“Making money is art and working is art and good business is the best art.” Andy Warhol
Licensing your art to a reputable company is a wonderful way to make your art available to the world. What I love about licensing:
- You’ll earn money off of one piece of art over and over again
- You can get your art on quality products without having to produce them yourself (leave the production and sales to the experts)
- It’s one more way to get your art and name out into the world
The difficult thing about licensing is that there is no solid road-map to follow. Sure, there are general rules, but it’s not easy getting the information on it.
Which leads me to this question that I received by e-mail today from a friend who has rapidly become a popular surf artist in Southern California:
“I’m going to sign with a company to use my art on their skateboards but am only working on a royalty basis. What is a common way to go about doing this – percentage, etc.?”
I’ve handled about 200 licensing deals over the past ten years for my husband, Drew Brophy, and a few other artists, and not one of those deals were the same!
There are many different aspects to a license agreement, and I won’t be able to cover all of them here, but I’ll hit on the basic points.
First, I would ask this artist how many designs the company wants to use.
FLAT FEE BASIS:
If it’s not a complete line of skateboards, but only 3 or 4, then I would recommend not doing a royalty deal but rather a fee per design. I’d do this for 2 reasons:
1 – Unless it’s a toy company that’s going to sell 10,000 skateboards, the royalty won’t be worth it because the volume will be low. You’re better off getting paid the full amount up front, and:
2 – The accounting of royalty reports is a pain the butt for your client, and for small deals, it’s a waste of their time.
The flat fee per design can range from $300 to $3,000. What you can charge depends on your reputation, the popularity of your art, and what they are willing to pay. Our typical flat fee for Drew’s designs are $1,500 per design, when providing existing art to a small company that will produce a small number of units. For some of you reading this, $1,500 will sound like not enough. True, I agree! But, Drew likes to work with companies that make products that he likes, and many of them are small and can’t afford much more. Some of you will see $1,500 as being a high number. And maybe for many it is. That’s the interesting thing about this business – the numbers are all over the place and are subject to the perception of the people on both ends.
You have to figure out for yourself what to charge, and eventually you’ll come to a formula that makes sense for you and your clients.
If you are new to licensing and your art isn’t very well known, you might have to charge on the low end to build up your portfolio. But please, don’t do this for long, because then you’ll lower the bar for all artists. Be sure that once you’ve got a few successful deals under your belt, you start inching your prices up to where they should be.
ROYALTY ONLY BASIS: If the company wants to do a complete skateboard line with your designs, then a royalty deal could make sense. Be sure you get an advance of royalty up front.
We rarely go into a deal without a non-refundable advance of royalties paid up front.
A royalty advance is a dollar amount paid to the artist at signing, before creating and/or providing the artwork. This advance is deducted from future royalties that are to be paid to the artist.
WHY GET AN ADVANCE OF ROYALTY? Without an advance of royalty, the client has no incentive to make this work. They may drop it from the line, or they may go out of business, or a new person comes in and changes things, etc. It’s one tool we use to be sure that the client is serious about making it work.
The other reason is that we are not a bank. Meaning, we aren’t able to do the work up front without getting paid anything for 6-18 months.
Your advance is insurance that you’ll be paid something in the event anything goes wrong.
And believe me, things go wrong. Here are a few real “wrong things” that we’ve experienced with licensees over the last decade:
- A 50 year old toy company (one of the largest in the U.S.), went bankrupt one month after we gave them the artwork for a kid’s skateboard line (good thing they paid us $5,000 advance for all the work Drew did)
- A kid’s clothing co. had their Drew Brophy line ready to go, then a new partner came in and nixed it. The line never made it to retail, which means there were no royalties to be paid. (Good thing we were paid $5,000 also.)
- A license plate company owner, after we did a deal for Drew Brophy Plates, shut down his business to join the airforce! (We were only paid $1,200, but it was something.)
- A cell phone screensaver company never sold anything after we provided over 20 images and put hours into the contract, marketing information, etc. (we were paid nothing up front here so we ate this one).
There are so many things that can prevent your line from making it to retail. If it doesn’t make it to retail, there’s no royalties. And that means that you’ll be paid nothing for your efforts unless you’ve received an advance up front.
HOW MUCH SHOULD A ROYALTY ADVANCE BE? This depends on so many factors. Sorry, I know that’s frustrating! If you are Disney, you can require anywhere from $50,000 to $200,000 up front. But in the real world, for your average artist, it will have to be more realistic.
There are two ways that we’ll ask for advances, and it depends on the size of the deal, the company, etc.:
- FLAT FEE ADVANCE: We use $5,000 as our benchmark. However, if we are dealing with larger companies for big deals, we’ll go as high as $15,000. (We usually put a cap on the number of images provided for a flat fee, to ensure that the client won’t keep asking for an endless supply of new art season after season. Another insurance policy…..)
- PER DESIGN ADVANCE FEE: We’ve gone this route with a licensee that produces Drew’s beach products, because they use so many designs. They’ve used up to ten designs just for skim boards. Charging per design ensures that Drew isn’t providing a limitless number of designs.
EXCEPTIONS: There are exceptions to everything in licensing. In the case of a t-shirt licensee, Coastal Classics, we provide many new designs each season but don’t charge any advance because our royalty payments from them are high enough to satisfy. We’ve worked with them for four years, and they have a track record that we can count on.
ANOTHER EXCEPTION: Sometimes a company just won’t pay advances. It’s rare for us to move forward with these companies, for the reasons I’ve stated above, but I can name one instance that I made an exception and it’s worked out great. Skin-It.com doesn’t do advances with any of their licensors because they’ve been burned on a few, and we decided to do the deal with them anyway, because they are large enough to where they actually feature Drew’s art on national t.v. commercials. (One of the commercials was running during Christmas.)
(NOTE to the Licensing Experts out there on why I’ve omitted information on a Guarantee: I don’t typically work with guarantees – I prefer advances up front. It’s the business model that’s worked well for us.)
ROYALTY PERCENTAGE: Percentages are all over the board in licensing, too. They are based on the product being produced, the number of items projected to sell, the value of the artwork (popularity), etc.
There are books that you can refer to and find ranges to this. I refer to Licensing Art and Design: A Professional’s Guide to Licensing and Royalty Agreements – as a handbook I received when I took my licensing course through LIMA.
For skateboards, you can ask for anywhere from 6% to 10%. If it’s a large company that sells in major retail chains, you’d go with a lower percentage such as 4 or 5%, because your volume will be higher. If it’s a smaller core company that sells in skate shops, you’d go with a higher % because the volume will be lower.
Just to give you an example of how percentages are all over the board: For paper goods like posters or greeting cards, the range can be anywhere from 10% to 18%. For high volume (in the tens of thousands of units) shoe sales or boogie board sales, you would go as low as 3% – 4%.
OTHER POINTS TO WORK INTO YOUR CONTRACT OR AGREEMENT:
- State that Artist retains the copyrights to the artwork. (This is a no-brainer, but you’d be surprised at how many great brains don’t get this concept.)
- Contract start and end date. (We typically go for 2 years.) DO NOT allow an automatic renewal. For so many reasons I have to write another post on this topic.
- Samples: Ask for a number of samples (for skateboards, I’d ask for 2 or 3. For less expensive products, we’ll get a dozen or more.)
- Approval: Artist must approve, in writing, the final sample before going to production (this gives you control over your art)
- Signature: Artist’s signature must appear legibly on the product and copyright notice (i.e. (c) Artists Name) must appear legibly on all marketing and advertising materials. This is important for protecting your copyrights.
- Payments: Must be made MONTHLY or QUARTERLY – however you determine with the client.
- Royalty Reports: Must be issued Monthly or Quarterly (see above) regardless of whether there’s been sales or not. Reports must state retailers names and quantity sold per design. (This information will be greatly helpful to you when determining what your best selling images are, as well as which stores are carrying your products.)
I recommend getting more information on licensing agreements as you go along – this barely skims the surface.
Here are some of my related articles on this topic:
- THE MAKING OF A GOOD ART LICENSING AGREEMENT
- WORK SMARTER, NOT HARDER: LICENSING YOUR ART 101
- BRANDING ART – FROM SURFBOARDS TO GREETING CARDS
- THE ART OF THE DEAL MEMO
- OUR BIGGEST MISTAKE EVER – IN THE ART BUSINESS
My final parting words: Move forward, do your deal, get into licensing. The best way to learn about licensing is to just do the deals without hesitation.
Don’t be afraid of making a mistake, because you will. And that’s okay – you’ll learn from it.
Don’t be afraid of being ripped off: that can happen, and you’ll learn from it.
Good luck on this, and please, anyone, if you have any questions on anything that wasn’t clear in this post, let me know in the comments below!
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: http://store.drewbrophy.com/
PS: You can find more very helpful tips for art licensing deals in my eBook, co-written with artist Tara Reed, called How to Understand Art Licensing Contracts.
Click the link to find out more about it!