Content drives websites and mobile applications.  Authoritative, accurate data sitting behind software applications improves a user’s experience with software tools and functionality. Great content makes many products and services valuable enough – or entertaining enough – to subscribe to. 

But creating great content is expensive. It requires deep expertise in a particular subject.  It may need to be updated to stay relevant.  For your website to maintain great organic SEO rankings on Google, fresh content is essential: Google’s search algorithm ranks websites higher in search results if a page displays new content.

Against this backdrop, many companies with great content are monetizing the investment in their own content by licensing it to third-parties. Companies in need of such specialized content – but witthird partiess to create it themselves – are more frequently licensing their content from outside sources.

In an interview with content licensing and content acquisition expert Rich Kreisman of Kreisman Information Consulting, Subscription Insider demystifies and explains the content licensing world. 

1. What exactly is Content Acquisition & Licensing? Isn’t this something ONLY publishers need to worry about?

Kreisman: Content acquisition is the process of acquiring content, usually from a third-party publisher, for a dedicated purpose.  Typically the purpose involves integration in a product, website, or marketing campaign with the goal of enhancing your user’s experience. 

Many publishers create content licensing programs to generate revenue from their content. In some cases, licensing is their core business (think Getty Images). In other cases, licensed content represents a strong supplemental revenue stream to their core business.

Licensing is a smart way for some publishers to repurpose their content to non-competitive parties, while also exposing their brand to additional audiences. In some cases, the publisher may even purposely “un-brand” the content as part of a license agreement. In my own work, I’ve seen every permutation imaginable in content acquisition and content licensing agreements.

2. Why do companies need to put acquiring and licensing content in their strategic roadmap?

Kreisman: Acquiring content is usually part of a company’s overall strategic product roadmap.  In some businesses, content acquisition is core.  A company like LexisNexis, for example, is primarily a content aggregator. It builds efficient search and data management tools on top of other peoples’ published content, such as news articles or court case law. Without licensed content, LexisNexis would not exist.

Like any other cost-of-goods item in a product, most companies go through a “build or buy” decision when it comes to content.  For some companies, especially publishers, “building” content is core to their mission. For others, such as an e-commerce site or a software application, it may just be a means to an end and require specialized expertise that doesn’t exist in their company.    

Either way, analyzing the “build or buy” question is frequently key to an organization’s strategic roadmap to success and profitability.

3. If I am a small company – e.g. $1-5M in revenue – am I even able to leverage content licensing to build and grow my business?

Kreisman: Absolutely. I’ve worked with many smaller companies who have used third-party content successfully to build their businesses.  In many cases, it works well to boost a small company’s perceived image in the marketplace. If you feature content from a name brand source on your site (not just link out to it), it is a validation of your credibility. After all, the publisher of the content made a decision to share/license their content with your site.

4. Can you share examples of content that companies license and what companies buy?

Kreisman: Content is just about everything these days. My definition includes text, video, graphics, infographics, photos, data, databases, apps and software. Each of these content types can potentially be licensed in a negotiated contractual arrangement with the copyright holder of the content.

It’s funny, but even today, most people think of “content” as a newspaper article or a YouTube video. However, in this age of Big Data. It’s companies and not just publishers who are generating more data than ever before, which is content about their businesses. 

The smart ones understand the power of licensing their data with third parties and, in some cases, monetize its value to generate additional revenue by selling it to others. There are important competitive and channel issues involved in the creation of such outbound content licensing programs – you don’t want to give away the ‘goodies’ to your competitors. But, more businesses are looking at the value of their own content to third-parties. 

eBay, for example, collects huge amounts of pricing data tied to activity on its platforms. It has developed eBay Market Data Services as a separate business to monetize its data with third-parties, such as manufacturers and retailers.

5. Can you provide examples of the types of licensing arrangements companies make with each other?

Kreisman: Speaking in very broad terms, most content licensing arrangements fall into one of four royalty models. 

Model #1 – Flat fee for licensed content, unlimited usage. If you are seeking to leverage content on multiple platforms without any type of restrictions, then this is your model of choice.

Model #2 – Flat fee for licensed content, limited usage. In Model #2, content may only be used in a certain market segment, only on a website, but not a mobile app, or for a restricted number of end-users. In other words, there are restrictions on usage. Pricing is typically adjusted to reflect such restrictions.

Model #3 – Variable fee, usually based on measurable and reportable tiers. This includes metrics such as circulation, viewership, or number of end-users. Be sure if you enter into an agreement with a variable component that your organization is capable of providing these required reports. In the worst case, you risk violating contractual terms and losing rights to the content. If you can’t generate accurate reports, you will alienate the publisher and jeopardize your contract at renewal time.

Model #4 – Some combination of Models #1-3, plus a traffic referral component added to it. A content licensor may strongly value eyeballs/traffic from your product to their product. So, instead of paying other sites to refer traffic, it’s using its own content as a way to do so. In the most extreme cases, publishers will syndicate content for free with links back to their site littered through the page. For a subscription product, referring traffic away from your platform usually involves a trade-off in conversion, but it may be worthwhile if you clearly understand your user’s actions and decision points.

Any legitimate content licensing arrangement is covered by a solid contract between the licensing party and the copyright holder. While it is not always necessary to engage an attorney in a content acquisition transaction, it is very important to carefully read the licensor’s contract agreement. Make sure to ask questions or seek advice from others if you are unclear on terms in the content licensing agreement. 

6. Do you have ANY idea how big this market is?

Kreisman: I honestly do not. I have been active in either licensing or acquiring content in many different information markets for more than 25 years. I have never seen a market sizing that made sense to me, capturing the breadth and scope of the content licensing market. 

Outsell, a leading information industry research and advisory consulting firm, sizes the total publishing/information market at $738 billion in 2014. I estimate at least 20% of the information industry’s revenue is exchanged in some form of content licensing/content acquisition model, so that would put total licensing revenue at about $145 billion. The number is potentially higher, depending on how the term licensing is defined.

7. What is a needs assessment for content licensing?

Kreisman: This is truly understanding the goals for what the license needs to achieve, from branding to revenue. There are many questions to ask as part of an overall needs assessment. Of course, the underlying need is usually in support of revenue generation – to enhance your product and make it more attractive to potential subscribers and advertisers.  

I really feel it is important to get very close to the client, understanding his or her business, the drivers for acquiring content (or motivation for licensing their content to others) as well as the competitive landscape. 

Are your competitors using licensed content? Are there leading content brands in the company’s marketplace? How much value does such content add to my client’s overall product or service offering? If this value can be quantified, licensing content is usually a good way to go. 

For content licensors, the motivation is typically revenue. Licensing content you have already created for another purpose is usually a high-margin sale for a publisher, though there are costs involved in marketing, delivery and support of your content licensees.

8. How do companies know what content licensing options are even available to license?   Is there a secret society of people who only know what’s available?  Is this a “who you know” type of situation?

Kreisman: This is a great question! No, there is definitely not a secret society and this is not a “who you know” transaction, though personal relationships are always important. A publisher’s decision to trust you with the proper, contracted use of their content is important to them, especially the person who is signing the contract with you. That person’s reputation is on the line when he signs a deal with you.

If the content licensor already knows you, so much the better for you – it’ll be easier to get a deal done. However, most content companies – pure publishers – have sales and business development teams dedicated to licensing. These folks are hungry for new customers, just like you are. Finding them is usually fairly easy with some Web research.   

As with just about any purchase decision, it is important to fully understand your options. It’s a rare category in the information industry where there is no competition. 

Most of the time, you will be able to “shop” for content, data and royalty models among several vendors. But making a purchase decision is not always about price or royalty model. Frequently, I’ve seen clients choose a higher-priced option with the understanding that content is delivered in a way that saves them money in development or drives down their time-to-market.  Create a matrix for yourself as you evaluate your options.

9. What are the top 5 tips for companies looking to license content? 

Kreisman: Here are Kreisman Information Consulting’s top five tips for your readers who are licensing content:

1. Research your content options. Too often, people just approach one licensor without fully understanding the other possibilities available to them. 
2. Try to anticipate future uses of the content you are licensing. It’s likely your business will morph and change. You may enter new markets or leverage new technology. Getting broad rights to content is usually favorable, though it may involve extra up-front cost.
3. Secure a multi-year license, especially if you have done a good job thinking about your future needs (see tip #2!) Negotiating a content license is time consuming. It’s usually a good idea to license for two or three year periods. If you are unsure about your future needs or you aren’t confident about the value of the content, it may make more sense to strike a shorter-term deal, such as six months or one year. However, many publishers will not take you seriously unless you commit to a minimum of a 1-year term.
4. Involve your technical team early on in the content acquisition process. While most publishers make their data available in easy-to-digest formats, I’ve seen many examples of “gotchas” where the content acquirer cannot integrate third-party content without substantial development cost or an expensive change to their own systems. That’s a nightmare for all parties involved. Do your technical due diligence.
5. Treat your relationship with the content licensor as a real partnership. It’s easy to finish a content license, use the content and forget you have a new partner. Don’t just treat them like any other vendor. You have shared interests – and, in some cases, shared customers. I’ve seen great partnerships emerge from content licensing relationships.

10. Who typically leads with the deal terms – the content licensor or the licensee?  Should people care if they lead here?

Kreisman: Typically, the content owner leads with deal terms. They usually have prior experience in the market, understand usages and licensee needs and, ultimately, their content’s value in the market.

With that said, I’ve been involved myself in many situations where I approached a publisher who had never before licensed their content. They appreciated the fact that I came to them with well-crafted deal terms that were fair to both parties. In general, there is no one playbook when it comes to content acquisition. Be creative and fair.

11. So let’s be honest – how many companies accept deal terms on the first pass?  On average – how many “back and forths” do you typically see between partners to get to a deal?

Kreisman: My general advice is to negotiate! While some companies stick to their own pricing models, most don’t, especially if you are creative and fair in your response to their initial terms. 

Like any negotiation, there is a point of diminishing returns and increasing animosity if the deal-making drags on too long. The duration of any negotiation is driven by other factors too: personalities, business priorities, changes in the business landscape while you are negotiating, and technology details. The list is long. It can be helpful to engage a third-party with experience to negotiate on your behalf. I’ve seen it bring focus to a deal amidst the long list of a CEO’s everyday priorities. 

12. Does any of the above differ by type of company and content involved?  (E.g. data, content, SaaS, mobile, etc…)

Kreisman: No, I don’t think it differs. If the company’s core business is licensing their content, they are going to have the infrastructure set up to get a deal done in a timely manner. If the company is new to licensing their content, it may take longer.

13. What is KIC, what do you do?

Kreisman: We are a strategy consulting firm. We closely support our clients – typically either the publishers of content or licensees of content – through the development and implementation of their content licensing strategies. 

KIC also supports its clients with more general business strategy work, such as acquisition and divestiture analysis, new market evaluations and annual planning cycle research.

14. Why did you start this business?

Kreisman: I really enjoy advising other people on important business decisions, especially where content is essential to their business success. 

I started Kreisman Information Consulting in March 2014 after serving as VP-Practice Leader for the Science, Technology and Healthcare sector at Outsell, the information industry’s top research and advisory firm. I continue to serve as an Affiliate Analyst at Outsell.

I’ve been in the publishing and information industry for more than 25 years. I was in the editorial trenches at the start of my career, working as a reporter and editor at Business Week, Inc. Magazine and Advertising Age.

I was lucky enough to transition to the product development side of the business in the ’90s when digital platforms first hit. At one point, I worked for a company whose product was created entirely from other publishers’ content – we were a content aggregator of company and financial information. That was the first time I licensed content. I saw the great benefits inherent in the licensing model. Our company focused on the presentation layer, making the data easier to understand and more accessible for the end-user. We successfully sold the company to another content aggregator.

15. Who are your clients? Give us a sense of who you service? 

Kreisman: In the past year, I’ve worked for clients as diverse as John Wiley, the great STM publisher, and J.D. Power & Associates, the leader in customer satisfaction research data. I’ve also worked with numerous smaller companies, mostly seeking to understand how to put together effective content licensing programs. I also work with companies seeking advice on content acquisition and in some cases will conduct negotiations on their behalf. It’s incredibly diverse and incredibly fun.

Rich Kreisman is the Principal Partner of Kreisman Information Consulting. He can be contacted at www.kreismaninfoconsult.com.