The Do's and Don'ts of Art Licensing

Who Pays What and to Whom?

by Lance J. Klass
President, Porterfield's Fine Art Licensing

    Many artists go "shopping" for an art licensing agency with much the same attitude that they might go shopping for a used car.  

    They know that they're the consumer and they're naturally suspicious about what's for sale, and how much it's going to cost them.  They have a pretty good idea that Sleazy Sam's Used Cars might be run by fairly disreputable people, and that what looks good on the outside probably has something under the hood that's bound to cause trouble for them  down the road.  It might not happen right away, but they're pretty darned sure it's going to happen somewhere "down the road" after they've spent their money and it's too late to take it back to old Sam.

    They know they're going to be tricked, fooled, robbed, maybe even worse.  And that goes for licensing their art, not just for buying a used car.  After all, they may have had some experience in the business of art that didn't go all that well for them.  They probably don't understand what licensing is all about but they've heard complaints from other artists who have been sorely mistreated, so they've been told.  So they're sure they're going to have a pretty uncomfortable and expensive experience, and that if they don't watch out they're going to get in trouble.

LET'S PUT IT ALL OUT ON THE TABLE

    Now, far be it from me to give a blanket approval to everyone in the art licensing business, much less in the far-flung "business of art", but there's something so basically wrong about the viewpoint I've expressed above that I thought I'd write this article to set straight any artists who might have that viewpoint, because that viewpoint alone is going to ensure that they either do get into trouble or else go absolutely nowhere in licensing their art.  

    Let's put it all out on the table.  First of all, let's look at exactly who is licensing art.  Those engaged in licensing art to publishers and manufacturers generally include the following:

1 - individual artists who license out their own work directly to publishers and manufacturers;

2 - publishers of prints, cards and other paper products who have either purchased the copyrights to art outright over the years or employed artists who did the works for them as part of their employment (what's called "works for hire"), and who then license this art - that they own - to other publishers and manufacturers;

3 - print publishers, who as a part of their contract to publish the work of an artist on prints,  have managed to gain representation of the artist's work for licensing (see our article on "Crossover Companies");

4 - promotional companies who charge artists a flat fee, often several thousand dollars, to print "sell sheets" showing an artist's work and often carrying a photo of the artist and a biography, and send them out to a pre-selected list which supposedly contains key people who want to license art for their products; and

5 - art licensing agents and groups of agents (working together in agencies) who represent many artists for licensing.  Porterfield's belongs to this group.

THE GOOD, THE BAD, AND THE IN-BETWEEN

    If you decide to try to license your own art directly to publishers and manufacturers, God bless you and good luck to you!  Just make sure you have a good attorney who is knowledgeable about the field of art licensing and copyrights.

    If you decide to use a promotional company, check them out thoroughly with artists who have used them before you spend any money, because in this instance you are definitely the consumer.  Ask these artists not how many responses they got to the promotion, but how much money they made from the promotion - or at minimum, whether they brought in more than they spent.

    If you decide to sell all rights to your art outright (this is called an "assignment of copyright") or do work for hire for an employer, realize that you won't have any right to your art at all once you've sold it.  You won't even be able to copy it without the new owners' written permission as it will no longer belong to you.

    But if you're seeking representation by either an art licensing agency or a cross-over company or print publisher, realize that the agency or publisher is the consumer, not you.

A BUYER'S MARKET - BUT WHO IS THE BUYER?

    Bluntly put, I'd estimate that there are at least 10,000 artists in America for every licensing agent, perhaps more.  At Porterfield's we receive an average of three art submissions every single day, every day of the year, from artists seeking representation.  Do the math, and you'll see that we receive a thousand inquiries from artists a year, and that's a conservative estimate.

    Some print publishers and card companies have been known to receive as many as a hundred submissions a week, sometimes even more.  Sound preposterous?  Well, there are a whole lot of artists out there who want to gain fame or fortune with their art.  Some card companies even hire a person whose sole job it is to screen the mountain of art submissions that comes in every week.

    But there's another, more basic, reason why you're not a consumer when you're approaching an art licensing agency.  When you went to look for a used car or decided to go shopping in the mall, you were the one who intended to spend money on something that someone else owned.  But guess who is spending the money when an art licensing agency decides to take a chance on you and your art?  Who is the buyer, the consumer, the investor?  Why, it's the art licensing agency, not you.

HOW IT WORKS IN THE BUSINESS OF ART LICENSING

    Here's how it works financially.  Keep in mind throughout this discussion that art licensing agents have to make a living just like you, and just like you they have living expenses - food, rent, house payments, utilities, car, gas, insurance, putting the kids through college, saving for retirement, paying taxes, all of those good things.  Plus they've got the expense of running an office and maybe even paying for employees.

    Nobody wants to put in an hour or a day or a week or month working on something and then at the end of that time, not get paid.  So when an art licensing agent decides that it makes good economic sense to take a gamble - that's right, take a gamble - on representing you, the agent is hoping to make money to cover his or her expenses and then some.  Some call it a gamble, others call it an investment.  Whichever way you look at it, there's a good deal of risk involved.

    After all, what if your work just doesn't appeal to licensing, creative, or marketing directors at publishing houses or manufacturers?  What if the work doesn't "hit the trends", or just doesn't license for whatever reason?  Then the agent might make nothing at all.  Worse, the agent could wind up losing a bundle.

COSTS AND EXPENSES, AND MORE COSTS AND EXPENSES

    Just what are those expenses that make up an art licensing agent's investment in an artist?  Here's a brief and undeniably incomplete list:

Labor - Hopefully the agent who has decided to take a chance on you and your art is experienced in the field and has spent many years cultivating an expertise in art licensing.  His or her labor won't come cheap.  I know people in the field who do occasional consulting work and charge anywhere from $160/hour and up.  One person I work with charges $1,000/day plus expenses.  Others charge more.  That's because their time is valuable, and in demand.  

    And it takes a whole lot of hours to promote an artist, so before long the agent's investment in labor alone is going to get pretty big.  There's call after call to prospective licensees, time preparing materials, time working with the artist, time presenting art at shows and conventions and individual meetings, time doing contracts - time, time, time, money, money, money.

Overhead - There's the cost of telephone, cell phone and the calls themselves.  There's the fax, the computer, the printers, the scanners, the copiers and other electronic equipment necessary to the task.  There are office furnishings, cleaning expenses, rent, employee expenses, taxes, accountants, lawyers and tons of supplies.

Promotion - Besides all that time on emails and phone calls tracking down, inquiring, following up, negotiating, more following up, on and on, there are special promotional expenses that don't occur every day.  There are the costs of art reproduction and all the mailings of materials, whether printed, copied or digital on disk.  The postage, the FedEx costs, the packaging.  And always the labor.  And the time.

    There are very expensive booths at industry conventions, visiting other shows in distant parts of the country, meetings to present art, lunches and dinners with prospective licensees, ads that may be run in various trade magazines.  Got the idea?  And, of course, there's the  labor, and there are lots of other expenses that I haven't even listed.  So who pays for all this?

HERE'S WHO PAYS, AND IT ISN'T THE ARTIST

    In most cases, the agent or agency pays for it in the hopes of splitting any revenues with the artist on the back end.  Some agencies require an artist to put up several thousand dollars as an up-front investment in all the time and expenses the agent will go through to promote the artist.  Not that this money will equal what the agent actually spends in most cases, but it's what is called "good faith" money, a testament that the artist is "on" and committed to moving forward and to sharing the burden of costs.

    So how does the investor (that is, the agent) make any money at all? In most cases, art licensing agents only make income on the back end and most tend to split all income 50-50 with the artist.  Some will insist on a 70-30 split because they feel that's the only way they can make a living in what's inherently a very risky business.  Some will take less of a percentage.  In the book and advertising field, for instance, illustration agents can take a commission of anywhere from 15% to 40%, with 30% probably being the most common.  Illustration agents tend to make perhaps 30% in commissions but insist that their artists contribute financially to any and all promotions, and that can be a bundle.  But in art licensing, chances are it's a 50-50 split.

SO HOW MUCH WILL YOU MAKE YOUR FIRST YEAR?

    I've had artists come to me demanding to know just how much they're going to make their first year.  Agents I know always laugh when they hear this question.  The artist who asks it is saying that they haven't a clue about how the business of art licensing works and that they're demanding to know what they're going to be paid if they condescend to have themselves be represented by the agent.  In other words, they have the mistaken notion that they're the consumer and that the agent is Sneaky Sam the used-car man.

    The answer for that artist, of course, is nothing.  No income at all.  After all, no experienced agent would knowingly take on an artist who doesn't understand that it's the agent who is the buyer (investor, gambler), and that it's the artist who is presenting something that the agent might hopefully want to invest in.  

THE NAME OF THE GAME

    And there's another key factor that's expressed in that 50-50 income split that I referred to above.  The relationship between an artist and an agent is very much a partnership.  The artist needs to create and create and create art for the marketplace.  The agent needs to work hard to license that art to publishers and manufacturers in a wide range of industries.

    If either side of the partnership isn't successful, for whatever reason, then money isn't made.  And making money is what it's all about, isn't it?  In an ideal world we wouldn't worry about money, but since we're doing this business to "earn a living" and bills must be paid, it really is all about money.  This is, after all, the business of art.

    That's not to say that the job of being an agent, or an artist, isn't essentially fulfilling and enjoyable.  Either can bring a tremendous sense of fulfillment and both parties can have a lot of fun along the way.  But it's still essentially a business relationship, a partnership in spirit if not in name.  Mutual cooperation is the name of the game.

    So if you're lucky enough to find an honest, hard-working agent who is willing to invest what will literally be thousands of dollars in you and your art, who believes in you and believes in your art, consider yourself fortunate.  

    And give the relationship enough time to mature.  It generally takes companies a long time to review and decide upon art, settle on the terms of a licensing agreement, produce prototypes, put together a catalog, launch product at a major show, sell the products to retailers, receive payment, wait for the end of the quarter plus perhaps 30 days, then issue a check for royalties.  Don't expect any income the first year beyond perhaps some advance payments to be deducted by the manufacturer from future royalties.  

    Work hard at it, do your very best, follow the market and perhaps the trends as well, paint good art that people will want, and you'll be successful.  And the agent or agency that has invested in you will be able to make back some or all of its financial investment in you, and hopefully even make a profit. 
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Lance J. Klass is President of Porterfield's Fine Art Licensing, with many years of experience in the licensing field and expertise in promoting the works of artists seeking to increase their income and establish their names in the world of commercial, licensed art. 

If you're interested in having Porterfield's review your portfolio of art, be sure to email us first.

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Porterfield's Fine Art Licensing is a full-service international art licensing agency, online at www.porterfieldsfineart.com. Visit our blog for artists on The Business of Art Licensing at www.art-licensing.biz and our Art & Licensing News Page at www.artlicensing.org.

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