• Are you good at negotiating?

The terms for every licensing agreement has to be negotiated. And, no two deals are exactly the same. Some manufacturers/licensees  will have their own licensing agreement that they use while others may want you to supply a licensing agreement. The terms that will need to be discussed and agreed upon are as follows:

• Whether or not a non-refundable advance against royalties will be paid at the time the contract is signed.

• Determine which images will be licensed. Include image number and name. Inserting a jpg of the image into the document is a good idea if you have the capability.

• Whether or not to allow exclusivity. For example, a manufacturer wants exclusivity on stationery products (you would also agree on exactly what stationery products) meaning you can’t license to any other manufacturer for those same products even if they only choose to use a few images. This can be a big mistake as it ties up all your other images and they are not obligated to feature a specific number of your images on their products. Most manufacturers do not require exclusivity and I would avoid it because it can limit your earning ability until the contract expires. Typically an agreement is for specific images for specific products, which frees up all your other images to be licensed to other manufacturers.

• Length of licensing agreement. Most contracts last 2-3 years.

• A period of time, usually a year, that the manufacturer is allowed to get the product to market. If that time expires and they still have not produced any products featuring your art, their licensing rights are revoked and the agreement is automatically terminated.

• How will you get paid; flat-fee or royalty. In art licensing, flat fee means a one time payment in a licensing agreement. A licensing flat-fee gives the artist all the benefits in a licensing agreement but instead of getting royalties the artist gets a one time upfront fee that can be $500 and up per SKU. (The only flat-fee licensing agreement I have ever done has been for non-profit organizations.)

Receiving royalties is usually the choice of payment for most artists (licensor) because the most revenue may potentially be made with this type of payment method. You will negotiate the specific royalty percentage to be paid to you on a quarterly basis, and the requirement that each royalty check be accompanied by a clear report of how they calculated the royalty amount.

• The royalty rate. Royalty payments are computed by multiplying the royalty rate against net sales. Royalty rates for licensing vary depending on the category of products. Below are some royalty estimates:
  • Greeting cards and gift wrap: 2% to 5%
  • Household items such as cups, sheets, towels: 3% to 8%
  • Fabrics, apparel (T-shirts, caps, decals): 2% to 10%
  • Posters and prints: 10% or more
  • Toys and dolls: 3% to 8%

• Product Samples and Approval. In most cases the manufacturer will agree to give the artist free of charge 3-6 of each product they manufacture and sell. Sample approval by the artist before the products are mass produced and sold to retailers is not always possible for some licensees because of tight scheduling in producing the products and shipping to retailers, however, many manufacturers will send pdfs or jpgs for your approval. It is important to do some research and be familiar with the manufacturer’s quality of products. By doing your research you can rest assured that you will be satisfied with what they have produced in the case where you don’t have the opportunity to approve the products before they go into production.

• An "indemnification clause" which states that the company will protect you from any lawsuits that might arise from any of their business activities which in any way relate to products featuring your art.

• Territory…where will the products be sold? The territory of the contract is usually United States or North America with additional countries listed separately. You can also agree to world-wide territory.

• Design credit. You want to make sure your name remains on the artwork. If cropping is involved in order to make the art fit the product, your name can be added in photoshop. You should insist your "©(your name)" will be printed on all publications, catalogs, brochures, promotional and sales literature. Also, all packaging and product tags should have your copyright and name.

• Below are some definite don’ts:

  • don’t let the manufacturer gain the copyright for any of your pieces of art
  • don’t let them gain the right to sub-license your art to other companies
  • don’t let them gain ownership of your original works of art as part of the licensing agreement

These are the terms that you will be negotiating with the licensee/manufacturer. However, there are many other standard legalese that need to be included into the licensing agreement. It is a good idea to have an attorney review your contract before you sign it. If you do not want to spend the money to hire an attorney to look over a contract, think again. Contracts can be complicated. Ideally the contract should benefit both artist and manufacturer. But missing terms, placement and incorrect use of words can make a big difference in the contract and ultimately benefit the licensee (manufacturer) and not the licensor (artist). Don’t risk losing revenue or even your art by failing to hire a reputable art licensing IP attorney.

•  Will you be able to promote you and your art?

Do you have the confidence to "sell yourself"? Will you be able to set up meetings and attend trade shows to meet with manufacturers? Will you be able to travel to meeting with manufacturers at their office? With today’s technology, it is possible to have online meetings using Skype in order to cut down on travel time and expense.

• Are you organized?

You will need a good and reliable system in place for tracking your licensees, contract renewals, products and images. For example, let’s say you have a licensing agreement with Company A for 2 years using image numbers 1219 – 1222 for greeting cards. You could still license your art to Company B for greeting cards but they couldn’t use images 1219-1222. (unless you signed an exclusivity agreement with Company A for greeting cards, if so, you can’t license any of your art for greeting cards other than with Company A) Then at the end of the two year contract with Company A, if they decided not to renew the contract, images 1219-1222 would then become available for licensing to other greeting card companies.

Again, I wouldn’t sign exclusivity agreements that tie up an entire product category. Contracts should be signed on a per image basis.

You will need a spreadsheet that will keep track of Who licensed Which images for What products and for How long. It is also a good idea to have a google alert one month before a contract expires in order to open up conversation with them to determine whether you are going to renew the contract or terminate it.

• Do you have an online database?

You will need to have a password protected website that shows all of your art available for licensing. (This can be done with wordpress.org) You will be able to send your licensees there to see what you have available for licensing. You can create categories, such as, Christmas, Winter, Easter, Floral, Angels, etc. to make it easier for them to find what they need. You will also want to change the password every so often. This will help you to monitor who is looking at your art. If a licensee hasn’t been to your database in a while and in the meantime, you change the password. They will have to contact you for the new password which can open up conversation. It will also keep people from "lurking" that maybe you had given permission to look through your images in the hopes of signing a licensing agreement with them.

•  Do you have time to sell and create?

Will you be able to do all the tasks  listed above and still have time to create your art? Creating art IS the most important task (and the most fun) for you to be successful and grow your business, so be realistic. If you will be working full-time (and then some) on your licensing business and you have the skills and confidence to sell and negotiate, then I say go for it!

Some artists are in the position to have their spouses join them as the business grows. Your spouse could keep all the paperwork and promoting rolling while you focus on the art. They make good travel partners as well!

As with anything else, there are ups and downs with self-representing and it may not be for you. That’s OK. There are a host of good art agencies that you can approach about representing you. In my next article, we will dive into the topic of working with an art agency.

I hope this article helped to answer some questions you may have had regarding self-representation in the art licensing industry. Comment below if you have any questions that I may have missed or want to add something from your experience.