The Art of Licensing
A work of art—whether it’s an illustration, a piece of fine art, or a graphic design package—is typically a single, discrete piece of content. Art can be reproduced, but reproduction often devalues the original work. And artists who work on commission are often constrained by a contract.
A commissioned piece of art is owned by the client, further limiting the artist’s ability to make a profit from the product of his labors. So it’s no surprise that many freelance artists prefer to produce work independently and then license it to customers.
Ready to license a piece of artwork? Negotiating a great royalty deal is the best way to boost your revenue…
A licensing agreement not only allows the artist to retain ownership of a piece, but it also provides a notionally boundless stream of revenue. As long as your client continues to sell products, or generate page views, then your work of art will continue to generate income.
And if the client decides to discontinue the product or page associated with your art, you retain your rights of ownership.
But licensing agreements can be difficult to negotiate, and payments can be difficult to monitor and audit. On the web, licensing is still in its infancy and royalty payments are relatively rare. It is much more common for artists to negotiate a single lump-sum payment for the grant of license.
To help you decide how to maximize your profits and protect your copyright, here is a short guide to online licensing.
How Royalties Work
When you’re ready to license a piece of work, negotiating a great royalty deal is the best way to boost your revenue. By licensing the work (rather than selling it), you retain legal ownership while a second party “sells” or duplicates your image.
In return for granting the license, you receive payments based upon a percentage of the income generated by the product or page associated with your artwork.
Royalty rates for artists are almost always below ten percent. The rate at which you license your work will depend upon a number of factors: the type of page or product being “sold,” the prominence of your brand, and the client’s prominence in the marketplace.
Your licensing rate might be as low and one or two percent if you agree to accept an supplementary upfront payment, or if you successfully negotiate an ongoing fee at a predetermined rate to be paid monthly or quarterly. Advances against expected royalties are common, so don’t be afraid to ask for a single up-front payment to offset a portion of the expenses you’ve incurred completing the piece.
In your licensing agreement, you should always include a provision for periodic audits. An audit will help you detect and quantify under-reporting or underpayment by the client. If an audit uncovers a significant error, then the client is contractually obligated to compensate you for the cost of the audit as well as the income you are owed.
Royalties on the Web
In general, it is difficult to work out royalty-based grants of license for work used on a website or blog. Artists who license their work to a web-based business usually grant a license in exchange for a one-time fee. These licenses allow the owner of the website to reproduce the image for use on multiple pages, or across multiple platforms.
But, of course, the nuts and bolts of the agreement are up to you. If you believe that your work of art will significantly increase a stream of revenue (for instance, the amount of money paid by advertisers who place banners on the site), then you might be able to negotiate for ongoing payments. The sky’s the limit!