Royalty-Free Licensing

The use of this option is pretty much confided to the sale of digital image formats. "Royalty-free" means that the buyer pays once for an image, and can use that image for multiple purposes over an unlimited period of time. About the only thing the buyer cannot do is re-sell that image (or use it in a manner that may be damaging to the reputation of the artist).

The same image can be sold many times to numerous different buyers, and each buyer must be charged the same price for that image.

The price of a royalty free image is normally based on the file size; bigger images cost more, since larger files can be put to more uses (e.g. printed media). To establish a unit price, all you need to do is look at what the main "stock photo" type outlets are charging. The royalty-free market is extremely saturated; so don't expect to get much more than a few pennies for each sale.

The advantage of Royalty-free licensing is that it is simple: there is no need to monitor usage. The first disadvantage is that once an image has been sold on a royalty-free basis, it cannot be sold under any other license arrangements. The second disadvantage is that, unless you can sell in high volumes, you will make very little money.

Traditional Usage License

A traditional usage license sets limits on the number of times an image can be used, the duration of use, and types of use. For example, you might sell an image for use in a 2011 calendar, printed in a specified volume, and to be sold only in a particular country.

Exclusivity is an issue that should always be negotiated. Obviously, offering exclusivity is justification for seeking a higher price, but sometimes the buyer may not want or need exclusive use. Whatever is agreed, images sold under the terms of a Traditional Usage License must not also be made available on a royalty-free basis (although they can be the subject of multiple licenses where there is no exclusivity).

The terms of usage of an image will provide a basis for calculation of the purchase price. For example, if an image is going to be used to illustrate a run of 500 posters, which will generate a net profit of £2000, then the buyer and seller need to negotiate what proportion of that anticipated profit is suitable payment to the artist.

The disadvantage of traditional usage licenses is that both buyers and sellers must adhere to, and monitor the terms of the license agreement, since these determine the value placed on the image. A big advantage of this type of licensing is that the terms can be very flexible (number of impressions, duration or use, sales area, etc).

Royalties

Royalties can be viewed as a variation on Traditional Usage Licensing, but based on actual rather than intended usage. Taking our "poster" example, a Royalties agreement would specify a unit cost for each of the posters sold, rather than a fixed fee.

The disadvantage of a Royalties agreement is that image usage needs to be monitored, and the practicalities are that the seller must trust the buyer to do this. The advantage to the buyer can be that they only pay for what they use (with no upper limit). Conversely, the seller cannot anticipate what profit they will realise, and so must take a calculated risk.

Sale of Copyright

The point to appreciate here is that, when an artist sells an original image (i.e. the actual painting or drawing), the artist normally retains the copyright. So, the artist can sell a painting, but retain scanned images, and sell (or license) these. The buyer on the other hand, should not reproduce the image; they may own the physical image but not the right to make copies of it.

The ultimate form of image sale is therefore assignation of the copyright to another. Essentially, the buyer becomes the owner of the image, and is at liberty to do whatever they like with that image. The seller relinquishes their right to make copies of that image, and the buyer gains this right.

Determining the price for outright sale of copyright can be a real shot in the dark. There are two ways to look at the issue. The first is to assess what "profit" the buyer will derive, and seek a proportion of that. However, the buyer may not choose to disclose, or even have this information at the time of sale. The other approach is to estimate the value of opportunities lost by the seller. If you have licensing agreements in place, these will give some clues as to the value of the image. If you have nothing of this sort, then there is very little basis for placing a value on the image, over and above the physical sale of the picture.

Personally, I would say that sale of copyright should be a minimum of double the sale price of the artwork. Anything more is down to the negotiation skills of the Artist.

Things to remember

When selling the use of, or rights to an image, always put the deal in writing. Clearly record what you are selling, to whom, for how long, and what you understand they are going to do with that image (and anything you do not want them to do with that image).

Be sure to state your moral rights in any agreement of sale. Even when selling copyright, the Artist still legally retains certain "moral rights" (e.g. the right to be identified as the artist, the right to object to derogatory treatment of the work which may be prejudicial to the honor or reputation of the artist).

When negotiation prices, be reasonable, and be prepared to explain how or why you have placed a particular value on your artwork. Don't be greedy, and don't overlook the worth of "exposure" and kudos that can come from the reproduction of your images.

Good luck!