I thought it would be worthwhile spending some time demystifying an important but frequently misunderstood cousin to pricing: licensing. But before we discuss licensing, we should spend some time on the basics of intellectual property.
Intellectual property is any tangible or intangible product or service that employs proprietary know-how which can be used to gain a competitive advantage or holds commercial value. It is the idea or the manifestation of an idea which people are willing to pay for. An image is an idea in the mind of the photographer before it is executed, and then it becomes tangible; people pay to have this image for their own use, or perhaps use in conjunction with promotion of their own product or service. In short: it’s worth worrying about if you could make money off it.
The key difference between IP and physical property is its ability to be replicated with little to no marginal cost to the creator; whether one person or a hundred people hear a song, it costs the same amount to produce. Yet clearly, people are willing to pay for the ability to play that song on demand – that’s the iTunes model – which means the song has value, which means that it’s intellectual property. It doesn’t matter whether five or five thousand people buy it, the cost to license for each individual is the same, and the product they receive is the same. When calculating pricing and production costs – i.e. musicians’ contracts – this is all taken into account. No doubt a song composed exclusively and specifically for an event will have a higher license fee than a library track which might be used for anything from an athalete’s-foot-powder jingle to a prize presentation ceremony.
Another example: When you buy a movie on DVD, you’re not buying the movie per se; you’re buying a license to watch the movie by playing it back on your home theatre equipment for you and some friends in a private setting, without any ability to make commercial gain from it: i.e. charging admission for multiple screenings would not be allowed. The theatre that shows the movies has a license too, but they have legal permission to run multiple screenings and collect admission fees.
So clearly, there are many things that affect the value of intellectual property. Let’s look at it in a photographic context: each photograph is IP, and probably has some estimated lifetime value depending on several factors; the aesthetics of the image, the criticality of the moment, and its difficulty to replicate – a generic crappy built-in flash shot of a flower is going to be far less valuable than a studio-lit and atmospheric image of the Loch Ness Monster making out with Bigfoot in The White House, especially if the President is in on the action. Clearly then, intellectual property, pricing/ value and licensing are all related. It’s important to remember this.
Since a photograph – especially a digital one – doesn’t ‘wear out’, this means that it can be reused multiple times, or resold to many people. However, there’s obviously value in exclusivity, regardless of whether you’re the only entity allowed to use it or you’re the one who commissioned the image, it means that legally, nobody else can republish the image for any reason – it is under your control. In situations like this, the lifetime value – let’s say 100 units, for argument’s sake – of the image is probably going to be used up by whoever it is who buys the license, assuming it’s for longer than a short period of time, or it’s something whose value is proportional to its currency. Thus, to give away the exclusive right to use the image, you would charge 100 or pretty close to it. Perhaps even more if there are multiple interested parties; this is how paparazzi get rich: there are clearly a lot of people who want to see Kate Middleton’s boobs.
But what about more complicated situations in which perhaps the photo is well executed, has a decent lifetime value, doesn’t go out of fashion quickly, and might have multiple uses? (We’re talking stock photography here, in case you hadn’t figured it out.) A photo of the grand canyon might be used in a travel advertisement, for an airline, for a hotel, hell, as a composite base for a fashion shoot, as a computer wallpaper* – who knows. And it the original object isn’t going anywhere anytime soon, but that particular combination of light and weather conditions may not be that repeatable. So how much does one charge for a ‘license’?
*The most expensive/ profitable stock photograph in history is reputedly the clouds and rolling green hills used as the Windows XP background. I believe in addition to a very handsome initial lump sum payment, the photographer continued to receive royalties for every copy of Windows sold: that’s a lot of money.
First we must understand the different types of license. (Remember, in the case of a photograph, a license is the right to use.) There’s commercial/ non-commercial; are you advertising something that will make you money? Then there’s time period – one month, one year, in perpetuity? Don’t forget geographical region – obviously, the more people see it, the more widgets you’re going to sell, so the higher the corresponding value of the image that helps you sell those widgets. Finally, there’s media type, which is somewhat linked to geographical region – online media has no region because the internet is accessible from anywhere; print media and billboards can be highly location-specific. In addition the obvious value of having more eyeballs through a geographically wider audience, it’s important not to forget the value of context and repeatability: it’s easy (and therefore relatively cheaper) to get a shot of Mount Fuji in Japan, but not so much in say, Austria. And thus the same image licensed in Japan would likely cost less on an estimated per view basis than licensed in Austria – but the total amounts might be similar because there are simply a lot more people who would see it in Japan.
The job of stock agencies is twofold: firstly, to serve as a clearing house for people looking to license images, providing diversity and a consistent level of quality; secondly, they’re also supposed to maximize the lifetime value of the images they represent. (Whether they do so or not is another debate.) Ignoring microstock agencies, which work on the basis of volume (fifty cents an image regardless of usage or content, perhaps half of which might go to the photographer) the rest of the more serious agencies will find out what you intend to use the image for, at what size, across what geographies and media etc. before presenting you with a quote. I know that agencies like Getty require this as a matter of course before you even get any sort of ballpark number; there are separate and intricate negotiations that go on behind the scenes if an image is to be used on an exclusive basis or have its rights bought over entirely.
In recent times, the agencies have been acting increasingly like the 500-pound gorillas they have become: agree to our rather one-sided royalty structures (where up to 80% goes to the agency) or have nothing at all. Inevitably, photographers agree with the agencies – myself included – because it often represents the difference between having all of nothing or some of something. The way I look at it, I’d rather have my images out there and available for sale – you never know, you might get lucky and be the recipient of a rights buyout or large exclusive deal – and thus potentially generating income, rather than sitting in my archive and probably never even viewed by me. Of course, agency representation comes with many caveats: for most agencies, you are no longer allowed to license the image on your own, i.e. all representation rights for that image transfer to the agency on agreement; and of course, they will never take images that are subject to existing licenses – whilst it’s still possible to extract some value out of it, there’s no point representing an image that has a significant chunk of its lifetime value already used up. Of course, for my better images, I prefer to retain tight control of the rights; they are not represented by any agency.
Even freely downloadable/ available images have notional licenses attached to them; the most common being ‘all rights reserved’ and ‘creative commons’. The former means that the image is not to be used without express permission from the IP holder, i.e. the photographer; they may grant you a license that involves payment, or it may not involve payment. According to Wikipedia, the phrase originates from “the copyright holder reserves, or holds for their own use, all the rights provided by copyright law, such as distribution, performance, and creation of derivative works; that is, they have not waived any such right.” This nicely ties in with the latter: creative commons are several types of generic usage licenses created by the Creative Commons organisation which detail terms and conditions of use for other parties who wish to use the intellectual property. All do not require explicit permissions (so long as the conditions of the license are fulfilled) from the creator or IP holder in order to use the work. Note that this is not the same as waiving rights entirely. Common stipulations of creative commons licenses usually take the form of credit or acknowledgement to the original creator of the work.
As a photographer, it’s important to bot know what your rights are, as well as keep track of any license agreements you might have made with other parties; this is so that if later on, you choose to offer an exclusive or regionally exclusive (for example) license, then you can actually ensure that you meet the terms of your agreement with the new party. I would strongly advise against putting any of your work out there under anything but ‘all rights reserved’; this way you have legal recourse if any of your images are used without your permission.** Similarly, don’t ever upload any full size images – even though legally people are supposed to seek permission, nobody ever does; piracy is too easily seen and treated as a victimless crime. Too often – especially in lower-educated third world countries – the perception is not only are there no physical goods stolen, there isn’t even a real person you can see! Avoid this entirely by not making useful-size images available. This is the main reason I will never post full size images online, so please stop asking. From the other perspective, if you use an image or work that is ‘all rights reserved’ without permission from the creator, you are liable to have legal action taken against you, and you will almost certainly lose. Think carefully: I’m sure you’d be rather angry if somebody took both credit and commercial value out of your hard work and didn’t even so much as ask your permission first.
**I imagine that your wife or girlfriend wouldn’t be pleased to find out that the nice portrait you posted on Flickr has been stripped and is now used to advertise haemorrhoid medication in Indonesia; it might not be that dramatic, but it’s happened to me often enough that I think you get the point.
Although most people who deal with creatives, images and IP should in theory be familiar with licensing, I’ve been met with enough blank stares and confused looks when broaching the topic that I’m convinced that it really isn’t common practice in this part of the world. This is not necessarily a bad thing. Clients don’t often understand why they need a license (“but I’m paying for the images!” is a common response) – it’s not so much that we want to charge them more as we need to ensure that legally, all parties are fully covered. Just as I want to have it in black and white that I can or can’t license the image to a competitor, you as a client would also want to make sure that if I breach that agreement, you can sue me for doing so since you paid for exclusivity. Generally, once explained, all is clear and there aren’t too many problems. I consider client education a necessary thing to safeguard the long term future of the industry – clients who understand and appreciate IP are certainly much easier to work with in the long run.
For the most part, you can grant these clients time-restricted unlimited media exclusive licenses anyway – most commissioned work of this sort is either small value and/or highly client specific, which means that you won’t be reselling them to anybody else, and the only possible way for you to increase the lifetime value of the image is to extend the usage period. For the most part, I actually tend to grant indefinite licenses in the interests of the client relationship; I’d rather they happily come back to me for more work rather than grudgingly hand over a bit more license money.
Bottom line: if you’re going to at any point bill for photo work, make sure you understand and manage your rights and IP carefully. It will help you to both maximise your revenues, as well as ensure that you’re not caught in the position of not actually owning your own images. MT
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