What is a Merchandising Deal?

A merchandising Deal is an agreement between an intellectual property (IP) holder—such as a film studio, TV network, or production company—and a manufacturer or retailer that produces and sells branded consumer products. These products range from action figures and clothing to video games and theme park attractions.

Merchandising is a crucial revenue stream in entertainment, often exceeding box office or streaming revenue. For example, Disney earns billions annually from character merchandise linked to franchises like Marvel, Star Wars, and Frozen.

Types of Merchandising Deals in Film & TV

1. Licensing Agreements

The most common type, a licensing deal, allows a company to manufacture and sell products using a film or TV brand. The IP owner receives royalties, typically 5% to 15% of sales revenue.

2. Co-Branded Partnerships

A brand collaborates directly with a film or show for mutual promotion—think McDonald’s Happy Meal tie-ins with Disney movies.

3. Direct-to-Consumer (DTC) Merchandising

Studios and streaming platforms create their own merchandise lines, cutting out intermediaries. Netflix’s online store sells exclusive Stranger Things and Squid Game merchandise.

4. Franchise-Based Merchandising

Some studios create franchise-based merchandising arms, such as Warner Bros. Consumer Products, which handles merchandising for Harry Potter, DC Comics, and Looney Tunes.

How Merchandising Deals Work

1. IP Owners Identify Merchandising Potential – The studio assesses whether a film, series, or character has strong consumer appeal.
2. Licensing Agreements are Negotiated – Terms include royalty percentages, product categories, and distribution rights.
3. Manufacturers Develop and Distribute Products – These range from apparel and toys to theme park attractions.
4. Retail & Digital Sales Drive Revenue – Products are sold via physical stores, e-commerce platforms, and special promotions.

Key Players in a Merchandising Deal

• Film & TV Studios (Disney, Warner Bros., Universal) – Own the IP rights
• Manufacturers & Retailers (Hasbro, Mattel, Walmart) – Produce and sell the merchandise
• Brand Licensing Agents (IMG, CPLG, WildBrain) – Manage merchandising rights for IP owners
• Streaming Platforms (Netflix, Prime Video, Disney+) – Monetize their content through exclusive merchandise

Revenue Models and Profit-Sharing

Merchandising revenue models include:

• Royalty-Based Model – IP owner earns 5%-15% of product sales revenue
• Flat-Rate Licensing Fee – Manufacturers pay a one-time upfront fee
• Revenue-Sharing Model – Profits are split based on a negotiated ratio
• DTC Sales Model – Studios retain 100% revenue from self-operated merchandise stores

Challenges in Securing a Merchandising Deal

• Licensing Complexity – Securing the right deal requires negotiation and legal expertise
• Market Saturation – Competing against established franchises is tough
• Retail Distribution Issues – Gaining shelf space in major stores is challenging
• Consumer Demand Fluctuations – Trends shift quickly, affecting merchandise sales