Negotiating - Establishing The Fee

Posted on 9/15/2008 by Jim Pickerell | Printable Version | Comments (0)

MULTIPLE SPECIFIED USES

Normally, when the buyer wants to make several different types of use of the same image such as a brochure, a postcard and a poster each use will be priced separately, and quoted as a separate item. A small discount of 10% to 20% on the total combined figure may be appropriate, if the combined usage is large.

MULTIPLE INSERTIONS



Pricing multiple insertions can be complex. It is important to take into account that the price for the first insertion in each unique publication should be higher than additional insertions in the same publication. For instance the following two scenarios should be priced very differently:

(1) Use of an image in a print ad for 5 insertions in Time Magazine. In this case, each additional insertion is going to be seen by much the same audience - Time subscribers - as opposed to a whole new audience with each insertion. Also, your client is probably getting a discount on ad space by buying 5 insertions in the same publication.



    Pricing: We would charge the full space rate for the first insertion and price each additional insertion (4 in this example) at 10% to 15% of the first insertion. (The greater the number of total insertions the lower the additional percentage should be with 10% being for anything over 25 insertions.)
(2) Use of an image in a print ad where the ad is printed one time in each of five magazines which are Time Magazine, Business Week, Newsweek, Field and Stream and Vanity Fair. While there are still five total insertions, the client is reaching a much larger and more diverse audience than was the case when the ad was used five times in the same magazine. In addition, your client will not get any breaks on ad space since they are only buying one insertion in each publication.

    Pricing: We would charge the full space rate for the first insertion and price each additional insertion (4 in this example) at 35% to 50% each. Base the first insertion rate on either the circulation of the largest publication (if they are all similar in size), or the average circulation (if they vary greatly).
Based on the above parameters, we would use a simple chart (shown on the following page) to price multiple insertions in multiple publications. In a different example we will make the following assumptions: an image 1/4 page in a print ad with 2 insertions in PUB 1 (circulation 100, 000), 3 insertions in PUB2 (circ. 2 million), 5 insertions in PUB3 (circ. 20,000), and 1 insertion in PUB4 (circ. 650,000).

  Insert 1 Insert 2 Insert 3 Insert 4 Insert 5
PUB 1 770 116      
PUB 2 385 116 116    
PUB 3 385 116 116 116 116
PUB 4 385        



    Average circulation 692,500 Total for all insertions = $2737
    *Additional insertion (after the first) in all publications should be 10% to 15% of the full price insertion. That is still a great deal! You can also argue that they are getting a total of 11 insertions for less than $250 each.
MULTIPLE UNSPECIFIED USES

Some buyers request an image for an initial usage, and then want to be free to use the image in a variety of other, unspecified ways. This is always dangerous for the seller, but sometimes necessary.

In such cases, keep the license as short as possible and avoid buyouts. The license can be renewed after the initial term, but the owner of the images should have the right to reopen negotiations, review how much use has actually been made, and renegotiate a new fee.
    6 months 2 times the highest possible advertising price
    12 months 3 times the highest possible advertising price
    18 months 4 times the highest possible advertising price
Multi-year prices should increase on a proportional basis if the use continues at the same level. (In this case there are no limitations on the seller to license usages to other buyers during the same period.)

EXCLUSIVES

A client may want to make sure that the image they are licensing will not be used by one of their competitors while it appears in their literature or ads. If so, they would need exclusive rights which would mean that you would have to refuse a sale of that image to anyone (sometimes just in a particular industry) for a period of time. This is not necessarily a total buyout, but the price will be higher to account for possible lost sales you may incur.

While the premise on which the stock photo industry is built is the need for one-time, non-exclusive rights to photos, most sellers are willing to negotiate an exclusive rights deal if the buyer is willing to cover the anticipated loss of income as a result of not being able to make the image available to other buyers.

BUYOUT

A buyout means that the client will have the ability to use the image in anyway they choose (unlimited use) in perpetuity (forever), and we are not able to sell the image to any other client ever again (exclusive).

Sellers are regularly getting $15,000 to $20,000 for unlimited use of an image in advertising for one year. In perpetuity is forever so it is worth a lot more. On the other hand major advertising clients who are planning major long range use o f an image that will become identified with their product may need these rights.

In most cases, the needs of the client can be met with unlimited and exclusive usage for a defined period. Buyouts are usually unnecessary. See page 300 for more information on buyouts.

MULTIPLE IMAGES IN ONE SALE

When you sell several pictures at one time, resist the tendency to average out the cost. Price each image and each usage differently. The bottom line may be the same but it is important to constantly reinforce the principle that different images have different values. Consider the long-range effect if the client comes to believe that the quarter page price is the same for all images, no matter how difficult they were to produce, or how unique they happen to be.

You establish a "commodity price" mentality for your images when you price the following at the same level for a given size and circulations: an average available-light street scene, a group of model-released business executives, an elaborate special effects shot that required days to set up in the studio, and a foreshortened shot that required a 600mm lens to produce.

Take time to explain. Take time to itemize the invoice. A few minutes of client education now may result in additional dollars in the future. Remember, a negotiation is not just for this image. It is part of a long process of educating clients. It is establishing policies and principles for the future.

MINIMUM PRICE

We used to recommend a minimum charge of at least $200 for any rights-managed use of a single photo in the smallest size. Given the cost of being in business, and the likely number of sales per year of the most efficient operation, there are few, if any, individuals or organizations that can make enough to pay for their time invested if they do not charge at least $200 for a single usage. Prices for specific usages range up from this point.

That recommendation seems ridiculous today because many agencies are making a majority of their sales for prices below – and often significantly below – this number. The photographer only gets a percentage (often less than 50%) of what the agency gets for such a sale. For most photographers only a very small percentage of the sales their agencies make for them are for fees of $200 or higher.

Lower fees might be acceptable if the number of units being licensed was increasing dramatically. But, that’s not what is happening in the rights-managed arena. For most the number of sales is declining due to volume and competition. So how can the photographer charge $200 if the agencies are charging so much less?

In some cases the customer will really need the image and the prices we have quoted are fair even if they seem high by some standards. The best position for the photographer to take is that he can’t be responsible for what others charge and the way they operate their businesses, but that based on the number of images he can license in a year, and his costs of doing business, charging these fees are the only way he can stay in business.

RE-USE AND REVISION

When publishers want to re-use a picture several years after the original use, they often send the photographer a notice asking that they invoice for 75% of the original fee. In fact, it should be 75% of the current fee, which will probably be somewhat higher. The 75% is for one additional press run of the same size or an additional one-year of usage. If the situation is for multi-years each additional year should be 75% of the first year fee.

CHECKLISTS: ESTABLISHING PRICE

Reasons for Asking More

General Factors With stock photography, the client knows exactly what he or she is buying and that it is immediately available. This security and immediacy has value and should never be ignored. With assignment photography, no matter how skilled the professional, there is always an element of risk. Thus, the more difficult it was to execute the photo, the greater the value. If the client were to make an assignment to reproduce this photo, he would run a risk of getting unsatisfactory results. Your estimate of the degree of that risk is an important factor in establishing your price.

One great advantage photographers have in pricing their work is its uniqueness. Even when we sell frequently to the same organization, it is almost always a different image or a different usage. Photographs are not cans of corn each has its own unique value.

Image-related factors - Possible premiums for certain usages:
Photos requiring basic auxiliary lighting techniques (not available light) 0.1
Situations requiring more than two lights 0.2
Photos with more than four models who have signed releases 0.3
Aerials (disk, expense and difficulty factor) 0.2
Taken with lens long than 300mm (Have you priced a long lens lately?) 10% to 20%
Wildlife in natural environment 0.2
Special effects in studio (depending on effect) 20% to 50%
Unusual travel expenses 10% to 50%
Pictures for which photographer risked being killed or wounded 0.5
Exclusive, one-of-a-kind photo that cannot be duplicated variable

These are only minimums or ranges. Higher percentages are certainly justified with many images. There may also be other aspects about your particular work for which premiums are applicable. With many images there are various other factors that make them unique. Examine those factors explain them in your negotiations with the client and charge for them. Explain to the client that you have less distinctive images available at lower rates, if the one they want is beyond their budget. Take some time and carefully consider the justifications you might give to a client, if asked, for charging certain premiums for categories of images in your file.

Then when someone wants to purchase rights to those images you will be prepared with an effective, well-thought-out response. Do not wait to think about this until someone calls requesting a price!

Service Related Premiums
  • Extensive research - (Service that was not paid for with a research fee, and was a broad or abstract request across several subject areas.)
  • Rush Service - (Inefficiency results when you break away from your normal routine to deal with a crisis project.)
Client Related Factors

The following factors are affected by the specific client, and may be cause for charging some clients more than others for similar usage:
  • Does the photo have special characteristics that set it apart from all other possible photos in fulfilling the needs of this particular project? (If it is easy to substitute another photo, this is not a factor.)
  • Does the photo have important characteristics that might be duplicated, but not in the time allotted? If it is a winter scene and the client is asking for it in the middle of summer, he cannot shoot it now.
  • How much has this client paid in the past for similar projects?
  • How large or small is the client' s business, and what is its standing (prestige) in the industry?
  • What is the holding time for images? (Based on past history or stated intent.)
  • What is the importance of this project to the client's overall marketing effort, and how crucial is your particular photo to the success or failure of this effort?
  • Is the photo extremely important to the client? (You may never hear the following comments, but if you do adjust the price accordingly.)
      A - " The chairman of the board (or ot her V.LP.) likes your picture!"
      B - " The chairman of the board definitely wants to use your picture!"
      C - " The chairman of the board said we had to get your picture! "
Keep in mind that the value of a stock image is directly related to how it serves the customer's needs. The emotion the photographer feels for the image has little to do with its market value.

Reasons for Asking Less

There are sometimes reasons for charging less than the Base Number for usage. They include:
  • The buyer is purchasing many pictures, or does a volume business with you over a period of time. Seldom should you reduce the price on the first sale just on the promise of future volume, but once volume is established, it is legitimate for the client to expect to receive a discount.
  • If the picture is being used as a small segment of a cover. Most of the rates for cover use listed in this book assume that the image is the only image on the cover. These rates can be lowered if the image appears on the cover with other images, because your image is no longer holding the entire impact of the cover. The impact the client is trying to achieve is being shared by more than one image. This theory also may apply to posters, point-of-purchase displays and packaging. Unfortunately, there is no standard formula for calculating any possible discount. We recommend that you try very hard to get a very clear understanding of how large your image will appear in relation to the other images (get a faxed comp or layout, if possible) so you can judge just how impact your image has in relation to the others.
  • If the photo was produced on a previous assignment for this particular client and the production expenses were totally covered.
  • If a new picture could be shot for less than the price calculated. This happens occasionally, particularly if the client is using several images that could easily be shot at one location at one time. Always take this into consideration and price the stock photos accordingly, even if they appear to be priced too low on an individual basis.
  • If there is significant assignment work as part of the package.
  • If the image is one where there are hundreds of acceptable options available from other sources (an image of the U.S. Capitol, for example.)
  • If the usage will provide you with some valuable public relations or promotional benefit. Such situations are rare, and buyers have a tendency to believe there is much more public relations value in having one' s photos in their publication than there actually is. Nonetheless, there are occasions when this works and the seller should be open to such possibilities.
  • If tearsheets of the piece would be valuable for self-promotion. Seldom are such tearsheets important enough to justify charging less than the normal rate, but there are exceptions.
  • If the client will assist you in getting access to subjects that would be valuable stock.
  • Re-use or revision.
All these discount factors will have greater influence when the total usage is large rather than when the usage is for a single image at the minimum size.


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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