Royalty - A Percentage of What?

Posted on 3/27/2001 by Jim Pickerell | Printable Version | Comments (0)



March 27, 2001

In the internet environment a new type of sub-agent is moving to take a share of the gross fee,
thus further reducing the photographer's percentage. These organizations provide a Technology
Service in exchange for a percentage of sales, not a fixed fee. Given their structure it is
possible there may be more than one in any transaction.

Each step in the chain may provide an important marketing service and/or access to a certain body
of users which the traditional agent or prime technology provider may not be able to offer. Each
will expect to be compensated for their service in some way.

A couple years ago it was believed that many Technology Service Providers (TSP's) would supply
"free services" and be compensated by selling banner ads, or something else. Those receiving the
service were supposed to receive it at no cost. That model seems to be an "endangered species"
and service providers are now saying, "If we are going to provide you with access to customers,
we want you to pay."

Random Eye is a classic example. They have developed a service that most online sellers of
photography are likely to need. It is uncertain what percentage of gross sales they will
eventually generate. However they will give image sellers access to certain customers, that the
seller may be unable to reach any other way because that customer has made a decision to use
Random Eye.

This is unlikely to be the only TSP that stock agencies or prime technology providers will use,
but it may be a marketing option that few can afford to ignore. Random Eye wants 10% of the fees
collected when a customer uses their service to find an image they want to use.

Who Pays This Cost?

This may well be an entirely legitimate and necessary service, but who pays the cost?
Photographers need to carefully examine their contracts to determine how such service fees will
be paid. Workbook, Solus, Stock Media and most stock agencies have clauses in their contracts
that say they calculate the royalty based on the amount they "actually receive," or the "net
license fee," minus certain specified fees. The Random Eye type fee will come off the top of what
the client pays before the photographer's royalty is calculated.

If your prime agent, or TSP, is only taking something between 10% and 30% percent of the sale, it
is hard to see how they will be able to eat the entire 10% charged by an organization like Random
Eye. On the other hand, if the agency is normally taking 60% or 70% of gross sales they should be
able to cover this 10% as part of their marketing costs.

Consider what would happen if Alamy decided to use Random Eye. Alamy is only taking 10%. If they
give it all to Random Eye they get 0% for the services they are providing. Obviously that's
impossible. Alamy tells photographers they will not use any other services to aid in marketing
the images. That may be short sighted on Alamy's part, and not in the photographer's best
interest if a significant number of buyers, for very good reasons, choose to do most of their
image searching through a service like Random Eye.

Photographers still need Alamy, Workbook, Solus, etc. to build and manage the database. Random
Eye doesn't do that type of thing. But Random Eye brings in customers so their service may also
be necessary.

For most photographers the difference between getting 90% and 81% of the gross sale is probably
not a big deal. More than likely they would prefer to give up that extra 9% on some of their
sales (the ones Alamy can't get directly) rather than lose the sale entirely. This is certainly
reasonable considering the separate services being provided by both Alamy and Random Eye.

What Is The True Gross Sale?

The problem is not that a few additional percentage points are deducted. Rather it is that the
photographer has no idea what the true gross selling price was for the usage.

The worry is not so much that someone is taking 10%, but that a series of cuts could knock 30%,
40% or 50% off the top before the photographer's royalty is calculated -- and the photographer
might not be aware that this is happening. Photographers need to be careful not to hamstring
their agencies. At the same time they need to have a clear understanding of what the breakdowns
really are.

Given the language in most of these contracts, the prime agency paying the photographer could
work with a variety of sub-agencies and service providers at varying percentages and never have
to report anything about these transactions to the photographer except the prime agency's "net
license fee." These percentages could be 30%, 40%, 50% -- anything the prime agency decides to
negotiate -- and there is no requirement to inform the photographer.

The solution is simple and costs the prime agency nothing. The agency can report to the
photographer the "Gross Fee" (Converted to dollars) that is paid by the customer who uses the
image. If there are research fees, digital file delivery fees, or other fees that someone is
allowed to take before the "Gross Fee" is calculated, these should all be disclosed. The "Gross
Fee" should include everything the customer paid and it should be reported in addition to the
"Net License Fee" on which the royalty is calculated. That way the photographer knows when other
fees are being deducted from the "Gross Fee."

Photographers should push their agencies and TSP's to supply this type of information. They
should also recognize that the Internet is not cutting out the middleman, but in may ways
creating new and different ones.

Copyright © 2001 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, 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:  


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