Defining Licensing Models

Posted on 9/9/2008 by Jim Pickerell | Printable Version | Comments (0)

The number of stock image licensing models, and variations within each model, are expanding as sellers explore ways to reach customers, and at the same time turn a profit. Below are basic characteristics common to each model, as well as some of the common variations that can be found.

Rights Managed (RM) – This term means the license fee is based on use. In each case the fee may be negotiated. Prices tend to be based on general categories of use, size of use in relation to the total project, circulation, and length of time. The vast majority of licenses are non-exclusive making it possible to license the same image simultaneously for many different uses. However, since customers must identify the specific intended use, all previous uses should be known and thus it is possible to negotiate exclusive rights, or the right to restrict others from future uses. Exclusive rights are not automatically granted as many buyers believe, or expect.

Rights Ready (RR) – This model, instituted by Getty Images, was designed to simplify the more complex RM pricing. It provides fixed prices for 12 different clearly defined broad categories of use. Each category has a single price for unlimited use. A few possible, but rare, uses do not fall conveniently into any of the defined categories and separate negotiations are required to determine prices for these uses.



    Modified Rights Ready (MRR) – I have recommended two major modifications to the Right Ready model. First, more categories are needed, particularly ones that address the market’s lower end. In addition, circulation needs to be taken into account when establishing a price. This process is slightly more complex for customers than RR, but much simpler than RM. It enables sellers to earn much more from traditional customers than is possible with RR, and to address an entirely new market not addressed by either RM or RR sellers.
Royalty Free (RF) – The fee for using these images is based solely on file size delivered. The price is not affected in any way by usage. Once purchased, the image may be used indefinitely for many different purposes with few restrictions, most of which involve use on products. Originally prices were fixed, non-negotiable and the same throughout the world. There was little price variation among brands. Now, prices vary greatly depending on the producer. There can also be price differences depending on the country where the image is purchased.

Subscription – Wire services have used a subscription model for years, but the prices paid have been based on the size of the publication rather than a fixed price, regardless of who the customer is. An annual fee entitled the customer to receive a daily news offering. Customers who want additional special pictures shot to their specifications, or pictures from the archive pay additional fees.



Newer stock photo subscription services base the price on the length of time the customer wants to access a collection. New images are added regularly to the collection. The number of images a customer can download is limited, but usually it is a very high number. The customer may use the images for any purpose (with few limitations) as long the subscription is in force. Once the subscription has expired continued use is no longer authorized. Some subscription services offer the opportunity to purchase images a la carte. Others do not.

RF CDs and Virtual CDs offer value similar to subscriptions. The customer gets unlimited use of lots of images for a fixed price.

Micropayment – The name is commonly used to identify a group of companies whose fees for image use are the lowest. Some images are licensed for $1.00, but a significant number are sold at somewhat higher prices. Among the various sellers there are significant price variations for the same file size. Price is based on file size, as is the case with RF. Unlike RF where unlimited use is allowed, under the standard license microstock users are limited in the number of copies they can produce. These limits vary from company to company.



Several companies offer “extended licenses” at much higher than basic fees, but for the most part these licenses are structured so they only apply to a very small segment of total uses. Pricing by credits tends to complicate the issue because the cost to purchase credits varies. A microstock selling point is that licensing is supposed to be simple, but with variations in credit prices and increasing variations in extended license rules and terms, understanding rights and rates for a particular usage is rapidly becoming much more complex than traditional RF.

This segment of the industry is growing at astronomical rates in terms of number of customers, while there is little or no growth in usage of other image licensing models. Companies in this segment of the market are very focused on building communities of sellers and buyers who share information. Initially, these companies attracted lots of amateur suppliers more interested in seeing their images used than in making money. Graphic designers also supply, as well as buy, a significant portion of the images.

Many suppliers look to microstock as a way to break into the market. Increasingly, leading microstock producers, who started as amateurs, want to earn their full time living from taking pictures and that existing usage prices make it extremely difficult to accomplish this goal. They are pressuring the sellers to raise prices and also looking for ways to get their images represented by RM and RF companies. Many supply images to Alamy.com because uploading is easy and there is no requirement to remove the images from the micropayment sites that currently represent them.


PACA DEFINITIONS

Rights-Managed Images are "rented" for a specific purpose at a specific price. Once you negotiate a fee with the agency (or photographer) for the specific use you have in mind, any other use is subject top an additional fee. The price of using a rights-managed i8mage is determined by how you want to use the picture.

Generally, the fee you will be charged is based upon the scope of your poroject -- and the permission you receive to use the picture will be limited to that which is outlined on the invoice. Rights-managed images for small uses are often less expensive than royalty-free images.

Royalty-Free Images are purchased outright, eitheras single images or on disc volumes in bulk, and can be used any way you want, with certain restrictions.

Royalty-Free Images are most often priced based upon digital file size, and have no concern with how you are actually going to use the images. The smaller the file size you purchase, the less you can do with the image, so the lower the fee.

Subscriptions for royalty-free stock photos, clipart and images. An image subscription means paying one low fee to access thousands of professional quality images ranging from clipart to photo objects to high-resolution photography. There are a variety of image subscription plans to fit the unique needs of every creative professional. Image subscriptions range from one month to one year and vary in price depending on image type and resolution.


Copyright © 2008 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 301-461-7627, 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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