The pricing game

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Just your regular headache.

Following on from an earlier article on understanding licensing, I thought it’d be instructive to spend some time on the remaining elephant in the room for any photographer – especially newly-minted ones – is the question of how much to charge. Attached to that comes the mechanics of it all: invoicing, accounting, collecting payment, and the big one: licensing. Oddly, I find that this part of the business is something that seasoned pros are the most reticent to discuss; perhaps it’s part self-protectionism, perhaps it’s the cultural omerta towards money (at least in Southeast Asia, everybody seems to judge you by how much you earn, but to ask outright would be a major social faux pas*) or perhaps it’s because some of us are afraid to admit how little we’re actually charging.

*Nobody is likely to tell you the truth anyway; culturally, it’s like asking a lady her age in the West. It’s the age-old dilemma of one’s ego wanting to show their success, but simultaneously being afraid of being a target of jealousy. Whilst boastfulness is never a desirable trait, I think we need to be proud of our work and position as professionals and craftsmen – like every other form of social posturing, others tend to judge your implied relative value on external appearances.

And here’s the dilemma (or is it a trilemma since there are three options?): if they ask, do you tell your competition – remembering that you may well be competing for the same job – what you’re billing, in order to maintain rates across the board? Do you not tell them so you win the job, but potentially at the expense of eroding rates for everybody? Or do you give them wrong information – for any one of a number of possible reasons? Let’s consider the last situation for a moment: perhaps you give a false answer because you simply don’t want anybody else to know. It could be higher or lower than the other guy – in the end it probably averages out to no harm, no foul. You could deliberately give a higher number – all other things being equal, that would win you the job at the expense of long term sustainability. Or you could lowball and hope the other guy just backs off without submitting an even lower quote, in which case you’d lose the job and affect future rates.

The problem with all of these scenarios is that none of them are win-win situations for everybody. The only situation that’s sustainable is complete transparency and meritocracy in selection – and we all know that not only does this not happen, it’s pretty much impossible to be objective when judging the relative artistic merits of photographers. Here, client opinion is law – if they don’t like your work, there’s no point in trying to argue otherwise. (In fact, there are plenty of reasons not to pursue the job – but that is another topic for another day.) As a photographer and industry member – this situation is concerning, to say the least.

Like it or not, the reality is that the professional photographic industry – perhaps to a greater extent in Asia than elsewhere – is a numbers game. Education plays a big part in this: even relatively savvy clients will choose a photographer on price as one of the primary considerations. If the difference in image quality or output is say 10%, but the price is 50%, diminishing returns never wins. This of course means two things: firstly, mediocrity thrives because it’s cheap and easy; secondly, it’s very, very difficult to perpetuate and promote a premium product and service because the incremental cost to do so far outweighs any potential returns. And in the end, if you’ve got to charge the same or close to it to get the job and the client doesn’t really appreciate the difference, then all you’re doing is running at lower operating margins than the competition. This will not be in your favor in the long run. This is also one of the reasons I decided not to switch to medium format even though there was definitely a clear jump in image quality. I’d have to spend north of US$30,000 just for a basic kit, and even then I’d still have to retain the Nikon for some things – it simply didn’t make sense in our economy.

This brings us back to the core question: pricing. You can’t charge more just because you’re using a more expensive camera, or at least it makes no sense that it’s justified; I’ve said it time and again: your equipment is in no way indicative of your skill level. And if anything, if one photographer requires less equipment to achieve the same results as another, then it should be clear that the deficit is being made up through skill. But how does this translate into money? How much better qualitatively is a $100 image vs a $1,000 one?

Ultimately, it’s down to the client, of course. But it’s important to have at least some internal scale of charges you use as a baseline to start from. Although ostensibly getting a rate quote from a photographer should be fairly simple, it’s not. Let me explain why by starting with a list of things we have to consider:

  • Physical shoot time required
  • Retouching
  • Travel costs, if any
  • Complexity of setup
  • Whether we have to bump or reschedule other things – you might do this for a large project, but not for a small one – this of course comes at the expense of other things and potentially written-off revenue
  • Permits and planning
  • Any additional things we might need to hire or buy – props, talent, lights, location, equipment, makeup artists
  • Volume
  • The client – both ability to pay, and how much you want to work with them
  • License model

In practice, the last two items are the ones that invariably provide us with the largest headaches. Let’s look at three examples, and calculate cost on a per-image basis.

  1. Photojournalism/ reportage style assignment for a corporate client, one day of shooting. Let’s say it’s documenting a new production line process or something. Final delivery of 50 images, for internal PR and comms use only.
  2. Commercial shoot for an ad campaign for a large international brand, five images of a couple of watches, some of which involve props. Has to be done on-location at the factory in Switzerland. Images will require heavy retouching and compositing, and be used worldwide for a period of two years across multiple media.
  3. Whilst on job 2, another one of your existing clients calls you up and says they heard you were in Switzerland; would you mind coming over and shooting a couple of watches for them? They don’t know how many images they’ll need, but it’s two watches and you can do your usual thing of shooting first, sending over a contact sheet and they’ll pick what they need from there. You happen to have a spare day, and the necessary equipment.
  4. A new client calls up and says they got your name from a friend, they’re opening a restaurant and need some photos of the food and interior. How much do you charge?
  5. You get an email from a small agency who would like to use one of your images they saw on Flickr for an advertisement in Peru. There is no indication or offer of payment.

Life is suddenly not quite so simple, is it? Day rates go out of the window for #3, 4 and 5. And yes, I’ve had all five situations happen to me. In the same month. For 1., I’d go with a day rate – let’s say 100 units**. That number of images and the scope of what I have to cover sounds like about a day of work; the retouching/ postprocessing should be relatively minor since it’s documentary rather than commercial work – perhaps another day at most. I generally assume a day of shooting translates into a day of processing; this is mostly true except for the most demanding commercial work, where it’s higher. This might seem counterintuitive, but if you’re shooting fewer pictures in the first place, chances are a) you’re getting more of it right in camera, and b) those images are going to need increased amounts of individual attention. So for the most part, it’s accurate. I price retouching in with my day rates – I’ve found it easier than to split the two out; if you do, clients tend to ask ‘would it be cheaper without retouching?’ The answer of course is yes, but there is no way any halfway serious commercial photographer worth their lenscaps would even contemplate releasing unfinished images. As for licensing, in this situation the images probably have zero value to anybody but the original client, so the license model doesn’t affect pricing – I can’t make any more money off them, so whether it’s single use or worldwide unlimited exclusive makes no difference.

**I’m playing coy Asian now. Of course, how you determine what 100 units translates to in real dollar terms depends on several factors in itself: your skill level, your credentials, your client list – clout and experience, if you will – prevailing domestic conditions like cost of living etc – and how much you personally need to survive off. I figure there are two ways to do this: either make it a low number so you’re billable and busy for a relatively high portion of each month – income will be consistent, but you will be tired and not really able to grow – or assume you’re going to shoot only about 1/4 of the time or less, and extrapolate from there. The reality is that I average between four and six shooting days a month. The rest of the time is retouching, planning meetings, client pitches, producing content for the site, teaching etc. This allows for both variety and expansion: if suddenly I’m shooting 10-12 days a month, my income doubles – success means that I spend less time pitching and meeting, and more time planning and shooting because people come to me. 

So, in situation 1., we have a per-image cost of 2. In situation 2, we’ve got travel costs, props, rental of stuff over on location, possibly location rental itself and permits, and in this case, either a day rate or a per shot rate. I’m guessing it’ll take two days to shoot, but given that it’s for a global ad campaign, even a raw per shot cost of 40 is on the low side. Here, I’d probably start with say 100 per shot, add incurred expenses at costs – travel – I dunno, perhaps another 200 – rentals etc – another 100. Now we’re up to 800, for a total of 160 per shot. Would the license model make a difference here? Oddly, again not directly: you can’t use the images for anything else, but what it does give you an idea of is the scope of use, and how much money they’re throwing at the overall campaign – and thus its relative importance, and the relative importance of your images. If your work is helping to sell more expensive product, why shouldn’t you get a larger portion of the proceeds? It seems like a win-win to me.

Scenario 3. is a tough one. You can’t charge travel costs because they  know you’re already there and your costs are being covered by the other client – and it’s important to find out if they mind or not for the longevity of your relationship – and you can’t charge a day rate either, because you know the end images will be used commercially and require similar levels of work to the campaign images. But you’re also going to have to shoot a lot of raw material because the client hasn’t given you a shot list or have a concrete idea of what they need. In this situation, I have an idea of what these kinds of images cost – let’s say 30-50, on a relative scale compared to situation 2. – so what I’d probably do is say it’s 50 per image for x images, then if you pick more, I’ll give you a sliding scale discount down to 30 per image. You’ve already done half the work, so if for not much more incremental work you can increase your revenue, then you might as well do so. At the same time, if you’re the client, you need some incentive to buy more images – especially if they’re ones that that are ‘nice to haves’ rather than critical. I see this situation as an incremental opportunity rather than a new one – so the rates tend to be dictated by  preserving the relationship and long term sustainability.

Scenario 4. happens more often than you might think. If the brief has that little information in it, chances are you’re dealing with a client that has absolutely no concept of IP, licensing or even retouching. They’ll ask you to do things like ‘photoshop in people to make the place look busy’. With jobs like this, I will usually ask for an estimated number of shots and assume unlimited use since they’ll probably be no good to anybody, and explaining any other kind of licensing model is near-impossible; if they can’t even give me that, then it’s a day rate and a guess based on what they need. If the number works, then we go ahead. If not, then I don’t touch it with a barge pole: I’ve been burned in the past. Convincing people isn’t the problem; it’s the disconnect in their expectations and yours. Never underestimate how much of a headache the inability to communicate your artistic requirements can be. Many years ago, I once had a fashion client that insisted he didn’t want the model looking at the camera; I warned him that the images would look distant because of a lack of direct viewer engagement; he insisted; and then complained afterwards when ‘the model isn’t even looking at me!’. Ugh.

The final scenario is also fairly common. I start off by informing them that I’m a commercial photographer and images are available for license; rates depend on the usage. If they come back after that, then usually we’re good to go – name a number and if it’s reasonably in line with prevailing rates, then you’ve just gotten a sale. I guess it’d be around 10-20 or perhaps more, depending on usage. If you get a reply along the lines of ‘but it’s only for xyz and it’ll be great exposure for you’, then thanks, but no thanks. Not only will nobody remember the photographer in some obscure campaign in some obscure location, but chances are your image will probably land up being used somewhere else too because they have no understanding or respect for IP. It’s one of the many reasons why I will never put full size images with any remote sort of commercial value online anywhere^. The basis is this: clearly your work has commercial value because the end user would like to employ it to help sell whatever widget or service it is; but they are not willing to reward that value, so why should I give away something for free – especially when there’s no value that returns to me?

^And given that I refuse to show unfinished work in case it’s attributed to me, this means I’ll just never post full size images period, no matter how many review commenters ask.

In these five fairly common scenarios, we’ve got per-image prices that range anywhere from 2 units to 160 units – a variance of 80x – for the same photographer, and probably the same equipment. Now, see why the question of ‘how much do you charge?’ is about as easy to answer as ‘how long is a piece of string’? Of course, if you only shoot one style – say full blown commercial campaign only, or reportage only – then your prices are likely to be a lot more consistent, but I’m sure you can also understand why there’s no way I can charge 160 units per reportage image, and 2 units per campaign image would be completely unsustainable.

To some degree, this means that rates are self-moderating; I can’t actually think of that many other photographers who both shoot reportage assignments and luxury watch campaigns. And within the categories, there are of course tiers; the more famous you are, the more you can charge. Of course, we all know that fame doesn’t necessarily correlate with ability the domestic wedding photography market is perhaps the best example of this, and also the worst example of a regulated industry. You’ve got famous society ‘pros’ who are little more than button pushers charging five figures per day; at the same time you’ve got some seriously skilled amateurs who do it as a weekend hobby for a few hundred for the entire event. There is simply no consistency here.

The same applies to teaching and workshops: if that’s all you do for a living, then you need to have consistency of income, which is brought on through volume. If you’re a bona fide working commercial photographer, then there’s always a tradeoff: the time you spend teaching is time you can’t bill a client for, and it must be committed to far in advance of the actual workshop – and you have to do it even if you have another better paid job for the same period, and less than half capacity. Here, as a student, you’re paying for the photographer’s opportunity cost and of course their knowledge and experience. Value here is relative; clearly there’s more to be learned from somebody who’s proven their images have commercial value than somebody who just blogs. Yet this doesn’t seem to be the case in the market, most of the time: as usual, the loudest voice wins. Just because he shouts loud doesn’t mean what he has to say is worth listening to. As usual: judge value by output. Be very careful of people whose images are either limited in style/ subject matter – a lack of diversity points to a fundamental lack of skills in some areas – or just downright crap.

In a roundabout way, this brings us back to our starting point. I firmly believe in a couple of things: how much you charge should be proportional to both the work required (obviously) and your level of skill. And your level of skill should be determined by both your clients, and by implication, your peers who also shoot for those clients. There’s a degree of information available that should give you a fair idea of what to quote; if not, be honest and ask what your client’s expectations are. Some will try to lowball or game you; most will be honest. The nice thing about this system is that whilst nobody really knows how much everybody else charges, they all have enough of an idea not to spoil the market. In the long run, whilst charging less will get you the job today, it means that things become tougher in the future: in every other industry, rates up with inflation and experience, not down. At the high end, a lot of this is semi-regulated by the agencies; whilst traditional ad agencies engaging photographers directly almost always take a sizeable cut of the bill presented to the client, they also handle a large number of major commissions; large enough that there’s a general benchmark for prices. Still, in recent times I’ve experienced (and heard) a lot of companies going direct to the photographer in the interest of saving some money; the photographer, not always being aware of the agency markup, will (if they’re smart) quote a lower price than the agency would, but a bit higher than their normal rates; there’s a bit of a positive shift going on at the moment.

Now what we need to do is be consistent to ensure that a) everybody wins and b) rates don’t erode further in the longer term. I don’t think the sharing of actual numbers is a bad thing, but I think we need to be a bit careful who we share with: you want to make sure that a) they’re not direct competition but still in a similar line, or b) you have tacit agreements not to poach each other’s clients unless the client makes the first move. There are a small circle of pros here who believe the same; in the longer term, the plan is to set up some sort of agency or accreditation/ regulatory body with the aim of both taking care of the long term commercial interests of the photographer, as well as educating clients and ensuring quality control. Despite what everybody thinks – it isn’t all doom and gloom in the industry, but it’s going to require a lot more collaboration than we have at present*** to make it stick. MT

Coda: Look out for a future article on understanding licensing: I originally wanted to roll it into this one, but by the time I explained the pricing model, we were already at dissertation-length and probably broaching the limits of most readers’ patience.

***In Malaysia, at least

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Image licensing 101

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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Visit our Teaching Store to up your photographic game – including Photoshop Workflow DVDs and customized Email School of Photography; or go mobile with the Photography Compendium for iPad. You can also get your gear from B&H and Amazon. Prices are the same as normal, however a small portion of your purchase value is referred back to me. Thanks!

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