In a licensing deal, which party typically pays the minimum guarantee to the licensor?

• A. Licensor
• B. Licensee
• C. Rights holder
• D. Distributor

Answer: (B)

The main idea here is that a minimum guarantee is a fixed amount the licensee commits to paying the licensor to secure the rights, ensuring the licensor receives baseline revenue even if sales are weak. In licensing deals, this payment is made by the licensee to the licensor (the rights holder). It can be an upfront fee or an annual minimum and is often treated as a floor against future royalties. If royalties later exceed the minimum, those higher royalties go on top; if they’re below, the licensee still covers the difference to meet the minimum. This structure protects the licensor's value and makes revenue predictable. The other parties listed don’t typically bear this obligation—the licensor would not pay the minimum guarantee, and distributors aren’t usually the ones guaranteeing revenue to the rights holder.