If the minimum guarantee for an NFL players union license is $2 million dollars, it would be reasonable to assume that the licensee expects to generate at least how much in revenue?

If the minimum guarantee for an NFL players union license is $2 million dollars, it would be reasonable to assume that the licensee expects to generate at least how much in revenue?

• A. $10 million
• B. $20 million
• C. $5 million
• D. $12 million

Answer: (B)

In licensing, a minimum guarantee is the floor amount the licensee agrees to pay the licensor, usually tied to royalties based on revenue. If the minimum guarantee is $2 million, you’d expect the licensee’s revenue to be high enough that the royalty payments reach that floor. With a common royalty rate around ten percent, generating $2 million in royalties would require about $20 million in revenue. So $20 million is a reasonable benchmark for the expected revenue. Revenue of $10 million would only yield about $1 million in royalties, $5 million would be around $0.5 million, and $12 million would be roughly $1.2 million—still below the $2 million minimum.

In licensing, a minimum guarantee is the floor amount the licensee agrees to pay the licensor, usually tied to royalties based on revenue. If the minimum guarantee is $2 million, you’d expect the licensee’s revenue to be high enough that the royalty payments reach that floor. With a common royalty rate around ten percent, generating $2 million in royalties would require about $20 million in revenue. So $20 million is a reasonable benchmark for the expected revenue. Revenue of $10 million would only yield about $1 million in royalties, $5 million would be around $0.5 million, and $12 million would be roughly $1.2 million—still below the $2 million minimum.