Rights Control

Posted on 11/16/1997 by Jim Pickerell | Printable Version | Comments (0)

108

RIGHTS CONTROL


November 16, 1997

As the use of royalty free imagery increases, traditional stock sellers are placing

more and more emphasis on "rights control" as a way of separating their product from

royalty free.

To make this work stock agencies must have the ability to restrict usage of certain

images. They must also convince buyers that they need exclusive rights, or at least

the ability to restrict some uses of the images they purchase.

If this strategy becomes widely accepted it would provide a justification for stock

agencies to charge much higher fees than the "royalty free" companies charge for

unlimited use of the images they distribute.

On the other hand, many in the industry contend that the majority of clients, for the

vast majority of sales, don't really care about restricting use by others. If this is

the case then they may still go to the "royalty free" sources because price is still

the major factor.

There are risks to the "rights control" strategy that photographers and stock agencies

need to examine closely before they totally embrace this marketing philosophy. It may

not be in the sellers long term best interests to convince the buyers that they should

always seek restricted use.

Key Questions

Industry leaders are encouraging buyers to ask the following whenever they make a

request:

1 - I want to be sure that no one in our industry will be able to use this photo for

six months or a year. What will the additional right cost me?

2 - Have any of our competitors used the image in the last six months? If so, for what?

3 - Will any "similars" be available to our competitors during this period?

All of these points raise some troubling issues.

Amount Paid For Restricted Use

The first one is not a big problem if the client pays significantly more for the

"restriction." Often, restricted uses come into play when the planned use for an image

is a major ad campaign. We believe that in such instances the fee should be at least

two times the highest one-time usage rate for advertising. This will vary depending on

length and comprehensiveness of the restriction.

Some agents say they charge a lot more for rights controlled sales, than for one-time

non-exclusive use with no limitations on re-sale. But average usage fees don't seem to

be going up which would be the case if, in fact, they were charging more for restricted

use rights.

On the other hand, clients are beginning to ask for the same kind of "restricted use"

when they plan to use an image 1/4 page in a brochure with a limited press run. In

some cases agencies are agreeing to restrict future usage of the image for little or no

additional charge over the normal one-time use fee for these small press runs.

This is troubling. It is easy to see how the client with a small press run brochure

can't afford to pay a huge amount of money for this usage. But the photographer can't

afford to produce these images for a small one-time fee when resale is restricted for a

long period of time.

Depending on how low the fees are for these "restricted" uses, this strategy may

actually encourage photographers to supply their images to royalty free producers. The

fees for royalty free usage may be a lot lower, but at least the photographer gets a

chance at multiple sales.

Unfortunately, this situation is one of those instances where the agency, particularly

a large one, is less likely to be hurt than the photographer, particularly if the image

was a catalog image. If an agency gets a call from another client requesting use of

the image during the restricted period, chances are they will have something else in

file (probably from another photographer) that they could convince the client to buy.

If the image is a catalog image, we believe restricted rights should never be licensed

for less than a fee that would allow the photographer to recover his entire catalog

advertising costs with this particular sale. This means that if the photographer pays

$300 for catalog space and he gets 30% of the gross sale price the fee to the client

must be at least $1,000.

This price is much more than many clients are willing to pay for a small usage, but it

may actually be too low from the photographers point of view. At this rate the

photographer has received nothing to cover his cost of production of the image and he

has agreed to restrict future sales in the industry that will probably be most

interested in the image.

Industry pricing structures for traditional sales have been built around a "one-time

non-exclusive" rights model. If the prices can not be pushed up significantly for

restricted uses all we are really doing is giving the clients a lot more rights for

less money. That is exactly what the "royalty free" sellers have been doing.

Another Way

There is another way to help the client who thinks he needs restrictions, but can't

afford to pay for them. The seller can charge the client the normal rate without

restrictions, plus a small service fee, and place a note in the image record that the

first client needs to be notified before any future sale is completed.

At that point the first client is given the option of paying to keep the second client

from using the image. The fee in this instance should be the same as what the second

client would be willing to pay to use the picture.

This is a little more complex, and the seller doesn't get as much money up front, but

the seller doesn't have to give up rights for much less than they are worth just to

make the sale.

The advantages:

  • The client doesn't pay extra fees unless a potential conflict really exists.

  • The agency doesn't have to do much extra work because they would have to track

    sales of this image anyway.

  • The photographer and agency don't lose the fees from additional sales. If it

    becomes necessary to forfeit a future sale the seller is compensated by the first

    buyer.

Ask About Previous Use

Another problem can arise if clients come to believe that every stock image they

purchase must never have been used in their industry. This could result in a severe

reduction in multiple sales for any image.

Craig Aurness of Westlight says, "We find that each industry has certain kinds of

images that they tend to use frequently."

Craig has analyzed the sales history for the last five years of the fifty best selling

images at Westlight "Within any twelve month period during the entire five years,

there were repeat sales in a particular industry for every image."

He continued, "Westlight normally resists licensing any type of rights control. We

believe there should never be any restriction on reuse of a catalog image for a fee of

less than $5,000. Our research clearly indicates that if we had been restricting usage

of any of these 50 top sellers during the past five years our photographers would have

lost tens of thousands, if not hundreds of thousands, of dollars in royalties during

that period."

"Moreover, I don't feel that these actions are in any way unfair to our clients because

we have always been very open and honest with them and clearly explained that we are

selling them one-time usage rights," Craig continued.

Some agents argue that fairness requires that we tell clients when an image has been

used previously in their industry. I believe we should tell them when they ask, but

that doesn't mean we need to encourage them to ask.

It is one thing to put restrictions on future sales when the agent has carefully

considered the potential loss of future value and charged a fee commensurate with that

loss. But, in this case there may be no fee for the photographer at all. The client

has been switched from an image they thought they wanted to something else.

The photographer who paid $300 or more to place that picture in a catalog has just lost

a sale. If the client had not been urged to ask this question the photographer might

have made the sale.

The agent, on the other hand, may still be able to make the sale. He can say, "I have

another image which really does the same thing, but it didn't make the catalog and

therefore I can let you have it for _______."

Similars

The question is how is a "similar" defined? Every agency has a different definition of

what is a similar. Some say, that it is "anything the client thinks is similar."

Others say it is "anything shot on the same set using the same clothes or models."

Either of these definitions can eliminate a lot of images.

There are two considerations here.

  • Is it fair to the photographer to eliminate so many images from potential sale in

    exchange for just one usage fee? While a few agencies can track usage of similars, very

    few can. It is also mandatory to get a very high fee for the usage in exchange for

    restricting use of similars.

    As I look at business images in some of the major print catalogs I see that the

    photographer has often brought several models to an office set and then shot them in

    large groups, small groups and often alone doing different things. Often not just one

    image, but several images from this shoot are placed in various places throughout the

    catalog. They are usually not numbered sequentially in the catalog.

  • I question whether the major agencies can track the uses of all these similars. If

    someone calls and asks for the sales history of image 456 in the catalog the agency can

    look in their database and come up with the answer. But I don't know of an agency that

    has a cross-reference system that will find the sales history of all images in the file

    that were shot as part of the same general shoot as 456. We are talking about a much

    more complex database.

    To add to this complexity, there are often situations where some images are in a

    catalog and others in the general file. Usually, images in the catalogs are numbered

    differently from those in the general file. If a restriction is placed on a catalog

    image will that also effectively block all those images in the general file that have

    quite different numbers?

Photographers need to have a clear understanding of the rules for "similars" and how

their agency's files work. Can your agency find the sales history of all similars in

the file when the sales history of a particular image is requested? If they can't then

they shouldn't be offering to sell this right, or restricting the photographers ability

to make multiple sales.

Reporting Of Uses Licensed

Photographers should also request that they be provided with some information on their

sales statement whenever an exclusive or restricted use sale is made. Just an "E" or

an "R" would give the photographer some idea of his gross income that is related to

this type of sale. (Currently, for many agencies, we believe the percentage is very

small.) If the percentage grows the photographer can begin to track it. The

photographer can also determine if the fee he is getting for giving up this right is

worth the long term risk of lost sales.

If possible, it would help if the agency could define the nature of the exclusive. Is

it, "two years unlimited in all media," or "six months in the medical industry," or

"six months in the financial industry in North Carolina." Every restricted rights deal

will vary, but the photographer has a right to understand what he is being paid for

what he is giving up.

Craig Aurness sees Rights Control as definitely limiting the photographer's opportunity

for success.


Copyright © 1997 Jim Pickerell. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-251-0720, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of www.selling-stock.com, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  

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