Things To Consider When Licensing Images As RM

Recently, I had the opportunity to examine the 2013 sales of a few of Getty Images’ major contributors. They licensed images as both RM and RF. While these contributors represent a very small sample of all the people represented by Getty, I believe their experience is reasonably representative of what is happening in the entire collection. Their figures may provide some useful insights.

The overall average license fee for RM sales in 2013 was $298.71 and for RF it was $133.20. It should be noted that back in 2006 when Getty was public and provided detailed sales breakdowns on a quarterly basis the average license fee for an RM image was around $540 and the average RF fee was about $240.
 
With Rights Managed (RM) licensing the fee is established based on how the image will be used and the estimated value the customer will receive from its use. A wide variety of factors may be taken into account in each negotiation. Creator’s hope that a few customers will want to make extensive use of some of their images and these licenses will result in multi-thousand dollar fees. Occasionally fees for $15,000 to $20,000 for unlimited use of a single image for a year have been negotiated.



However, the existence of a variety of Royalty Free (RF) pricing models has changed the dynamic. With RF a flat fee based on file size delivered is charged. This fee entitles the vast majority of customers to all the uses of the image they will ever need and greatly simplifies the licensing process for the customer. There are limits that require an Extended License, and there as still a few uses that must be negotiated separately. Almost never does the fee rise above $1,000.

Getting back to the sales reports I examined, while the average fee for RM was $298.71 only 3.7% of the licenses were for fees over $1,000 and 16% for fees over $500. That leaves 84% where the gross fee to use the image was less than $500.



If we just consider the licenses under $500 over half of them were for fees under $50. Almost one-third of the licenses were for fees under $25 and 16% were for gross fees of less than $10. In a few cases the gross license fee for use of an RM image was less than $1.00. And remember the photographer’s royalty share of these fees varies, but averages around 35%.

Hoping For The Big Sale

That 3.7% of sales over $1,000 accounted for 43% of the gross RM revenue. If these few big sales were missing (and most photographers see very few sales over $1,000) the average gross fee for all the rest of the licenses was $182. With a 35% royalty share the photographer’s average royalty-per-image-licensed for just these uses would have been around $64.

RF Comparison

Many photographers would say, “Ok, maybe, I won’t get any big sales, but even without them the average license fee for the photographers you tracked was $182. That is still higher than the $133.20 for RF that only pays a 20% royalty instead of 35%. Thus the photographer would get $26.72 for each RF image licensed compared to $64 for an RM license.”

However, there is another factor to consider. These contributors had 2.46 times as many RF sales as RM. So to get a real comparative number we need to multiply $133.20 by 2.46 and that gives us $327.67 in equivalent revenue from RF sales compared to the $298.71 per RM sale.

Back in 2006 when Getty was providing detailed quarterly sales breakdowns they licensed 1.73 times as many RF images as RM. Thus, the records I examined may have had a higher percentage of RF sales than the average contributor. But today Getty has a higher percentage of RF images in its collection now than it had in 2006 and we know that an increasing number of customers tend to prefer the simplicity of RF licensing.

In this case the photographers licensing images as RF are effectively earning royalties of $65.73 compared to the $64 for RM if we leave out the over $1,000 sales. Now, whether or not the RM images generate some of the over $1,000 sales becomes hugely important.

Among the other things to consider are whether stock agencies will accept as many RM images as RF into their collections. In addition, because RF images are not normally being licensed for exclusive rights there is usually less pressure to be exclusive with one RF sales outlet than there is with RM.

Maximizing Price or Total Revenue

Many photographers license their images as RM because they want the chance of getting the highest possible price when their images are used. They say, “I worked hard to produce my images and they cost a lot of money to produce. They are great images and they are worth more than RF or Microstock prices.”

The question is not whether they are great images. There are thousands of great, well-produced images out there. The question is whether that Great Image is one that a customer with a Great budget, and extensive planned use needs for her project. The odds of those two factors coming together are very slim.

The simple fact is that for most uses today there is very little difference between RM and RF prices. And RF images tend to get used at a much higher rate than RM.

If you are a Getty contributor it may be worth the effort to count your sales for 2013 and determine the average gross license fee and royalty per image licensed. Also count the number of gross fees over $1,000. Compare your results with the numbers above. You may be surprised.

If you are represented by a smaller RM distributor that is better at holding the line on pricing your average sale may be higher, but is your volume of sales limited because customers can find the images they need at other distributors that charge much less.

If your goal is to maximize revenue from the images you produce it may be time to accept that the market has changed and re-examine the licensing strategy you should be using.