Licensing Industry in Hong Kong

Overview 

• Hong Kong has been chosen by many international licensors and licensing agents as the strategic base to expand their licensing businesses in Asia. 
  
  
• Hong Kong offers clear advantages as an ideal platform for licensors, licensees, agents and manufacturers to get together. These include intellectual property (IP) rights protection, respect for business agreements, distribution networks, access to quality licensees, availability of industry talent, market sensitivity and close business connections with the mainland. 
  
  
• The Hong Kong International Licensing Show (HKILS) held since 2002 is well-known in Asia and has helped promote Hong Kong as the regional licensing hub.
  
  
• In 2010, Licensing International (previously known as International Licensing Industry Merchandisers’ Association) opened its Hong Kong office, which serves as the regional centre for promoting licensing businesses and broadening the business network of its members in Southeast Asia’s licensing markets. 
  
  
• Hong Kong licensing agents, with strong networks in mainland China, are considered by many foreign licensors to be preferred partners to exploit emerging opportunities there. 

Market Characteristics and Service Providers 

Hong Kong’s licensing market began to take shape in the early 1990s. Despite its relatively short history of development, the Hong Kong market has become highly developed in Asia. Main categories of licensed products in Hong Kong include apparel and accessories, food and beverages, toys, gift items, stationery, computer supplies and sales promotions for fast food chains and banks. 

Hong Kong local fashion label, :CHOCOOLATE, has been actively exploring licensing opportunities with international brands and companies. For example, it has featured Japanese character Kumamon, Disney’s Tsum Tsum, and South Korea’s LINE FRIENDS in a variety of its apparel and accessories collections. YGM Trading, a Hong Kong apparel retail and wholesale company, is a licensee of European and American designer brands to handle their sales and distribution in mainland China and other Asian markets. In the food and beverages sector, Maxim’s Group is a licensee of renowned brands such as The Cheesecake Factory and Shake Shack. 

As face masks are becoming essential to minimise the spread of Covid-19, retailers are turning to launch them with licensed characters to attract customers. 2 Degree Studio, a local face-mask retailer, differentiates itself by selling various face masks with licensed characters such as Snoopy, Le Petit Prince, Kakao Friends, Moomin and Pokemon. Daniel & Co. (Gifts) Limited, the official licensee of Sanrio since 2008, has also launched face masks with Sanrio characters. 

Hong Kong has relatively few home-grown brands and properties for licensing. Some examples include Din Dong, SHIBAinc characters, Hong Kong cartoon character McDull and Ocean Park’s Whiskers & Friends. Nevertheless, many international licensors and licensing agents, such as Iconix Brand Group and Mattel have chosen to set up offices in Hong Kong, which often function as the regional headquarters in Asia. Moreover, many famous foreign licensors have entrusted their exclusive property rights to Hong Kong licensing agents to develop the business in Asia. 

Best known as a shoppers’ paradise, many international licensors choose to partner with Hong Kong shopping malls for promotional campaigns for their licensed characters or products. For example, LEGO has collaborated with Tuen Mun Town Plaza to set up interactive game zones to offer hands-on experience and promote its brand. 

The Asian Licensing Association was established by Hong Kong industry leaders in 2011 to promote Hong Kong as an international licensing hub. The Innovative Entrepreneur Association launched the Design Licensing and Business Support Scheme (D-LAB) in 2019, which aims to provide licensing and design-related training courses and mentorship programmes for design start-ups or SMEs. 

The Hong Kong International Licensing Show (HKILS) held since 2002 is well-known in Asia and has helped promote Hong Kong as the regional licensing hub. The 18th edition of HKILS held in January 2020 attracted more than 20,000 visitors, including manufacturers, licensees, retailers and distributors. 

The Asian Licensing Conference 2020, held concurrently with HKILS, brought together 30 expert speakers from various international brands and different sectors in the licensing industry, focusing on new opportunities and strategies for licensing business in Asia. The event also served as a networking platform for international licensing executives and businesspeople to gather industry intelligence and explore new opportunities.

Trade in Services

The significance of Hong Kong’s licensing business lies in its status as a hub for licensing activities in Asia. Local business usually accounts for a small proportion of the overall business of licensors and licensing agents, who are more active in other Asian countries.

Licensing activities between Hong Kong and the rest of the world can be partly reflected in the cross-border payments for the use of intellectual properties.

Industry Developments

Licensing Trending Globally  

According to Licensing International, the global retail sales of licensed merchandise and services amounted to US$292.8 billion in 2019. North America remains the largest market for licensed merchandise and services, with revenue accounting for 58% of the global market. Meanwhile, Asia recorded the strongest growth, increasing by more than 5% for the year. ‘Character and entertainment’ was the largest group of licensing property in terms of global licensed merchandise sales in 2019, accounting for 43.8% of the global licensing market. ‘Corporate trademark and brand’ was the second largest property type, generating US$60.1 billion of retail sales (21% of the total). 

E-commerce and Licensing  

E-commerce is facilitating the international licensing business. Characters, fads, brands and fashion trends now travel at high speed across the markets, cutting short the time needed to get a product from licensed concepts to retail shelves. Medialink Group, a leading distributor of third-party owned media content headquartered in Hong Kong, launched its e-commerce site Ani-Mall in August 2020. The platform sells a variety of authentic merchandise ranging from anime accessories, collectible items, stationery and plush toys from world-known character brands licensed by the company, such as My Hero Academia and The Promised Neverland. Social media, such as Instagram and Facebook, is also an important channel for marketing new properties. 

Gaming and E-sports Licensing  

Gaming and e-sports have become mainstream entertainment in recent years. According to Newzoo, the global gaming market is expected to generate revenues of US$176 billion in 2021. Spinning off from the gaming industry, global revenue from e-sports – largely from media rights and sponsorships – will grow by 15% and reach US$1.1 billion in the same year, with China being the largest market (33% of global share). 

E-sports merchandise is making its way into the apparel market. For example, Champion Athleticwear has partnered with HyperX, a gaming gear brand, to launch several apparel lines including hoodies, t-shirts and face masks. Global luxury fashion brand Ralph Lauren has also joined the European esports organisation G2 Esports as their exclusive fashion outfitter. 

China’s Burgeoning Licensing Market  

According to a report released by China Toy and Juvenile Products Association, China saw US$17 billion of licensed merchandise sales in 2020, up 11.5% from the previous year. ‘Character and entertainment’ continues to dominate the Chinese licensing market, with home-grown licensing properties, such as Deer Squad, gaining popularity in recent years. 

Attracted by the large consumer base, many foreign companies are scouting the Chinese market to seize licensing opportunities. Canadian multinational entertainment company Entertainment One, Care Bears brand-owner CloudCo Entertainment, Japanese company Sanrio (best known for its iconic character Hello Kitty) and Korean brand Kakao Friends have all established a presence in China for brand licensing and retail distribution of licensed consumer products. 

In China, e-commerce has become one of the top trends in the licensing industry. Many brands and properties use B2C online platforms to promote brand awareness and extend their customer base. Tmall, JD.com and Taobao are the three major online platforms used to promote licensed merchandise in China, while social media platforms such as Douyin and Xiaohongshu are also gaining popularity as marketing and sales channels. 

Hong Kong licensing agents with strong networks in mainland China are the preferred partners for many foreign licensors to exploit emerging opportunities there. One example is Medialink Group, which has been appointed as the licensing agent of Sesame Street’s products and manages licensing business in the mainland. Hong Kong-based licensing companies are major players on the mainland, setting up offices in cities such as Shanghai with distinct functions. 

In addition, Hong Kong is the preferred gateway for mainland-based enterprises to promote their brand names and trademarks overseas due to the city’s remarkable international network, as well as resourceful licensing players providing quality licensing services, including public relations support and personnel training. 

CEPA Provisions 

The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) further opens up the mainland market for Hong Kong products and the distribution business to Hong Kong companies. Under the Agreement on Trade in Services (ATIS), Hong Kong service suppliers are granted national treatment to conduct retailing and wholesale services in mainland China. More information on the latest CEPA agreements can be found here. 

Effective distribution is vital to the success of a licensing deal. Hong Kong companies making use of the opportunities provided by CEPA to develop their business in the mainland will likely be sought after as distributors for foreign licensors, since they offer adequate intellectual property rights protection and provide services in line with international practices.