Making Money as an Artist: The Nuts and Bolts of Art Licensing

1. Welcome to Our Class!: [MUSIC] Hi, I'm Kaley Good, Lead Marketing Manager and President of Kaley Good's Goods. Today, we're going to talk about the magic of marketing. [MUSIC] We interrupt this program to bring you this important message from Jennifer Nelson Artists. Shocking news today as Jennifer Nelson Artists decides to focus on the nuts and bolts of licensing, refusing to bow down to Queen marketing. If you're an artist starting your own business or looking to brush up on business basics, this announcement is for you. Jennifer? Thank you Cathy. Traditionally, online classes about making money as an artist focus on sexy things like marketing, branding, and creating art that will license. This emergency broadcast invite you to become a little less sexy. So much less sexy, in fact, that you might be considered boring by your friends. Boring, but smart, prepared, and successful. Business savvy doesn't just come from being super awesome, it comes from knowing the basics, the very basics, in this case, the very basics of art licensing. Let's get started. We've got loads of points for this one, you guys. You're going to love it. [MUSIC] Before we dive into licensing, here's a little about us. We are Jennifer Nelson Artists. An agency representing the tippy top bestest artists in the world. Our artists come from all over the place, from Stockholm to Staffordshire, Tel-Aviv to Tennessee, and many stops in between. Our artists are fortunate to work with clients such as Fjällräven, Anthropologie, Seattle Chocolate, Vogue Italy, Godiva, and more. Much of this wouldn't be possible if we weren't well versed in art licensing. Art licensing is about more than just selling art. Knowing the nuts and bolts of licensing can have some far-reaching effects, like increasing your income by leveraging your art in many products in different places at once. Boosting professionalism with clients, pricing your artwork, negotiating, building a passive income stream. During this course, we invite you to slow down. [MUSIC] You don't have to focus on marketing at all right now. We'll cover fundamentals of art licensing, we'll clearly define the form of business, and help you understand how these agreements can simultaneously increase your art income and benefit you and your clients. We will also share our first-hand experiences, tips and tricks from an agency whose bread is pretty much buttered [LAUGHTER] by art licensing. For the class project, you'll fill out a choose your own adventure. During this course, you will create an e-mail template to help you define the terms of a license and confirm a piece of your artwork. To do this, all you need is a screen for watching us, something to write with, and if you like, a piece of your art. All of this in just six short lessons. What is licensing, licensing terms, buyouts, presentations, payment structures, and confirming a license? Our goal is for you to gain a confident negotiation skill set. This will yield mutually beneficial results for you and for your clients. I think skills that you will rely on for the rest of your career. We want you to have a fresh perspective on yourself as a business owner more than just a freelancer for hire. It's true. Art licensing can change the way you work and the way you market your art too, but we're getting ahead of ourselves. Let's talk about the class project. [MUSIC] 2. Class Project: [MUSIC] Meet Jethro the Bunny, who is also an artist. Jethro has some artwork that he's put onto social media and a potential client has reached out to inquire about licensing the piece. Smartly, Jethro writes a response, negotiating with the client to define the particular terms of the license. This is the first part of the class project. Like Jethro, you're going to create an email that you can use when starting a licensing conversation with any of your clients. This email should be one of the first things you send, especially before you talk about finances because it will help you know how to price the project. Because project pricing is not one size fits all, it should change based on several factors. One of the most important being the terms of the license. It also sets a business-like tone with your client, which can make a really big difference in how the negotiations go. The next day, Jethro receives his response from the client. Based on the response, he puts together a quote which he and the client agree upon. Here is where you will go through our choose your own adventure assignment. With this assignment, you will gain a sense not only of how licensing terms can affect pricing, but also a sample flow of client conversations. There are several potential scenarios. Feel free to do more than one. When you have landed on a scenario that results in a buyout or license, you can go on to the final part of the assignment. Then Jethro, using his confirmation template, confirms the terms of the project with the client. The client reads it and agrees. The final part of the project is filling out the confirmation template provided in the resources below. If you watched our course on the debate over working for free, you know that smart templates are one of our go-to tools when working with clients. If you didn't watch the course, these are the reasons why. They're great because they help you avoid snap decisions, clearly state what you want, and are extremely efficient. The confirmation is key. It outlines all of the information you and your client have agreed to from the term of the license to the schedule and any other important details. [MUSIC] By sending the confirmation, you are giving a client a chance to make sure you are both on the same page so you can move forward with the work. At the agency, we use confirmations for all of our projects. It is the way that we track licenses on every single piece of art. Let's get started by talking about what the heck licensing is. [MUSIC] 3. What is Licensing?: [MUSIC] Oh gosh. When I first heard about licensing, I think it was an idea of something that McDonald's would do for a Disney movie. Maybe the Little Mermaid would be showing up and a happy meal. That was my idea of what art licensing was. It never occurred to me that artwork that we see on clothing and suitcases and stationery and so forth could be used for different purposes. Before I started working at [inaudible] I didn't even know art licensing was a thing. I thought it was really cool when I found out about it, because it is such a great way to handle artwork and to make more money. Before I started working here, I was actually talking to someone about why don't you become an artist? Because she did an amazing job with art and she said, "Well, if you're an artist, you have to create the same thing over and over again and you sell a piece and then you have to recreate it and people expect one thing from you." It was really her strong reasons about not being an artist and me not knowing about this part of the industry. I was like, "Oh yeah, that stinks." Then ironically, months later I'm working here and I'm realizing that is not true. Art licensing is when you give a client permission to use your work on their product. Licensing is essentially renting a piece of art to a client. Using an art license, you create parameters around what products the client puts your art on, how long the client can use your art and where in the world the client can distribute the product. The interesting thing is, our art license can be very specific. A client might want to rent your art for pillows in Poland for three years, or they may ask to rent it for suitcases in Slovenia for 18 months, or they may be more general like renting it in perpetuity for all of stationary all over the world. The great thing about this is that it means you can have multiple licenses on the same piece of art at the same time in various parts of the world for various products. One company has for pillows, and another for suitcases, and yet another for stationary. This way, licensing increases the amount of income a single piece of your work can earn. To demonstrate the flexibility of licensing, here's Haley. [MUSIC] A company license this piece for wrapping paper, [NOISE] blank cards, journals, for soap, and pajamas. Like with all good things, there is a catch. You must keep track of those licenses. It is super bad to mistakenly license a piece of art for the same use to two different companies. It can get you into a pickle. [NOISE] We will talk more about that in the upcoming lesson when we get into collections. [MUSIC] [LAUGHTER] I was so terrified of making a mistake. I was working on my own. This probably went onto first two or three years. I printed out each piece of art that was in our portfolio and I taped them up on the wall and with a pencil, [LAUGHTER] I recorded the duration, the time, the territory, and the use of each piece along with a fee and the expiration date. I have seen Jennifer's little [LAUGHTER] in her bathroom for some reason, all the financial stuff is. She has this cute little journals with her handwriting in it. [MUSIC] Now it's time to start your project. To start, we invite you to post in the project section an image or even a description of an image that you've decided you'd like to make available for licensing. In the next steps, we'll move through the process of licensing this piece. In this lesson, we've touched briefly on what are licenses. Now let's dive deeper into licensing terms and how they work. [MUSIC] 4. Licensing Terms: [MUSIC] We have a broad idea of what licensing is. Let's look a bit closer at the terms of a license. In this lesson we will discuss use, duration, territory, and exclusivity. [MUSIC] Use is what the artwork is going to be used for. This could be a very specific thing like dog tags or a general category like pet supplies. We've included a list of uses in the Resources tab. [MUSIC] I think the coolest use for art that we've seen has been putting patterns on the wheels of a wheelchair just to make it a lot more interesting to people. The more specific the use, the higher probability for licensing it elsewhere. It really gets down to the nitty-gritty. For example, wall calendars and agendas are not really the same thing. You could license the same piece of art at the same time for each of these categories with two different clients. For us, use is a big part of the pricing process. The more uses a client wants to license, the more you can ask for in the negotiating process. [MUSIC] If you're painting, think about a variety of uses. This will help you reflect on your own artwork. Suddenly a pattern you design thinking of wallpaper could actually be used for bedding or a liner for a beautiful box of stationary. Imagining your work in a variety of applications will expand your reach into new and different markets. Cathy puts it much more complicatedly here. Uses can also be useful if you utilize them to come up with unusual and unique ideas for art. For example, say you yearn to see your unique new work on unisex clothing for youngsters. Using that yearning, you can make new work uniquely suited for said unisex clothing for youngsters. Using use can be unusually illuminating when used thusly. [MUSIC]. Because of all the possible uses a piece can be applied to at the agency, we want the artwork to appeal to the widest variety of clients possible. One thing we don't recommend artists do is create and share mockups. While it can be thrilling to place your artwork on a mockup of an apron or a mug, this may pitch and hole that piece of work. For example, an art director looking for a gorgeous floral pattern for a journal cover might pass right by that perfect repeat if it is mocked up as bedding. Also, in my opinion, mockups tend to lose a lot of the detail of your work when they're shown in the context of a product. Mockups can also take up valuable time that you could use towards making a coordinate or another piece of work. When it comes to uses, this is one way we keep the work appealing to a broad range of clients. [MUSIC] Duration is the length of time the licensed art will be in the marketplace. The duration of a license could be as little as 18 months and as long as several years. In fact, there are three items unique to the duration you should know. They are, perpetuity, life of product and the sell off period. Perpetuity means forever. A license for an image in perpetuity is one that never, ever expires. Life of product is little different. It means the client will license the image for as long as that product is in the market. With life of product, you need to reach out to the client if you want to know whether or not the license has expired. Sell off period is the time it takes for a client to sell the remaining products created past the licensing term. The agency includes a sell off period, typically six months after the license has expired, which looks like this expired. Typically, the longer the duration, the higher the fee for the license. [MUSIC] A licensing, licensing where for as a licensing. Where did Cathy go? I've got to take our seat. Licensing territory refers to the area of the world where products will be sold. Location, location, location. I don't know where that girl is. Anyway, a piece can be licensed in just one country, say Sweden or region, all of Scandinavia, or even worldwide. My fellow Americans ask not what your country can do for you, ask which you can do for your country. Cathy? Hi, what's going on? Are you okay? Yeah I'm fine. Aren't we talking about territories and licensing? Oh, we are? Yes. Sorry. Did you mention that a license can happen in a country or two countries, all the countries? I did, yes. Well then I guess there's nothing new to be said. [MUSIC] Exclusivity is another factor in licensing that you may run into. Basically, if a client wants exclusivity, this means they do not want your work to be licensed to anyone else for the same thing. At the agency, we consider every license an exclusive because it is neater. By treating all licenses like exclusive licenses, we avoid confusion. There is no way to get tripped up. Speaking of exclusives, there was that time when Cathy dated two guys at once. Oh God, who told you about that? It was a real mess. She got herself into a giant. What, did Jennifer tell you that? Oh, God. Well anyway, so what happened was that I was dating this guy Fernando, and he was super nice and he didn't mind if I dated other people. So I met Fabian and Fabian was also super nice and so I started dating him. What I didn't realize is that Fabian was not okay with me seeing other people. Well, it turned out that Fabian wanted an exclusive and he was really mad. I always think about that when we're talking about exclusives at work, just because the first client doesn't mind sharing a piece doesn't mean that the next client that comes along and wants to license that piece is okay with sharing that piece. That whole mess is why we always do exclusives. Even if we have a client who would be okay with a non-exclusive. Are Fernando and Fabian twins? Maybe,. Yeah, they're twins. Speaking of exclusivity, you never want to license different images with the same elements. Remember earlier when I said it's super bad to mistakenly license a piece of art for the same use in two different companies? This is the pickle we want you to avoid. Licensing the same piece of art in the same territory or duration to two different companies is a big mistake. This can get you into quite a pickle. [MUSIC] Similarly, and this is really serious, I'm going to get close to the camera. Similarly, you do not want to have two separate images that share the same elements. Keep track of those licenses and those collections. Oh God, so people reusing images and the same piece of art. I think this is a really important question because I have seen it coming up more and more. I think as we're moving more into this digital art fees and things, people are finding like, I can take this cat and I can put it in this other image and I don't think some artists understand that that's actually not an okay thing to do. That reusing an element of one piece into another piece and licensing them separately can actually create a big problem. It's like one of the scary things for me as an agent. We really don't want to get sued so try not to do it. For example, here is Jethro again with a beautiful piece he just licensed. Jethro decides he wants to create a new piece. If he reuses the bunny from the other piece like this, he cannot license it separately from the original piece. When images share the same element like this, we call it a collection and it is licensed as one piece. If Jethro try to license this new piece separately for the same uses duration in the same territory, he could end up in a real pickle. For those of you participating in the course project, congratulations, a brand new client called Tammy's Tea Towels is expressing interest in your artwork. Here is their email to you. Greetings. We just saw this amazing image on your site and we'd like to buy it. Thank you, Tammy. Now it's your turn to respond to Tammy. In the project section, create an email that ask the client to outline the licensing terms you've learned so far in this class. Getting clear on the details of the license. We've included a list of all these terms in an email template guide in the course resources to help you along. Then keep this as a template. You can use it in the future when a client request work from you to license. In this lesson, we've gone over a lot of steps. Pat yourself on the back for getting through it. [MUSIC] 5. Buyouts: Yes or No?: [MUSIC] Full buyout is when a piece of art gets sold outright. It's for all territories, all uses for all time. Basically the artist owns her work until it is sold outright. That means at that point, the client owns it. The client can make it into a variety of different things. Have those things out in the market forever, anyplace in the world, or they can do nothing with it and just sit on it. It is a transfer of rights. I actually encourage artists to consider buyouts in many circumstances. Wait. Why is that? There are some clients who will only work with art that they can own exclusively. Small businesses may not have staff to manage the rights, which is actually a big undertaking. Larger businesses may want to use the art like stock imagery where they can pull a design element from this piece and combine it with a design element from this other piece to make their compositions. Now that you say that, I do remember, we have some clients who only do buyouts. That's right. Buyouts can stabilize your income flow. A client that buys your work may come back again and again and add considerable amount to your income. I think they can be good. I think you're probably getting more money up front, and that can be definitely appealing to an artist. But it really depends on the piece of artwork and how much mileage you think you get out of it. [MUSIC] Guidelines for it from my point of view, really have to do with what is the potential value of it. If you paint a repeat pattern of rabbits, let's say they could be beautiful, they could be the best rabbits you've ever painted, but they are in fact a graphic. They are not a character as opposed to Jethro that Haley painted for us is a character. A character is something you want to retain the rights to because a story line could be built, a line of products, plush, books, a feature film, who knows how famous Jethro could get? But a rabbit repeat is something that is more of a flat graphic that can be treated as an application to a product and less likely to ever be a story line. I also see the opposite where a piece is docked at a home and then somebody wants to buy it outright and it's like, that's it's home. It just works out really well. You get more money than you would if you were just licensing it, and some pieces aren't going to license multiple places. I think that sometimes there's this idea that licensing will always work. You'll always license a piece multiple places. There's no guarantee that that happens. A buyout can be in a good way to make a good amount of money without having to license multiple places? I think the best advice is to consider both. Buyouts make up part of a balanced income for professional artists. Most definitely. We recommend considering which images are best suited for buyouts, and which you may want to license only. Thanks for clearing that up, Jennifer. Any time. [MUSIC] 6. Presentations: [MUSIC] It looks like Jennifer and Kathy forgot to tell you about presentations so let me fill you in. Some clients need to present art for approval internally or maybe to their client before they license it. This can be tricky because you can't license the artwork until you know whether or not the presentation has been approved. At the agency, we have two ways of dealing with presentations. One is to charge a presentation fee. The presentation date is stipulated as well as the date the client will let the agency know the results. Typically, the artist will send the HR flat and file to the client. If the artwork is selected, the nominal sum goes towards the licensing fee. If the image is not approved, the artists or agency keeps the sum to offset the potential loss of another license. The second option we offer is a non-exclusive hold. In this scenario, the client can present a low resolution version of the artwork and if a second client wants to license the art, we can still license it to them. Before we agree to a presentation with a client, we identify all the terms if the image is approved and include it in the confirmation. If the license moves forward, the use duration, territory, and fees are already established. If the presentation is approved, all we need to do is send over the high-resolution image and invoice the client. [MUSIC] 7. Payment Structures: [MUSIC] We're talking about payments structures this time. I love that [LAUGHTER] It's time to talk about one of our favorite things at the agency, getting paid [MUSIC]. While we won't go over the finer details on how to price art in this class, it's important to devote time reviewing the ways that you can be paid when licensing your art. Options typically include flat fees, incremental payments, royalties, and advances with royalties. I don't know why it just wouldn't have occurred to me before I was working here and doing all of this that there could be so many different ways that you would get paid. I know it's actually great because I think that it helps the client to figure to balance their finances and their financial planning. It's great for the artist to see multiple streams of income on one piece, and it provides a lot of flexibility. A flat fee is a onetime payment for the use of your work. Incremental payments are usually for commissions. We recommend you ask for 50 percent of the payment upfront or when you sign a contract and another twenty-five percent when sketches are delivered and then the balance when the final files are delivered. While you may not get this exact breakdown, you do want to get some financial commitment at each of these stages. I suggest at least 65 percent of the job is paid prior to your final art delivery. I remember there was one deal we were working on a book with one of the artists and the client couldn't afford that chunk up in advance. I remember you worked out this deal with them where they paid in the increments, but the increments were a little bit bigger than usual, so usually we do sign the contract, the sketches are done, the finals are done, and then you added another increment for when the book was published. That helped out the client so much and they were totally grateful for us doing that. It is a nice way to make it more realistic for a client who maybe he doesn't have enough money, but you still get paid the amount you should be paid. There's a level of trust there that you have to have and confidence in that client. But it certainly was made the difference of them doing the project or not doing the project. Definitely. Yeah, that worked out really well. Yeah, it really did. Royalties are when you get paid a percentage of money the client makes selling their product, which features your art. I know we have a little bit of a disagreement about payment structures. We never disagree [LAUGHTER]. My favorite, as you know, way to get paid, I love royalties so much. I just think it's so fun to [LAUGHTER] maybe if my income depended on it, I might feel differently. But I open the mail and when I see a royalty check come in, it's like a little surprise, like a scratch ticket or something. You just don't know what it's going to be, if the amount is going to be paid. From my perspective, it's fun, but I can't imagine being an artist and it isn't quite that much fun [LAUGHTER]. For me, it's an unknown and when it comes to money, I like to be able to plan and I like to help the artist with their long-term financial planning as best as possible. I'm on the fence about it, but you can get these big surprises which are great. Yes. I think I've seen too many $50 royalty payments to be that excited about. We've also seen just as many that are healthy and good. Yeah. Royalties are paid on a specific schedule and are a great source of passive income [MUSIC]. Don't count them before they come. I think just not to bank on any specific amount of money coming through because it really depends on market and how well the product's selling and the time of year, you don't know. I would recommend they get an advance on the royalties so that they have a guaranteed amount that they'll make. The other thing I would want an artist to know about royalties is that they take awhile to get started. It might be a year before you see a royalty on our products. An advance is when you receive a sum of the income upfront. The sum is deducted from the royalty earnings. It is not refundable. If the total earned royalties should fall short of the advanced amount, you still have earned something for your work. For example, if you receive a $250 advance on a license, you would be paid $250 at the time the agreement is signed. Once the product is in the market, your client will send earning statements. The clients will send these statements on a predetermined schedule like quarterly or bi-annually, and make any additional payments once the advanced sum has been reached. Throughout this period, whether you're paid or not, you should be receiving royalty statements detailing the sales of the product and the amount that you have made or the product has made since the last royalty payout or statement. Confirmation should outline the royalty statements schedule. If you're unsure of these dates, ask your client prior to the final agreement. Mark those dates in your calendar, check-in with your client if they are running behind. All of these payments structures, including full buyouts, make up a healthy income structure for an artist providing larger sums all at once as well as smaller amounts over time. When you are confirming a project, the payment structure is something you'll want to include [MUSIC] [LAUGHTER] For the next step in your project, it's time to complete, choose your own adventure. The adventure starts with Tammy's tea towels responding to your request for licensing details. Click the link in the resources section and follow the instructions. Feel free to do it a few times and see what different outcomes you get. Once you find an outcome that results in a deal, join us in the next lesson about confirming a job. [MUSIC] 8. Confirmations: [MUSIC] We keep mentioning conformations and I thought I'd tell you exactly what it is. To talk in a license completely, we need to have all of the licensing designations, fees, deadlines, payment schedule, and art direction documented. We can call this a conformation. The conformation states all of the terms of a project and it is shared with the client. This is what a typical conformation looks like. It has, the name and contact information of the client, the name and contact person who is responsible for payment when the high resolution file or in the case of a commission, when the sketches and finals will be sent, the price and payment schedule of the license, the designations of the license with the exclusivity, when payments are due, and any art directions. Once all the details are ironed out, we send this to the client. A document is our agreements and helps us track the usage of a piece of art. A complete confirmation tells us everything we need to know about the availability of that piece. Keeping conformations organized along with your art is vital to a healthy art licensing business. We've put some course recommendations in the resources section to help you get started with this very important task. [MUSIC] 9. Thank You!: [MUSIC] Just like that,our course is complete. We hope you've enjoyed our little crash course on the basics of licensing. It's really an important part of a successful business as an artist. Determining all of the elements to a project like the use, duration and territory will open up new vistas of possible ways to increase your income. Being aware of the pros and cons of selling your work outright can help you decide which work you're willing to sell and which pieces you want to try and license. As you've seen in our Choose Your Own Adventure project, knowing this information will help price your artwork, negotiating a better price, and potentially meeting the client where they are budget-wise. It'll also add more professionalism confidence and that extra bit of polish to your art business. If you're looking to add even more polished professionalism and confidence to your business, consider joining us in our free group for artists called Advice For Artists, where we discuss all sorts of things about being a part of the surface design and illustrating industry. You can also book an appointment with Cathy or with myself for a one-on-one consultation. To find out more about that, please visit our website [MUSIC]. Till next time. We return you to our regularly scheduled programming. While I'm waiting for those calls to come in, I like to spin around in my chair. [MUSIC]