Selling merchandise of anime characters has a growing consumer market in North America. The U.S. anime merchandising market was valued at $364.7 in 2022 and is expected to expand from a compound annual growth rate of (CAGR) of 16.1% from 2023 to 2030 (Grand View Research Inc.). This is a market with a ton of potential for growth and streaming services and businesses are eager to participate in this growing market. But it is necessary to get a license to manufacture and sell merchandise of popular shows.

In the context of merchandising licensing agreements, it is important to understand the roles and responsibilities of the licensor (the company providing the license) and the licensee (the individual or company purchasing the license). To illustrate this, let's consider an example from the popular anime series Naruto. The production studio, Studio Pierrot, owns the copyrights to the anime and its characters. They can grant a merchandising license to a licensee, such as a toy manufacturer or clothing brand, allowing them to create and sell Naruto-related products. For example, the Crunchyroll store has Naruto-related merchandise.

Key elements in a merchandising license agreement include geographic areas of interest (specifying where the licensee can sell the merchandise), the context the anime character will be featured in (when the character will appear on clothing or products), whether the license is exclusive or nonexclusive (whether others can also make similar merchandise), the length of the license term (often with a renewal clause), financial details (such as upfront fees and royalties), quality controls standards (ensuring consistent product quality), and conflict resolution provisions (UpCounsel and Weedmark, 2021). These agreements protect the rights of both licensors and licensees and play an important role in licensing copyrighted and trademarked materials. Kenneth Williams, a senior lawyer for Crunchyroll, told us about the process of securing licensing agreements with Japanese publishers and committees:

Much of anime merchandise (60%) is being sold online (Grand View Research Inc.). Merchandising licenses are required for online sales, too, even small sellers of anime merchandise. While anime creators generally don't pursue legal action against small sellers of fan-created artworks sold on platforms like Etsy, their stance changes when larger sellers infringe upon copyrighted material. If a designer or company tries to sell anime merchandise without a license, they risk getting sued by the owner of the intellectual property (Weedmark, 2021).

With the increase in anime and anime fans, there is also an increased desire for anime merchandise for people’s favorite shows. It is a great feeling to find a community of anime fans and connect with them through merchandise. Fans can enjoy products that feature their favorite character and connect with others that share their same interests. For streaming services and anime creators, they can sell merchandise that features the characters appropriately and create more popularity for the show, and generate additional revenue.