Jeff Immelt’s chump change

The GE annual report came in the mail today. It provided at least a partial answer to my earlier question about its seemingly foolhardy trademark licensing program.

GE had $163.4 billion in 2006 revenues, of which (Note 3) $221 million was licensing and royalties. That’s 0.14%. Other than the discussion of amortizing IP and other intangible assets on page 92, the subject of licensing income did not appear significant enough to mention in the AR.

It’s tempting to think of GE as a company that makes things (like jet engines or locomotives): for this, the infrastructure division pulled in $47 billion in revenues in 2006. But about 38% of its revenues come either from financial services or its 80% share of NBC Universal. Entertainment aside, GE is not historically a major IP company. In its biggest trademark deal, in 1987 it sold the RCA product line to Thomson, which included a royalty-free license to the RCA name. In 2001, Thomson bought all rights to RCA for $6 million.

So why is CEO Jeff Immelt risking brand dilution with its trademark licensing? Maybe he dreams of IP business model margins to match his old buddy Steve Ballmer. Or maybe it’s such a nonentity in the B2C segment (other than white goods) that the risk seems low. Still, protecting the Monogram and Profile profit margins (of nearly $1 billion annually) and market share seem like something worth worrying about.

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