Character licensing: building brands with beloved characters

At its core, character licensing is about using familiar characters like these to give experiences and consumer products instant appeal. Just think about how many times you’ve watched a film, bought a toy, gone to a theme park, or picked up merchandise simply because it featured a character you love. That’s the influence of character use agreements.

From fashion and gaming to education and food, licensed characters help brands connect with audiences quickly and meaningfully. And it’s not without its business perks. Ultimately, a well-chosen character can boost recognition, strengthen brand personality, and drive sales.

But what’s really happening behind the scenes when a brand licenses a character? How do companies decide which character is the right fit for their product, and what kind of creative decisions go into making it a success?

In this article, we’ll explore what makes character rights so powerful, how it works, and why brands continue to rely on famous characters to tell stories, build loyalty, and stay culturally relevant.

The business case for character licensing

Fans love characters – but savvy brands can love them too. By leveraging popular characters, brands can connect with audiences on an emotional level, boost recognition, and even unlock new revenue streams. Let’s explore the business case for licensing characters.

Financial upside

There’s no denying it – brand character use can make serious money. In fact, the entertainment/characters sector is the biggest in the licensing world, generating $149.8 billion according to Licensing International.

Using well-loved characters lets brands tap into this massive, ready-made fan base, boosting sales across different markets and product lines. Royalties from licensed products bring in steady income, while co-branded releases can command higher prices thanks to their exclusivity and fan appeal. Put simply, a strong character can quickly become a reliable source of income for a brand.

Consumer trust

Fans don’t just like their favourite characters – they believe in them. When a brand aligns with a beloved character, it borrows that trust and instantly feels more familiar, safe, and appealing. This emotional shortcut can turn hesitation into confidence, and one-off buyers into long-term loyalists. The character becomes a bridge between the brand and the customer’s sense of comfort and joy.

Reduced costs

Breaking into a crowded market usually means spending heavily on awareness campaigns. Licensed characters shortcut that process. Their instant recognisability grabs attention without the same level of advertising spend, and their built-in popularity can generate word-of-mouth momentum at little to no extra cost. For brands, this translates into faster visibility, lower launch expenses, and a marketing strategy that pays for itself.

Boosting brand recognition

A memorable character can make your brand instantly recognisable. When used well, it becomes shorthand for your values, voice, and story, helping you cut through in crowded markets. People remember faces and personalities far more easily than taglines, which makes characters a powerful way to keep your message front of mind. They also invite interaction – through games, social media, or other content – sparking conversations, encouraging engagement, and making your brand difficult to forget.

Industries that benefit most from character use

Character rights makes up around 41% of the global licensing industry, with toys, gaming, and entertainment driving much of that share. But its benefits reach far beyond those sectors – characters can bring value to almost any product or experience.

Toys and games

This is perhaps the most obvious fit. Kids (and collectors) are drawn to familiar faces – from Mickey Mouse to Marvel superheroes. Strong character design can turn an action figure, board game, or video game into a must-have item that taps into excitement, nostalgia, and the joy of play, making your licensed product a go-to in the eyes of consumers around the world.

Food and beverages

Characters bring personality and energy to everyday products, turning the ordinary into something special. A cereal box with a playful animated character feels more fun at the breakfast table, and a limited-edition snack tied to a blockbuster film suddenly becomes a collectible. By tapping into personal connections and making these moments enjoyable and memorable, characters transform routine choices into lasting brand favourites.

Apparel and accessories

Fashion thrives on character use. From t-shirts and trainers to jewellery and backpacks, recognisable characters inject personality and cultural relevance. Well-considered collaborations can help brands reach new audiences and ride cultural trends. For example, ahead of the Barbie movie, Mattel teamed up with over 165 brands – from Crocs to Zara – showing just how powerful licensing can be in shaping global fashion conversations.

Publishing

Books, magazines, and comics also benefit hugely from character rights. Characters like Mr. Men & Little Miss or The Gruffalo aren’t just illustrations – they’re personalities readers already love. Licensing opens doors for these characters beyond the page. Spin-offs, activity books, and educational content let characters reach new audiences and stay relevant across generations.

Tech and gaming

Digital experiences become more engaging when brought to life by characters. Mobile apps, video games, and interactive media often feature characters to attract and engage audiences. For example, Crash Lab’s The Snowman and The Snowdog game extended a beloved story into a playful, interactive experience. Characters also appear on accessories – like phone cases and gaming gear – turning everyday items into personal, collectible statements that fans can enjoy every day.

Crafting a winning licensing strategy: the steps

A strong licensing agreement strategy isn’t just about borrowing popularity – it’s about creating the right alignment between brand, audience, and character.

The most successful collaborations are carefully chosen, strategically positioned, and deeply connected to both consumer needs and brand values.

1. Choosing the perfect character

The first step in a licensing business is not asking ‘who is the biggest name?’ but ‘who is the right fit?’ That starts with a clear understanding of your audience – what excites them, what they trust, and how they see themselves in the brands they choose. While household-name characters, like the Muppets, can deliver instant recognition, recognition alone does not guarantee sales. Relevance is what drives results.

A children’s product may benefit from the instant joy of a familiar TV character. Parents see their child’s delight and choose accordingly – safety, suitability, and a smile often outweigh questions of longevity. Brand owners rely on these insights to structure licensing programs that maximise engagement.

But the same approach may fall flat with older demographics. Mature consumers tend to weigh function, quality, and aesthetic appeal over character-driven novelty. In these cases, a well-matched character, even if less famous, can feel more authentic and build deeper loyalty

Ultimately, the character or intellectual property (IP) you chooses should align with your brand identity, resonate with your stakeholders, and strengthen the story you are telling in the market. A licensing agent can help ensure that any licensing agreement feels mutually beneficial – as if the two brands were always meant to stand side by side.

2. Measuring return on investment (ROI) potential

Licensing is an investment, not a shortcut. The right partnership should deliver value far beyond the initial buzz of recognition. To evaluate potential ROI, consider not only projected sales but also the ripple effects: increased visibility, stronger brand equity, and long-term consumer loyalty.

A character with mass awareness may generate a quick surge, but a well-aligned IP can build sustained growth by reinforcing your brand’s unique positioning.

Ask: will this collaboration deepen connections with your core audience, open doors to new markets, or elevate your overall brand perception? ROI is not just about numbers – it’s about lasting impact.

3. Seamless marketing integration

A licensed character should never feel like an add-on. The most effective integrations weave the character into your brand narrative, creating campaigns that feel authentic, organic, and purposeful. That means thinking beyond packaging.

How does the character amplify your storytelling? How does it show up in your advertising, social content, retail experiences, or even product demonstrations? Successful campaigns make the character part of a bigger journey – not just a face on a box, but a catalyst for engagement, recognition, and emotional connection.

4. Co-Branding that works

The most effective co-branding partnerships don’t compete for attention – they complement one another. Here are key principles for achieving maximum impact:

• Find the shared values. Look beyond surface-level recognition. A strong partnership starts with aligned values that make the collaboration feel authentic and credible to consumers.
• Respect both identities.Maintain balance between your brand and the licensed character. Neither should overshadow the other – the magic is in the harmony.
• Design for integration, not addition.Think of the partnership as creating something new, not just placing two logos side by side. Integrate the IP into your brand story in ways that feel natural and intentional.
• Keep the audience overlap in focus.Identify where both fan bases and consumer segments converge. This overlap is where resonance – and sales potential – is strongest.
• Create mutual elevation.The best co-branding moments make each brand stronger by association. Aim for an outcome where both sides walk away with enhanced equity and relevance, benefiting both brand owners and rights holders under the licensing agreement.

Potential pitfalls

While character rights offers clear advantages, it is not without risks. The wrong choice or poor execution can weaken impact and even harm brand equity. To avoid costly mistakes, brands should consider the following potential issues:

Overpaying for underperforming characters

Not every character with name recognition delivers results. Brands may invest heavily in licensing fees only to find limited consumer interest or short-lived appeal. Without careful audience alignment and ROI forecasting, costs can outweigh returns.

Licensing disputes and infringement

Contracts are complex, and disagreements between licensors and licensees can arise over usage rights, royalties, or creative control. Infringement – intentional or accidental – can also trigger legal action, financial penalties, and reputational damage. Strong legal frameworks and ongoing oversight are essential.

Brand dilution or misalignment

A mismatched partnership can erode brand value. If a licensed character feels off-brand or overexposed through multiple collaborations, it can dilute both identities. Consumers quickly spot inauthentic pairings, leading to confusion, disengagement, or loss of trust.

Operational complexity and resource strain

Managing licensed IP can require additional oversight, approvals, and coordination with licensors. Without sufficient internal resources, campaigns can be delayed, costs can increase, and execution quality may suffer.

Over-reliance on a single character

Relying too heavily on one character can make a brand vulnerable if that character’s popularity wanes. Trends shift, and consumer tastes change – a previously beloved character may lose relevance, leaving the brand exposed. Diversifying licensed IP can help mitigate this risk.

Success stories: characters that deliver

Some of the world’s most memorable brand moments come from brand character collaborations done right. These collaborations demonstrate how the right pairing can drive sales, expand reach, and create cultural buzz.

LEGO x Star Wars

This long-running partnership transformed both brands. Since 1998, LEGO has produced nearly 1,000 Star Wars sets, from the Millennium Falcon and R2-D2 to newer fan favourites like Grogu. Originally licensed for a limited run, the agreement has been renewed multiple times – now extended through 2032 – reflecting its success.

For LEGO, Star Wars remains one of its top-performing product lines, driving consistent sales growth and attracting collectors worldwide. For Lucasfilm, the collaboration has helped keep the franchise culturally relevant, introducing the Star Wars universe to new generations through play.

Nike x Hello Kitty

In 2004, Nike introduced its first Hello Kitty collaboration, turning the Air Presto into a playful must-have. Loved for its mix of cutesy-charm and classic streetwear, it became an instant collector’s item. Nearly two decades later, the partnership returned in 2022 with a new Air Presto, hoodie, and T-shirt, capturing the hearts of a new generation. The collaboration showcased Nike’s knack for tapping into pop culture while creating high-demand, globally buzzed-about releases.

The future of brand character use

As with any industry, franchise licensing continues to change with technology, culture, and changing consumer behaviour. Let’s explore the trends shaping the future – and how brands can adapt to stay ahead.

Digital and AI-generated characters

Characters are no longer limited to cartoons or superheroes. Virtual influencers like Lil Miquela, with 2.4 million Instagram followers and collaborations with global brands such as Calvin Klein, show how digital personas can engage audiences where they live: online.

Artificial intelligence is enabling the creation of entirely new original characters with unique designs, personalities, and story arcs. For brands, this opens up limitless creative possibilities, faster content production, and highly targeted engagement with digitally native consumers.

Licensing in the metaverse and NFTs

As immersive platforms grow, characters are becoming central to interactive experiences. From avatars in virtual worlds to exclusive digital wearables, the metaverse allows fans to engage with characters in entirely new ways. NFTs add another layer, offering limited-edition digital collectibles that provide ownership and exclusivity.

Together, these tools turn characters into tradeable, interactive assets while opening new revenue streams and deepening community engagement.

Cross-platform and interactive storytelling

Characters are no longer confined to a single medium. Fans now expect narratives that span TV, streaming, social media, gaming, and live experiences. Licensing strategies that enable characters to move seamlessly across platforms create immersive, multi-touchpoint engagement. Interactive storytelling – where audiences can influence a character’s journey – enhances emotional investment and brand affinity, turning passive fans into active participants.

Shaping your brand with characters

The benefits of character licensing are clear. Done right, it builds recognition, deepens audience connection, and drives growth that lasts. But success goes beyond attaching a familiar face – it requires strategic choices that align with your story, your customers, and your long-term ambitions.

The key is clarity: which characters truly resonate, how they integrate into your narrative, and the impact you want to achieve. With careful direction, licensing becomes more than a marketing tool – it becomes a catalyst for meaningful engagement and enduring value.

At Studio Noel, we help brands get the most out of their characters and IP by creating style guides that bring their vision to life with authenticity and impact. Get in touch with us today to start your brand character strategy.