WeightWatchers 2004 Annual Report Download - page 14

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WW Foods to use improvements that Heinz may develop in the course of its use of our dietary
principles or weight-loss program, which WW Foods sublicensed in turn to us.
Third Party Licenses
During the period that Heinz owned our company, it developed a number of food product lines
under the Weight Watchers brand, with hundreds of millions of dollars of retail sales, mostly in the
United States and in the United Kingdom. Heinz, however, did not actively license the Weight Watchers
brand to other food companies. For the period from our acquisition by Artal Luxembourg until
September 29, 2004, we assigned to Heinz all licenses that we had previously granted to third parties,
and Heinz retained all existing sublicenses granted by it to third parties for various food products
outside of Heinz core categories. Until September 29, 2004, Heinz received royalty payments of over
$4 million per year from this existing portfolio of third-party licenses. Beginning May 3, 2001, we
managed these third party licenses on behalf of Heinz for a fee equal to 5% of the royalties from these
licenses. After September 29, 2004, these licenses reverted to us and the associated royalty payments
are payable to us in their entirety.
WeightWatchers.com License
We granted an exclusive license to WeightWatchers.com to use our trademarks, copyrights and
domain names in electronic media in connection with its online weight-loss business. The license
agreement provides us with control over the use of our intellectual property. In particular we have the
right to approve WeightWatchers.com’s e-commerce activities, marketing programs, privacy policy and
materials publicly displayed on the Internet. These controls are designed to protect the value of our
intellectual property. See ‘‘WeightWatchers.com Intellectual Property License’’ in Item 13.
During 2001, WeightWatchers.com launched two online paid subscription products, Weight Watchers
Online and Weight Watchers eTools in the U.S. Weight Watchers Online is a self-help product based on
our current Weight Watchers plan designed to attract consumers who choose the Weight Watchers plan
but not the Weight Watchers meeting services. We believe that Weight Watchers Online has increased
and will continue to increase the popularity of our brand among dieters and strengthen our brand in
the entire weight-loss market. Weight Watchers eTools is designed to supplement and strengthen the
Weight Watchers classroom business. Weight Watchers eTools is a suite of electronic tools available only
to Weight Watchers members, designed to help them achieve greater success by making it even easier
to follow our food programs and by reinforcing our weight-loss approach between meetings.
During July 2002 and September 2002, WeightWatchers.com launched an upgrade to its United
Kingdom and Canadian web sites, including the offering of two online paid subscription products. In
January 2004, WeightWatchers.com launched similar subscription products in Germany. These products
have similar functionality to the existing United States products, but are tailored specifically to the
United Kingdom, Canadian and German markets, respectively.
Weight Watchers International owns 20.1% of WeightWatchers.com, or approximately 38% on a
fully diluted basis (including the exercise of all options and all warrants). In January 2002, Weight
Watchers International began receiving royalties of 10% of WeightWatchers.com’s net revenues and
during 2004, Weight Watchers International earned $8.2 million in royalties from WeightWatchers.com.
In Items 1-14 of this Annual Report on Form 10-K, ‘‘Weight Watchers,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’
refers to Weight Watchers International, Inc. and its subsidiaries and does not include
WeightWatchers.com, Inc. Please see Note 1 of our Consolidated Financial Statements on page F-6 for
a definition of the terms ‘‘WWI’’ and ‘‘the Company’’ as used in Item 15.
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