive offer without exposing myself to too much risk, and I'm getting hung up in the details of the minimum guarantee. I have offered a 15% royalty, with a $12k MG, but my worry is that there isn't enough demand for the product to support that MG. It's a high-end product, with a high price-tag (mid $100s).
I have created a 3D mockup of the product and created a facebook group that is generating some buzz, but not the level of interest that would give me 100% confidence in the products success. Further, the licensor asked me to remove all of the photos until an official agreement is signed, so I am unable to continue to create/gauge interest unfortunately.
My current offer is to put $2,000 down, which would allow me to make a prototype and pre-sell the product. If there is enough demand, measured by the number of pre-orders over a specific time, then we would move forward with the agreement, and another $10,000 would be owed on the MG. This offers me protection, but it's not very appealing to the licensor since they pretty much lose their guarantee. Long story short, they're not showing a lot of enthusiasm for these terms.
Are there other ways to protect myself from being on the hook for $10k for a product that might flop?
@Vigilante
I'm seeking ways to make an attractive offer without exposing myself to too much risk, and I'm getting hung up in the details of the minimum guarantee. I have offered a 15% royalty, with a $12k MG, but my worry is that there isn't enough demand for the product to support that MG. It's a high-end product, with a high price-tag (mid $100s).
I have created a 3D mockup of the product and created a facebook group that is generating some buzz, but not the level of interest that would give me 100% confidence in the products success. Further, the licensor asked me to remove all of the photos until an official agreement is signed, so I am unable to continue to create/gauge interest unfortunately.
My current offer is to put $2,000 down, which would allow me to make a prototype and pre-sell the product. If there is enough demand, measured by the number of pre-orders over a specific time, then we would move forward with the agreement, and another $10,000 would be owed on the MG. This offers me protection, but it's not very appealing to the licensor since they pretty much lose their guarantee. Long story short, they're not showing a lot of enthusiasm for these terms.
Are there other ways to protect myself from being on the hook for $10k for a product that might flop?
@Vigilante
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