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Learning to Licenseby Ellen Million
Licensing is scary, complicated, strife with problems and something only serious, famous professionals actually do. Or is it?
You may think that licensing is just plain out of your league, but chances are very good that you already have a licensing contract or five. Maybe even more!
Seriously. Every time you formally agree to let someone use your work, you have entered a licensing contract. Every time. You don't need to sign anything in hardcopy, and you don't need to be making money off of it.
How can this be? Take a good close look at the 'user agreement' or 'terms of service' that you probably don't read all the way through when you sign up for an account at a gallery site. It will generally say something like this:
You hereby grant to us a non-exclusive, royalty free and world-wide license to display, reproduce, publicly perform, broadcast, distribute, and/or transmit the Artwork in whole or in part.
Always be aware of these agreements, and what their terms really are! You can break down the various legal bits into these contracts (yes, they really are contracts!) in this article: What's This Bit About my Soul? In general, these are harmless, non-exclusive, non-profit licenses that do you far more good than harm.
Be aware, too, that licensing can be far, far less formal even than that. If someone emails you about using your artwork or writing on their webpage and you say yes, you have given them license to display your work. You may have terms for your licensing (for example, you require a link back to your webpage), and you may have exclusions (for example, they can't sell products of your art). Some of these will be explicit. If you say specifically, you can only show my work if you link to my page, list my name and use this exact blurb of text, that's an explicit licensing term. Some terms will be implied. If you give someone permission to show off your work, it is implied that they do not get exclusive license, even if neither of you comes out and says that.
So, licensing sounds a little bit like copyright, doesn't it? Specifically, licensing is the act of granting copyright. Not all copyright, though, just very particular little bits of it, usually in return for something, whether that's money, exposure, or just good karma.
You probably opened up this article to find out about the kind of licensing that actually pays you, so we'll skip ahead to that area of licensing.
Print on Demand Licensing
Cafepress, Zazzle, Lulu and several other similar companies allow you to set up your own storefront, where customers can (hopefully) find you and (more hopefully!) spend money to buy products with your art on it or writing in it.
This is a very risk-free kind of licensing; these agreements are non-exclusive, so you aren't restricted in other ways to make your art make you money, their basic accounts are usually free, and you don't really have to do a whole lot of work after some initial effort. You are licensing your artwork to them to sell on products in exchange for a set royalty or percentage of each sale.
The cons of such licensing is that the base pricing on sites like this is pretty hefty – they're making plenty from their cut of the products sales, and unless you are pretty famous, you aren't going to sell a whole lot of product, so your total profit just isn't going to be all that great. The other con is that you don't have a lot of direct control regarding the quality of the product. You should always do some research before agreeing to license to one of these companies – either order some product yourself to ascertain the quality, or find reviews of other customers.
Small Press Licensing
The word 'press' here may be a touch confusing, because I intend to also cover small merchandising companies, like my own EMG Giftshop, or any sales company that makes merchandise or publishes book in small quantities. These are different than major licensing generally not only by size, but also usually by contract terms. Smaller businesses have to make concessions for the fact that they are not distributing to Walmart and usually make products in much smaller batches, if not outright individually. Their per-item costs are larger than they are for big companies, but their overhead tends to be much less. These companies generally only have a few – or even no! - employees.
Small presses (and almost all licensors for artwork) don't tend to pay an advance on royalties. An advance would be a sum of money paid against your royalties before production is begun. If a publisher thinks they will sell 100 of your books, and they plan to pay you $1 per book, they may pay you an advance of $100. And advance is a nice safety buffer – the publisher would never ask for this money back, if your book tanked and only sold 5 copies, and if they book sells more, you'd still make additionally royalties for all the copies after 100. (This is called buying out an advance and makes everyone happy! Usually a writer who doesn't buy out their advance won't get another book offer from that publisher.)
Most small presses for writers pay flat fees, but many also pay royalties, particularly if they are using print-on-demand technology to fill their orders. Most small merchandisers make their own items, and don't make the item until it has been ordered, so they almost always only pay royalties. Some small presses make trades of things of value, for example they can publish artwork in exchange for giving the artist advertisement space in a magazine.
The major difference between a small press business and a print-on-demand business is that a small press business is more directly representing you. They select what work they wish to use, they don't leave that up to you only, and they tend to market themselves and their artists, investing in advertising, even doing conventions and shows, so that you get more exposure. Print-on-demand structures, on the other hand, are selling their services to you, not you to the market; legwork is your responsibility if you want to get sales through them. In many cases, small presses want exclusive rights in exchange for the risk they are taking with you, so these contracts may be more restrictive. In most cases, the companies are small and personal, and contracts are greatly negotiable.
The Big Dogs
Licensing with big corporations is a whole new kettle of fish. They generally own their own equipment and make (or order) everything in very large batches, which keeps their per-item cost very low. They are very selective about what work they license, and their contracts may be very restrictive; in some cases they want control of an artist's entire portfolio, not just the images they want to use at the time!
Their royalties tend to be a smaller percentage of a sale price, but because they are selling a much, much larger volume than small press, actual payments are much higher. These tend to be the cream of the licensing crop – but be sure that a company you are dealing with is really all that they seem to be! Big companies are going to be names you're familiar with, that you probably already buy from.
“On Spec” and “To Spec” and other licensing tidbits
Two licensing-related terms that get confused and tossed around a lot are 'on spec' and 'to spec.' 'On spec' is short for 'on speculation,' which is to say, you would be asked to do work for a company (usually, specific illustrations or writing projects for a project, but the term could include other labor like editing or layout) that you would be paid royalties for eventually. Maybe. Hopefully, of course, but most 'on spec' projects never get the funding to get off the ground if they don't have funding to outright purchase their creative material, so these projects are generally not very lucrative to get involved in.
'To spec,' on the other hands is short for 'to specification.' This can be any commission, illustration job, work for hire, art trade, writing assignment, or anything where you are told what to create and how big to make it.
Usually, work to spec comes with implied licensing, even if the work doesn't warrant a traditional contract. For a private character commission, this may be very basic – there is an understanding that the commissioner will be able to show people a copy of the art, maybe on their webpage with their character information. They can't claim they created it themselves, of course. It's always a good idea to be specific with your client about what they will be able to do with the work you create for them, and what you will be able to do. Some artists won't sell prints or merchandise of commissioned work; some keep the right to do that under every circumstance. It's up to you and your customer what rights you wish to license to them!
Pitfalls and Warnings
There are definite dangers to licensing. Not all companies are straight-forward and honest. Some of them don't pay their royalties on time. Some of them don't ever pay them! Some of them will tie up a good piece of artwork in a contract and then never do anything with it, so you don't end up making anything at all. Some of them will offer your work on shoddy products, which can damage your image.
One way to avoid some of the speedbumps in licensing is to have an agent handle the business end of things for you. Their job is to find you good contracts, negotiate you favorable terms, and see that you are treated well by a company. In return for this, they make some percentage of your payment. Naturally, there are as many problems with agents as there can be with contracts – always be careful whom you sign your rights to, how many of your rights you are giving them, and make sure you know how you can get out if you need to.
Next month, Selina Fenech will talk in more depth about what terms are in a good contract, and what danger signs to look for, as well as how to negotiate for the best possible agreements.
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