This is the second post I have written about art licensing. In the first one (which can be read here) I gave an introduction to this topic and some of the basic pointers about licensing. I now want to delve a little deeper and consider some of the things which you will contractually need to agree to when agreeing to license your art, and how the terms and profitability may differ depending on where you are in the world.
If you are approached by a person/company and they are wanting to license one or more of your designs, then these are my top four things that you need to be clear on.
No. 1: Where?
Where will the goods be sold? If a company wants worldwide rights to license a design for their product, make sure you ask them if they actually sell worldwide. If they don’t sell into America, I would ask if this territory could be removed from the contract – you might be able to license the design to a company selling that product in the USA, and that’s a big territory to be missing out on.
No 2: Length of Term
How long will your agreement last for? Whilst you will retain copyright for the artwork at all times, you are giving the company the rights to sell it on their product. Agreements can last, in my experience, anywhere from 2-5 years. After this time, you would be able to license that same art for the same product again, in the same territory with a different company.
No 3: Royalty / Flat Fee License
There are two ways that companies work here. When thinking about licensing, I used to automatically assume that payment will be on a royalty basis (you receive a fixed percentage of the price each unit is sold for), but actually flat fee licenses are common too.
If you are receiving a royalty based on sales, then the percentage can vary greatly depending on the product type, the territory and sometimes on projected sales volume. For example, you could perhaps expect a lower royalty rate if licensing art for a product such as a gift wrap in the USA. It would not be out of the question to receive as little as a 2% royalty for this product in the states, in comparison with say 7% in the UK. Due to the potential sales volume in that territory, however, you may end up with a similar amount of cash at the end.
Royalties are typically paid at the end of each calendar quarter. Expect to receive a sales statement to invoice for, which will then be paid within an amount of time as set out in your contract.
Be clear on if you are getting a royalty % of the wholesale price or the retail price. If the company sells on a wholesale basis then you will be getting a percentage of that price and not the end retail price. If they only do retail, you will get a percentage of the retail price. A 5% royalty on 1000 units at a wholesale cost of £1 is a very different sum of money to a 5% royalty on a retail price of £2.50. You need to know your numbers and be clear on the facts.
If working with a company overseas then fluctuating exchange rates could affect the profitability of the deal.
The second way of getting paid is by way of a ‘flat fee license’. This means that you agree on a single one-off price for the customer to use your art, which you will receive upfront, regardless of sales. Some large companies will only work in this way due to the impracticality of tracking specific sales volume. All of the other points to consider remain in place and copyright will still be yours, it’s just an alternative way of getting paid. This method of payment could be preferable as it means you will get money quicker and help with cash flow. Your customer will usually have a preference and expect you to agree to that, rather than give you the choice.
No 4. Which Products?
You need to be really clear on which products the company wants exclusivity for.
Sometimes, they may want exclusivity for more products than they are actually manufacturing. I had a company wanting exclusivity for my art on rubber stamps, as well as the products they were manufacturing, even though my art wasn’t actually going on to rubber stamps. This can be because they are thinking of adding that product in at a later date or because they are trying to cover most products in their category so you don’t license the work to another competitor. If you’re not happy with this you can negotiate. The client will give you their offering and if you think you want a higher percentage or to have a territory they aren’t selling in taken out of the contract it’s your chance to negotiate that with them before you sign, however, don’t expect them to budge too much from their initial offer.
I find it useful to print out a copy of each design within my portfolio just on an A4 sheet and keep in a folder. Each time the artwork is licensed for a product I just write a note on the sheet so I can see at a glance what it is currently being used for, should I get an enquiry from a new customer. I give each design a number which is usually the year it was created followed by the number of that design for the year. For example: 1801, 1802 etc. It allows all parties involved to be clear on which designs are being discussed.
So now that you know a little more about what licensing entails, how can you go about getting a deal? You need to get your work out there! I love Instagram, and this is a place where a lot of art directors go to look for new artists to work with, as is Pinterest. You could also do a licensing show. Shows obviously require financial investment and take time to prepare for, but it can be a great way of getting feedback on your work and having important face-to-face conversations with buyers and art directors from around the world. I have popped a list of some shows below.
USA – New York
Print Source: January and August
Blue Print: May – some studios do Blue Print and Surtex even though they run simultaneously so they must bring in slightly different customers. It would be costly to visit these shows prior to exhibiting so do plenty of research and try to find out which show may be best for you.
UK – London
Brand Licensing Europe (BLE) – my personal opinion of the show from what I have seen online is it is more corporate, with lots of big brand licensing going on such as for Disney etc, although they do have an artists quarter.
There will be other shows too, but these are the ones that have been on my radar for a number of years now.
This was mine and my friend’s booth at Surtex in May 2017 – art licensing shows are full of colour and innovative trend-setting artwork, and there was a real buzz for the duration of the event.
Another way of getting a licensing deal could be to approach an agency to get licensing deals on your behalf. The agent can take anywhere up to 50% in commission, but they will already have access to a wide range of industry contacts. Leaving the admin to them will free up your time to create more art, which will, with any luck, lead to even my jobs!
Hopefully, this has given you some food for thought about the world of art licensing. Remember that licensing agreements, like any other contract is legally binding. If in doubt, it is a good idea to have contracts read through by a professional.