Licensing Fees

Recently a new company approached me about licensing some of my panoramic photos. This company has developed a new process (printing images directly on acrylic) which are magnetic and mount to a wall bracket to get a floating off the wall effect. I just got a sample of one of my images and I'm quite happy with the results. The agreement is pretty straightforward and good for me. Its non-exclusive and I get to keep the copyright. However, I've never done this before and don't know if their offer of 5% of the total cost of the products ($60 for 5x15, $120 for 10x30) is even reasonable or not. I've looked into some of the quote software and it seems to be directed more towards one time uses. Anybody have any thoughts as to whether this is even in the right ballpark? If you want to check out some of the images look at the panoramics in my gallery here...

www.natureisgrand.deviantart.com/gallery

Thanks,

nathan

I'm not clear whether they want to use your images to demo the product and service, or whether they are going to sell your images as part of a finished product. It's also not clear whether that's a one-time license or an annual license, or if you are being paid the 5% for each sale. I'd be pleased in the latter case, especially if it's the start of a long relationship. But if it's a one-time fee or annual license for using your photo as often as they want without further payment, those numbers feel really low.

BTW, when computing license fees for video case covers we assess a license fee based on a similar percentage of sale price, but for the first "X" number of sales- paid up front. Using arbitrary numbers, if the license is for 1000 covers of $10 videos and they're paying us 10%, we would get 10% of $10,000 up front. The contract also includes provisions for renewal at the start of a new print run, usually at a smaller percentage. This frees both parties from accounting for just how many are sold in a year, while making the additional print run a hallmark for renewing fees. It covers the risk to the vendor if the video is not a big success, while assuring continued income for us if it is.

I don't know if that's a relavent example for you, but it's an easy way for both parties to do the accounting while assuring that the relationship remains fair.

A percentage of the production costs doesn't seem reasonable if they're going to be selling the end product. There's a profit margin built in there so why aren't they willing to give you a piece of that? It should be a percentage of the end selling price, really, and should be for each sale.

You referenced total costs rather than production costs as Robert added, by which I assume you meant retail. If Robert's interpretation is correct, that gets complicated. Far easier to compute if your % is based on retail price as I assumed, and is the formula we use in all similar licensing contracts.

Hank, thanks for the info. To follow up..... The license period is unlimited and they will be directly selling my images as a finished product, as well as allowing photographers to order their own prints on this new material. I get the 5% for each sale of my image, and its 5% of the retail cost of the product. In addition I would get substantial discounts if I were to order my prints (which is attractive to me because I am currently a student and can't afford to order my own prints and get them framed). Is there any potential downside to a relationship like this, other than that they could potentially undercut me on prices, should I ever actually start selling some of these images from another source? I can't see one, so am leaning pretty strongly towards going forward with it. Thanks again.

The only downside, if it really is one, is accounting-- keeping track of how many of your images they sell. If you trust each other and see the potential of future sales of additional images, it sounds like roses to me. And BTW- The arbitrary 10% in my example was just that, used for the sake of quick math. Our actual % for video/DVD case covers is very close to yours, and in fact less for subsequent runs.

Congratulations!

I obviously misread how the arrangement would work. Sorry for the confusion.

A flat percent of the retail price works well assuming the price never drops. If their retail price is $100 today, and you get 5 percent, your compensation is $5 per sale. If they lower the retail price to $75 next year, and you still get 5 percent, your compensation drops to $3.75. You could put in a clause along the lines of "5 percent of the retail price or $5, which ever is higher" so that you guarantee yourself a minimum return from each sale regardless of the direction retail prices go.

Another consideration is what happens if they offer incentive pricing (i.e. holiday specials or volume discounts). Let's say they offer a 15 percent discount for a holiday weekend sale, or as an internet special. How does that affect your compensation? Do they absorb the entire discount or do you also absorb a piece of that? You need to have a clear definition of "retail price" and whether it is the final sale price after all discounts are applied, or it is the original retail price before discounts are applied.