What Do Disney and Am Holdings Make Money From? [Intellectual Property as a Competitive Advantage]

①The Secret of Companies Strong Without Factories [Interview with Professor Ko Young-hee]
Sound Company 'Dolby' with More Lawyers than Engineers
Movies as Marketing Tools... 'Disney' Making Money through Licensing
'Cloud Bread' Valued at 440 Billion Won... Creator Earns Only 18.5 Million Won
"More Companies Should Emerge Earning Money through Licensing"
Asia Economy-Seoul School of Integrated Sciences and Technologies Joint Project

Professor Ko Young-hee is giving an interview to Asia Economy on the 30th at Seoul Science Graduate School in Daehyeon-dong, Seoul. Photo by Dongju Yoon doso7@

[Asia Economy Reporter Kim Bo-kyung] "It is a misconception to think of Disney simply as an animation production company. They invest heavily to create a single character and market it by releasing movies in theaters worldwide to monetize the character license. It is not an exaggeration to say that movies are merely a marketing tool to promote the character globally."

On the 30th, at the Seoul Science Graduate School research lab in Daehyeon-dong, Seoul, Professor Ko Young-hee, head of the Intellectual Property Strategy major (pictured), said, "Recently, manufacturing industries have faced unbearable production cost burdens due to rising energy and raw material prices and are constantly plagued by external risks. Now, domestic companies must shift their mindset to grow by leveraging intangible assets."

Professor Ko then brought up well-known examples such as Disney, Pok?mon, and the UK’s global semiconductor design company Arm Holdings.

According to Professor Ko, as of August 2021, Disney earned $80.3 billion (about 100 trillion KRW) by utilizing copyrights of Winnie the Pooh and Mickey Mouse. This explains why he said, "Movies are merely a marketing tool to promote characters worldwide."

[Image source=Yonhap News]

Japan’s Pok?mon is the most successful character, maintaining the top spot with cumulative global sales of $105 billion (about 130 trillion KRW). Various Pok?mon characters have generated revenue exceeding Hyundai Motor’s annual sales without a single factory.

Arm Holdings has no large factories or manufacturing workforce. It succeeded by adopting an intellectual property business model that licenses semiconductor circuit designs to manufacturers. It earns revenue through licenses and royalties from about 1,000 global partners including Samsung, Apple, and Microsoft.

Professor Ko said, "Our companies need to break away from the old perception that earning money through licenses rather than manufacturing is unearned income." She emphasized the need to actively develop intellectual property such as patents and copyrights and utilize them in business strategies and monetization. Although Korea ranks 4th worldwide in international patent (PCT) applications (as of 2020), many patents are limited to technology protection and maintenance. The intellectual property (IP) trade balance has recorded deficits every year.

In 2018, 90% of Arm Holdings’ revenue came from royalties (60%) and license fees (30%). Last year, U.S. graphics semiconductor company Nvidia expressed its intention to acquire Arm Holdings for $40 billion (about 49 trillion KRW). Dolby, which made its mark with audio technology, has more lawyers than engineers. Many companies on the opposite side of the globe have been increasing their corporate coffers and national wealth through licenses and royalties.

Professor Ko said, "Many global companies we know have actually realized stable revenue structures based on intellectual property licensing." She added, "The intense competition over intellectual property rights, centered in advanced countries like the U.S. and Europe, has recently seen China emerge as a key competitor by strengthening its patent strategy in the field of artificial intelligence (AI). China, which has developed as a copycat, is now showing clear signs of change."

Professor Ko emphasized that systems, policies, and education related to intellectual property must harmonize with industry. As an example, she cited the copyright dispute story related to Baek Hee-na’s children’s picture book Cloud Bread.

Cloud Bread was estimated to have created a value of 440 billion KRW through various character products, animations, and musicals as secondary works, but the original author Baek only received royalties of 18.5 million KRW from the initial contract.

There have been lawsuits between the once wildly popular honeycomb ice cream 'Softree' and copycat companies, plagiarism and trademark disputes over ‘Deopjuk’ featured on entertainment programs, and more. Lack of awareness about intellectual property creates unfair situations for creators, dampening their creative will and causing enormous social costs.

Professor Ko said, "Intellectual property is not a concept limited to specific industries like bio or gaming; it is connected to all industries and our daily lives." She stressed, "There is a need to promote education linking intellectual property portfolio building and business so that startups and small merchants no longer suffer from being 'copycats.'"

Professor Ko Young-hee, Seoul School of Integrated Sciences and Technologies. / Photo by Dongju Yoon doso7@

◆Terminology Explanation = Intellectual Property Rights (IPR)

Intellectual property rights refer to rights granted to intangible intellectual creations with economic value, such as knowledge, information, and technology created or discovered through human creative activities or experiences. Types of intellectual property rights include industrial property rights such as patents, trademarks, and design rights, as well as copyrights.

◆About Professor Ko Young-hee

Professor Ko is one of the few domestic experts in the IP field who majored in intellectual property rights, law, and business administration. She studied at KAIST (Intellectual Property), Northwestern University in the U.S. (Master of Laws), and Seoul National University Graduate School (Ph.D. in International Business Strategy). Currently, she is a professor at Seoul Science Graduate School and teaches IP strategy courses in MBA programs at Aalto University in Finland and the State University of New York. Since 2007, she has taught over 1,000 executives and practitioners from domestic large corporations, mid-sized companies, and global firms on intellectual property. She also serves as a member of the National Intellectual Property Committee and vice president of the Korean Entrepreneurship Society.

◆[Intellectual Property is Competitiveness] Planning

Our economy is facing a 'triple whammy' of high exchange rates, high inflation, and high interest rates. With continuing low birth rates and aging population, the contribution of labor to economic growth is decreasing, and capital input has reached its limits. Prime Minister Han Duck-soo expressed concern earlier this month during his candidacy, saying, "The more important issue is the declining potential growth rate. It has been falling by about 1% every five years, and if this continues, it will reach zero percent."

Asia Economy views strengthening intangible assets, especially intellectual property rights, as one way for the Korean economy to escape the low-growth trap. Coincidentally, the new head of the Korean Intellectual Property Office appointed by the new government is Lee In-sil, the third female patent attorney in Korea with over 30 years of experience in intellectual property rights, and president of the Korean Women Inventors Association.

Asia Economy believes that a business structure that properly protects inventions and creations derived from human intellectual activities and utilizes them as revenue sources is necessary, and that the time to make such efforts is now with the launch of the new government. Professor Ko Young-hee of Seoul Science Graduate School, who co-planned this topic with Asia Economy, said, "In that context, it is an appropriate time to change the name of the government agency, the Korean Intellectual Property Office, to reflect integrated intellectual property policies."