Maria Brophy

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art licensing / Deal Making / Pricing

What to Charge for Art Licensing – Royalties Advances and Flat Fees

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Slay those Dragons, Fear No More!

(Artwork provided by the wonderful, fun and talented Sara Jane Franklin.  Check out her blog here!)

When you need to have your sink unclogged, there’s little difference in price from plumber to plumber.  I think that at one time in the past, the wise plumbers got together and said “let’s all charge the same high price so we all get paid well!

If only artists could do the same, then pricing would be so much easier!

In the art business, while one creative can garner $10,000 for a painting, another can only get $500 for the same size and medium.

Many artists have a hard time financially because they just don’t know what to charge.

Often, artists will turn down a good opportunity because they are paralyzed by the fear of making a mistake and charging too little.

And when it comes to licensing your art, there are many different ways to be compensated.

(Licensing Art means – you retain all copyrights © to an image, and license, or “rent”, the art to someone for either a one-time use, such as in a magazine or advertising campaign, or for a longer term use to print on products, such as a t-shirt line or pottery, greeting cards, etc.)

FEAR THE LICENSE DEAL NO MORE – I promise you that once you begin to understand how these things work, you’ll feel more confident with deal-making.

With confidence comes more deals, and no more lost opportunities.  So please, read on!

The most common methods of pay for art licensing are:

1 – ROYALTY:  This is where the manufacturer pays the artist a royalty percentage of their gross sales.

2 – ROYALTY WITH ADVANCE UP FRONT – Sometimes there will be an advance payable up front, which is later deducted from future royalties.

3 – FLAT FEE – A one-time fee is paid instead of royalties.

Okay, but how much moola do you ask for?!  Below are a few guidelines:

ROYALTY PERCENTAGE PAYMENT:

Before we get to the topic of how much to ask for, let’s make sure you understand how royalties work.

Royalty payments are calculated based on the total (gross) revenues generated by the licensee (manufacturer) for your products.

Red Flag Warning:  Never agree to get paid your percentage based on the Licensee’s revenues minus their expenses.  This is an impossible number to quantify.

ROYALTY RATE EXAMPLE:  Let’s say that you have agreed to license your art to Perry Pickle Manufacturing for t-shirts.  They plan to sell the t-shirts to a chain of stores called Racey’s.  You have agreed to a royalty rate of 6% with a $3,000 Advance up front.

This means that Perry Pickle Mfg is going to pay you 6% of their total gross revenues generated.  Since they agreed to pay a $3,000 Advance up front, they paid you the advance at the time that the contract was signed.

In their first quarter, Perry Pickle Mfg received $100,000 in revenues for t-shirt sales of your line to Racey’s.

That means that you would receive a royalty payment of $6,000.00 ($100,000 x 6% = $6,000.00), MINUS the advance of $3,000.00 up front.

The advance is “recoupable against future royalties” so your first royalty payment would be the $6,000 minus the advance amount of $3,000, and you would have been paid $3,000.00.

Okay, now let’s talk about how you arrived at the 6% royalty rate:

ROYALTY RATES DEPEND ON SEVERAL DIFFERENT FACTORS, THE 3 MOST IMPORTANT:

  • The TYPE of product being produced
  • The QUANTITIES expected to be sold
  • The POPULARITY (STRENGTH) of the artist or brand

THE FIRST FACTOR IN DETERMINING ROYALTY RATES is the type of product being produced.  The average royalty rate varies from product to product.

For example, the average rate for art lithographs ranges between 5% – 15%, compared to 3 – 6.5% for wristbands.  The average royalty rate is a good starting point for determining what the rate should be.

There are a few resources that will help you learn what the average royalty rates are, such as artists groups and reference books.

To find out what others are being paid, connect with artists who are experienced in licensing through online forums and groups such as Linked In.  Ask the members what the average royalty rates are, in their experience, for a particular product.  These groups can be very helpful.

THE SECOND FACTOR IN DETERMINING ROYALTY RATES is the expected (or projected) sales volume.

The higher the volume, the lower the royalty:  If the products will be sold in mass market retailers and in mass quantity, the royalty rate will be less because mass market retailers (like Wal-Mart, Costco) demand better prices, which means tighter profit margins for the manufacturer.

Usually, an artist will earn more money from a lower royalty rate when products are being sold in mass market, than they would with a higher royalty rate for products being sold in small mom and pop shops.

The lower the volume, the higher the royalty:  If the products will be sold in specialty stores and in smaller quantities, the royalty rate should be higher.

For example:  A t-shirt manufacturer that sells in mass market stores (Wal-Mart, Target, chain stores) might pay 4-6% royalties.  A t-shirt manufacturer that sells in smaller channels such as core skateboard shops might pay 6-10% royalties.

If the artist is well known and their art is a proven seller, the royalty rates would be on the high end of the scale.  If the artist is unknown and new to licensing, the royalty rate might be on the lower end of the scale.

In some cases, a licensee that works with artists on a regular basis will have a standard royalty to offer to you.  At that time, you can decide if you want to accept their offer, or negotiate for more

FLAT FEE PAYMENT:  A flat fee is a lump sum that is paid up front at the time the contract is signed.  There are no royalties that will be paid later.

Flat fees may be calculated by image (i.e. $500 per image x 10 images = $5,000); or they may be paid in one specified sum (i.e. $2,500 total).

The flat fee method is best when the licensee is either a small company that does low volume, or is a start-up company that does not have a track record of sales.

The disadvantage to a flat fee royalty is that if the product sells above expectations, you may be missing out on sharing a piece of those revenues.

The best way to protect against the possibility of missing out on a piece of a great selling product is to have a short term, such as a one year or eighteen month contract.

With a shorter contract, if sales are very good, the licensee will want to renew, at which time you will be paid again, or you can negotiate for a better deal.

How much of a flat fee should you ask for?  Like all deals, the range is wide.  I know of some artists who charge as little as $100 per image for a flat fee license.  In the greeting card industry, an artist might be paid a flat fee of $275 – $500 for a card design.  I’ve had deals in the action sports market where I charged a flat fee of $1,500 per image, with a price break if they license multiple images.

The flat fee amount that you get will depend upon: 1- the strength of your brand, 2 – the competition in the industry and 3- what the licensee is willing to pay.

The most important thing is that you get paid what you feel that your art is worth and that you are happy with the end result.

ADVANCES:  An advance is a dollar amount that an artist is paid up front, due at the time of signing the contract.  The advance is usually non-refundable, and is deducted from future royalty payments.

What I love about advances is the most obvious:  you receive a payment up front.

Often in licensing deals, you won’t see royalties for a year or more because it takes that long to develop a line, sell it and get it shipped to stores.  The advance is money NOW, which is when most of us need it.

I use the advance as an insurance policy should something go wrong.  It hedges against the possibility that there will never be royalties paid in the future, because if a company is willing to pay an advance, than that means they are committed fully to the product sales.  Without commitment, sales often won’t happen.    Sometimes the products never make it to the marketplace or are dropped from the line.

And that means No sales which means No royalties.

The main reason we almost always require an Advance for Drew’s work is that it helps me to weed out the serious people from the not-so-serious.

If a company is willing to pay us an advance, I’m more convinced of their commitment to the success of the product sales.

Red Flag Warning:  If the deal you are about to enter into is going to require an excessive amount of work on your end, it’s crucial to require an advance or a design fee to cover your time.  That way, you don’t have to wait the 12 months or so that it takes for royalties to generate before you get paid.

Since there is no guarantee that a license will generate any royalties at all, an advance is insurance that you’ll be paid something in the event anything goes wrong.

What could go wrong, you ask?!  The client is so excited and they plan to put a lot of effort into the line.

One personal example is when we did a deal with one of the largest toy companies in the U.S.  They went bankrupt one month after we gave them the artwork for a kid’s skateboard line.  Drew had spent weeks working on it.  Thank God we were paid a generous advance so that Drew’s time was covered.

Another time we signed on with a kid’s clothing company.  They had their Drew Brophy line ready to go, after weeks of work on our end.  Then a new partner came in and changed everything.  The line never made it to retail and no royalties were generated.  We had been paid an advance up front, so we didn’t lose a month’s worth of work for nothing.

The flip side to all of this is that for every deal that isn’t successful, there’s one that is successful.  You have to sign on with many companies because some will be duds and some will be good.

Remember, there are no set-in-stone pricing structures for licensing or for art deals.  You have to be creative and come up with a deal that works for you and for your client!

Maria

PS:  Read Beware of these Red Flags in Contracts for more food for thought.   

Would you like your own licensing agreement template that you can use again and again?  My new  LICENSING AGREEMENT/CONTRACT TEMPLATE PACKAGE is now available.  This package makes it easy for you!  Complete with a template that you can change as needed, and instructions, this is the perfect short, simple agreement for artists not yet ready to hire an attorney.  More details here:  Licensing Agreement Contract/Template

OR:  If you need help with a deal that you are currently negotiating, I can help!  Check out my consulting services!

 

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198 Comments What to Charge for Art Licensing – Royalties Advances and Flat Fees

  1. Scott

    Hi Maria,

    I’m curious to know how royalty enforcement is handled. I have read a few articles and through a handful of contract and none of which mention enforcement.

    Specifically, how can a person find out how many units were sold… It seems the licensee could make up any number… I.e. They say they have sold 50 units but in reality they sell 2000.

    Reply
    1. Maria Brophy

      Scott, excellent question! And I have a great answer: A good licensing agreement will include a statement that allows the Licensor (artist/you) to audit the Licensees books at any given time, with notice. A Licensor can send in an Auditor to do this for them.

      A great licensing agreement will also include language that states that if the audit reveals that the Licensee was underpaid by 5% or more, the expense of the Audit is payable by the Licensee.

      Reply
  2. Jan

    Offered a flat fee short term to client they thought it was fair but are unsure how many they will sell so they wanted to know a per piece price to use the image, any thoughts on this

    Reply
  3. saimamacfee

    Thanks, helpful article make me happy to read this. I am photographer and well selling royalty stock to get extra coin. I love my work and happy with that.

    Reply
  4. Pingback: Art Licensing Info Ask Call replay is now available | Art Licensing Info

  5. Rikki

    I’m an illustrator who is re-branding a large business. They are asking for a non- competition agreement that will prevent me from working for similar businesses for two years. Is this a good idea for me? How do I decide on a compensation amount?

    Reply
    1. Maria Brophy

      Rikki,

      I would not agree to anything that would prevent me from working for 2 years, not unless they are paying you enough to take 2 years off.

      Have a conversation with them and find out what their true concern is. Are they worried you will create similar branding for a competitor? If that’s their concern, then the agreement would state that you cannot create similar branding for a competitor.

      A non-compete is typically used for highly paid employees that have insider info in an industry. It protects the company if the employee decides to quit and go work for the competition.

      Rarely is a non-compete signed by a freelancer. This is because it’s meant for employees or highly paid advisers.

      Discuss it with your contact at the company and let them know that agreeing to not provide your services for 2 years would kill your income earning ability. And that goes against your business model! 🙂

      Ask them their true concern, and address that concern as best you can.

      Good luck!

      Reply
  6. Evelyn harper

    Hi, I draw as a hobby and have been contacted by a huge craft company to supply them with drawings for an upcoming adult colouring book. They are proposing a 2 year license and have asked me to name a price per drawing, I have absolutely no idea what to ask for and no friends in the industry that I can ask………. Help !!!!

    Reply
  7. Daniel

    Hi Maria! Your blog is super informative and interesting!! Thank you for sharing. However, I have an issue that I didn’t see addressed anywhere else in this thread… I’m a painter who makes my living by selling my original work only. Surprisingly, it’s worked out great for me thus far, despite being a simple “formula.” But I was just contacted by an art consultant for a luxury hotel. My interest was piqued, so I’m considering. They asked for a quote for 4 originals and limited copy rights for producing prints for 170+ rooms. My work sells for $1500-$10k per painting. It seems to me, the most appropriate way to “bid” this would be to ask for a flat licencing fee for the print rights? Though I have no idea what to charge. A percentage of an original? Any input?

    Reply
    1. Maria Brophy

      Hi Daniel,

      Congrats on this great new opportunity! There are definitely different guidelines for dealing with hospitality art print sales.

      It’s best to handle all printing on your end, so that you can control quality and quantity. However, some designers insist on printing it themselves. I recommend you buy Liron Sisson’s book “How to get your Art into Corporate Collections” where she shares how all this works: http://bit.ly/OP40Cl – it is very helpful to get insider info and as far as I know, hers is the best resource out there on this topic.

      Selling art to consultants for hospitality industry is different from licensing. The % are much higher. Instead of 10% for paper prints (in normal licensing) you can charge up to 50%.

      If you do the printing yourself (which is recommended) then your profit is much higher.

      Hope this helps!

      Reply
      1. Daniel

        Thanks soooo much for your feedback, Maria! I got my proposal squared away, and we’ll see what happens… Regardless, this is a valuable learning experience.

  8. cait

    Hi Maria,

    I have sort of a loaded question I hope you can help me with: A design company has created an image for the cover art of one of their house books which is being sold world wide. The cover image is very similar to an image I created for a series prior to them publishing the book. My lawyer would like to know what to ask for in compensation if we were to go forward with a copyright lawsuit. I told him that the artist, who is most likely received a flat rate or royalties for this high-end book but that I have no way of knowing what sort of deal the artist would have received as a basis for what I should request. This is a large fashion design house that created the coffee table book with an artist who is represented by the image agency that produced the book.
    Do you have any ideas of what the artist might have received as payment for this project and/or what I might think of suggesting as compensation for the use of my work –both for the past year and any future sales? Thank you!

    Reply
  9. Lala

    Do you have any advice about usage of one image in a book? Also, the piece that is featured is my work, but the photo was taken by someone other than myself. Should there be a usage fee for book print? Should the artist receive the fee or the photographer (if no agreement had been decided beforehand?)?

    Reply
    1. Maria

      The answer depends on who owns the copyrights to the photo. Is the photo a creative photo that includes the artwork? If so, then the artist and photographer share in the royalties.

      If the photo is just of the artwork, then most likely you should get the royalties. (If you hired a photographer to “scan” it for you).

      The price to charge depends on how often the photo is used, if it is a full page or partial, and is it an inside cover or page?

      Each is priced differently. The Graphic Artist’s Guild guidebook of ethical pricing covers the pricing for these things. I recommend every artist have a copy of that book.

      Reply
      1. Lala

        Maria, thanks for such a speedy and helpful reply. I’ve really enjoyed coming across your blog with my question and have been directing my pals to check it out because we are so used to selling ourselves short and your tips are so helpful and encouraging to deal with our everyday issues. I will definitely check out the guidebook!

        It turns out that the image will be used on the cover of the book and 1/4 page inside – million copies, worldwide use, all languages etc. I wouldn’t have asked the right questions had I not found you! Looking forward to your newsletters.

  10. Adrienne

    clicked on:
    LICENSING AGREEMENT/CONTRACT TEMPLATE PACKAGE
    and got an error code. Really? After all the trust you built in the article. Big disappointment and loss of trust. I gave you my name an email address and regret it. I’ll unsubcsribe asap.

    Reply
    1. Maria

      Hi Adrienne,

      Thank you so much for bringing this broken link to my attention. I just fixed it.

      And I’m sorry that the broken link caused you such distress! And yes, I understand if you unsubscribe, as I occasionally make mistakes and wouldn’t want to cause you harm again. I wish you the best!

      Reply
    2. CJ

      That’s a bit harsh, Adrienne. Mistakes occur and technology fails us sometimes. Alerting the author of a broken link is the kind thing to do, but losing trust, being so disappointed and having regrets about subscribing seems like an over-reaction, IMHO.

      Reply
  11. Abner Bonet

    Hi Maria. I’ve read many articles regarding rhis topic and by far yours is the clearest and most helpful. Hope you can help me on this. I’ve just been contacted by a company who wants an exclusive licensing agreement for a certain quantity of my drawings as a package deal. They intend to 3d copy them and sell on mass market under their buisiness concept idea. Since this is new to me, I am totally lost on what royalty rate is fair for 3d printing based on my art or what to compare it to and for how long my contract should be. They suggested 5 years. Any input from your great expertise would bring light to me and I would truly be grateful.

    Reply
  12. Margaret

    It can be so difficult finding a reputable Internet Marketing
    freelancer at the moment, just going to do it ourselves I
    think
    Posted this on Twitter, very useful!

    Reply

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