Sell or License?

Blue Spring by Celandine, WIP detail

Blue Spring by Celandine, WIP detail

Commercial artists navigate a jungle of legal clauses when working with clients, and we lead many debates on the perils and benefits of selling vs. licensing our work. Each view carries merit, but many of the arguments seem to come from an emotional reaction against the notion of selling copyright, rather than full understanding of the facts.

But before we go any further, first let’s define what we mean by these two terms:

Selling a design: Selling a design means transferring the copyright for a certain piece of art from yourself (as the creator and automatic copyright holder for that piece) to the buyer.

Licensing a design: Licensing means you remain the owner of the artwork, but you are giving the buyer the right to use that artwork on his products, under specific terms and conditions laid out in your contract. If those conditions are negotiated well, this means that you can earn money over and over from the same design, letting different companies use it in their products.

So what’s the big deal with selling your rights? Why does it give some designers fainting spells?

Selling copyright means that the artwork is no longer yours in any way. Depending on the exact contract you sign, this could mean that:

  • You are never allowed to sell or license this piece again
  • You may not be allowed to show it in your portfolio (though most often you can negotiate this if it’s important to you)
  • Your name will probably not appear on the artwork when it’s used by the buyer – they will present it as if they had it developed in-house
  • The buyer may be able to alter the work and use any of the new variants in any way they want
  • The buyer may be able to resell the work, even as an art print or stock image
  • The buyer doesn’t owe you any royalties or additional payments, no matter how much money the artwork ends up making for them.

One famous case of an artist who would have done well to license instead of selling is Yuko Shimizu, creator of Hello Kitty. If she had received even a tiny percentage royalty for every single Hello Kitty product ever sold, she would have been able to comfortably retire on that one design alone. Unfortunately she was an in-house designer working on a salary, so she never shared the immense profit of her most famous creation.

At this point you’re bristling with indignation at the Evil Design Buyers, determined to never sell your work, ever. But before you swear an unbreakable blood oath that you will never give up your copyright, check out the other side of that equation.

  • Some industries simply do not license work – fashion largely, and home décor partly. So if these are your target industries, you will lose many potential clients by refusing to sell. In fashion in particular, designs live on the shop floors for a very short time – no more than a few months. This is an industry that burns through work quickly and is always looking for the newest trendy thing. Many fashion and home décor buyers won’t even look at artwork if it’s been shown online – the success of their product depends on the exclusivity of the artwork they use.
  • Licensing means that you’ll wait a long time before you see any money. The product needs to be made, to reach the market, and sell reasonably well before you start receiving your royalties, which are usually paid quarterly.
  • You often have no idea how much you’ll make. Royalties are usually expressed in percentages of the retail price, the wholesale price, the cost price or the profit. All of these give different amounts. (Retail price is what the product sells for in the stores. Wholesale price is the price at which the store buys it from the wholesaler – it’s usually around half of the retail price. Cost price is how much it costs to actually make the product, usually around half of the wholesale price but not necessarily. And profit is the most difficult to define – it’s what the seller will make when all expenses are deducted, but it’s difficult to find out all the things they count as expenses. Ideally you want your royalty to be expressed as a percentage of the wholesale price or the retail price.)
  • Even if you know your exact royalty per unit sold, you have no idea how many will sell.
  • Sometimes products never make it to the store shelves. In that case, your royalties are $0,00.
  • Poorly defined license terms can be as limiting for you as giving up your rights. An exclusive license without a determined termination date is pretty much the same as selling rights.
  • Licensing requires a ton of careful tracking on your part, or you can end up in big legal trouble by breaching contracts you forgot were still valid.

‘Ok, so they both suck! I’ll just sit on top of my precious pile of designs like Smaug!’ I hear you say. But trading art for money is what we do. So here’s how to navigate the rough waters.

  • Aim to sell simpler, more generic pieces, and those that don’t fit with your core brand aesthetic. Aim to license and keep the rights to intricate, detailed and original work with a high resale value and many potential product applications. If something is made in your signature style, you probably want to keep the rights to it. Then again, a buyer could always make you an offer you can’t refuse.
  • Ask for a flat licensing fee instead of selling copyright or being paid through royalties. If you’re worried you’ll miss out on extra earnings in case the product ends up being a huge seller, you can always negotiate a flat fee plus royalties, or a flat fee against royalties. (Flat fee plus royalties means, say, 300$ in advance and also 10% of the wholesale price for every unit sold. Flat fee against royalties means the same, but the royalty will start to be calculated only after the first 300$ you would have earned – you have effectively received them as an advance from your royalties).
  • Read contracts more than once. Underline the unclear parts. Google any terms you’re not sure about. Ask for clarifications on any phrases that you don’t entirely understand. Negotiate on any unfavorable point. Everything in a design contract is negotiable. The worst they can do is refuse the change. No serious buyer will ever walk out on a deal simply because you asked them to change some contract terms, so it does you no harm to try, and it can potentially bring you serious benefits.
  • Ask more experienced friends (or experts, if you can afford them) to look over the contract and give you advice on any terms to avoid or renegotiate. Check with a copyright lawyer if you can – though in my experience and that of most artists I know, usually you can manage on your own as long as you read carefully and focus on the details. Checking each contract with a copyright lawyer is by far the wisest course of action, but also by far the costliest.
  • Consider each offer individually and assess if it’s worth it. Only you know if a deal is good for you or not – it’s primarily a personal decision. The fact that you’ve heard another artist does this or that is no reason for you to do the same, unless you personally feel it is the best decision for you. Don’t stress about what other people are doing.
  • When you sell a piece, archive it out of sight. When you license a piece, add it to a spreadsheet of licensed work with all the contract details, so that if anyone else wants to license the same piece in the future you can see at a glance what terms you can and cannot agree to.
  • Negotiate negotiate negotiate!!!! This feels scary at first, but in truth most buyers have standard contracts written up to set things as much in their favor as possible – usually beyond what they objectively need. If they can meet you half-way on any particular point, they will happily do so. You’ve gotta ask, though!
  • Always remember to define a contract duration (one or two years is common), and/or a get-out clause in case something goes wrong or the company declares bankruptcy or something. Nothing sadder than a design trapped forever in an unbreakable contract with a failed company. You can ask that contracts be made to renew annually, then at every renewal you have the opportunity to renegotiate the terms if the circumstances have changed. (So you can, for instance, ask for a higher royalty on a product that has proven to be a high-volume seller, or change the terms of the license from exclusive to non-exclusive if you have other opportunities to earn income from that piece).
  • Learn from your mistakes, but don’t fret about them too much. After all, it’s only art – you can always make more! Just be careful not to end up like that one guy who actually sold the rights to his own name to one of his agents, which meant that he was no longer allowed to make or sell art as himself. Bet he wishes he’d read that contract more carefully.

Any contracting horror stories to share? Any questions about that long and dense text? Let me know in the comments below!

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