Licensing fees for photography

There are usually three components to a commercial or corporate photographer’s price: production expenses, photo fee (or creative fee) and licensing fee (or usage fee).

The first item, production expenses, refers to all expenses directly related to the job at hand. It doesn’t include your cost of doing business. It should be straightforward as to how to determine and charge for production expenses.

Photographers often charge a markup on some of these expenses but some clients ask for receipts and will refuse to pay any markup.

One important expense is your own equipment. Some photographers charge each client a rental fee for using their own photo equipment. Other photographers put the cost of their own equipment into their cost of doing business and wrap that into their photo fee. I’m not sure which method is better but remember that the cost of your own equipment must be recouped.

This leaves us with photo fee and licensing fee. I often use a car ownership analogy to explain these two.

The photo fee, or creative fee, compensates you for your time, effort, expertise and creativity. But where does this number come from?

This fee is influenced by your cost of doing business, your experience and talent, and, to some degree, from what other photographers charge for the same job. There’s no magical, one-size-fits-all price and there shouldn’t be. Every job is different.

You may wonder if licensing is worth the trouble. First, you MUST provide some sort of licence to your customers. Since you own the copyright to your work, your customers can’t legally use the pictures without a licence from you. Second, licensing is the standard for all intellectual property. It’s been the standard for many decades because it works. It provides the customer with a fair price for their use, it provides you with ongoing income, and it gives you control of your work.

The licensing fee, or usage fee, can be added to the photo fee and presented to the client as one lump sum or it can be listed separately. But where does this number come from?

A licensing fee can be based on your previous licensing experience, it can come from software like fotoQuote or BlinkBid, it can be determined by using an online photo agency’s price calculator or the BUR licensing calculator (extremely important: be sure you understand the concept behind this British calculator), and, to some degree, it can be comparable to what other photographers charge for a similar use.

You must remember that pricing software and online numbers are just reasonable suggestions and do not apply to every situation. Again, there are no magic numbers and experience is the best teacher.

The licensing fee might be charged as a flat rate for using a picture in a certain manner for a certain time period. This is how pricing software and online stock agencies work. This flat rate method lets the customer easily see the cost but you may not be fully compensated if the usage is extensive.

Licensing could also be charged as a percentage of the media buy. But note that this method is pretty much out of date. Many ad agencies no longer do media buys nor do they get paid on commission either and many clients don’t like this method at all.

Nevertheless, how this works is that the photo licensing fee is a small percentage of the client’s planned use of paid placements. For example, the client might be buying $100,000 worth of newspaper ad space or $200,000 worth of billboard space and the photographer would get a small percentage of that buy. But the problems are that the client may not have decided their total media buy, they won’t tell you, or there may not be a media buy.

Note that this percentage of media buy can be a fixed percentage or a sliding scale. In the old days, the fixed percentage was often around 5%. For a sliding scale, the percentage starts higher for low media buys and slides to a lower percentage for higher media buys. A common sliding scale used to range from about 3% up to 6%. For example only:

Media buy up to $400,000 = 6%
Media buy $400,001 to $600,000 = 5%
Media buy $600,001 to $1 million = 4%
Media buy over $1 million = 3%

If licensing fees based on media buy are out of date then perhaps so are licensing fees based on circulation or print run. Circulation or print run is still used for book publishing but not so much for advertising, corporate brochures, annual reports and some other types of publications.

You can always try to base your licensing fee on circulation or print run but you may find that the client has no idea what the total circulation or print run will be. It’s also impossible for a photographer to police print run or circulation. For electronic publications, print run and circulation don’t exist.

Often the client wants the right to run their advertisement or print their brochure as many times as they want within a given time period.

Most clients understand:

(i) Duration – how long the pictures will be used.
(ii) Location – where the pictures will be used.
(iii) Media – in which type of media the photos will be used.

So in many, but not all, cases, these three factors are more important than circulation, print run or media buy.

Another way to calculate a licensing fee is to base it on a percentage of the photo fee. For example, for a certain usage, the licensing fee might be +100% of the original photo fee; for another usage, the licensing fee might be +50% of the photo fee.

The problem with this method is that the licensing fee is based on the photography and not solely on the usage. So if you have low-cost photography with a high usage, or vice versa, you may not get a fair licensing fee. But if your photo fee included some initial usage rights then this method might work when licensing additional uses. This is sort of how the BUR system works. Note the BUR system doesn’t use media buy or circulation but it uses duration, location and media use.

In most cases, before you can determine a licensing fee, you need to know how the client will use the pictures. Some clients know their plans exactly and some don’t. I’ve found that most clients prefer a flat-rate licensing fee not a percentage.

For clients who don’t know all their uses, I think it can help to break it down into general categories – editorial, corporate, non-paid publicity, public relations and advertising. Corporate, non-paid publicity, public relations and advertising all come under the general category of “commercial use”. But they are not usually priced the same.

Then try to suggest a general package for editorial, corporate, non-paid publicity and public relations, if applicable. For example, a business headshot could be used for all four of those uses and a company might be considering that. So suggest a licence for that.

On the other hand, pictures of a piece of machinery might only be used in an annual report or in an internal publication, so you might offer only a corporate-use licence.

Advertising use has so many possibilities that it’s almost impossible to do a general package without more information.