In the past, we’ve talked about several methods for finding companies that would be the most likely to license your art for us on their products. The next step is contacting those companies. Licensing decision-makers, especially those working in large companies, are inundated with people looking to speak with them about potential opportunities, so always think about how you can break through all that noise, and stand out. The most effective approach is to have people you may already know, introduce you. In the early stages, you may not have all the connections you need as it takes time to build up the industry, but hopefully, you have been networking, and at this point, you are developing a good group of contacts. It is not necessary to know these people well. You would be surprised at how willing people are to make introductions. A great tool for connecting to decision-makers is LinkedIn. Adding people as LinkedIn colleagues will give you access to their list of contacts. The more contacts you have on LinkedIn, the more likely it is that one of your contacts will have a “connection” to someone you need to meet. In most cases, you need to do no more than ask for an online introduction. For a more detailed discussion on using LinkedIn for networking, see Three Steps For Using Linkedin To Grow Your Art Business. As well, there are a lot of resources on the web.
Regardless of whether you are being introduced or are cold calling a decision-maker, it will always boil down to you sending you work. After all, talking with someone may help build a relationship, but first and foremost, it is about the creative work you present. In branding, ranges of products usually have similar themes, so we as consumers know they are all from the same company, and same product areas. So decision-makers think about how your art will play across brands. Providing multiple themes with complimentary images that can be used across a range of products is ideal. So whether you are a fine artist, illustrator, or graphic designer, it’s important that you create your work in sets. So if you are submitting past work, but only have one of each design, it pays to develop so new work that follows the theme. You can offer sets of 4, 5, or 10 in each theme.
Be trendsetters, not trend followers. But don’t let them rule your creative decisions. This is also the time that you can go back into your archives and look at older work that you like but never made it into your final repertoire. A member of the Graphics Art Guild put it this way, “A character you drew as a child may have been trying to get itself on product for years—it’s just waiting for you to learn what you need to know to make the best licensing deal for yourself. If you’re into character-driven art, develop the character profiles and a point of view for your characters as a whole and individually. Create a world that they live in and a series of plots they can play out to generate an audience fan base and convince a Licensee that they have marketing and product potential. If you see your work as patterns, illustrations, or photographs, your art tells a visual story of the product. Develop lines along with thematic buying or sending occasions that drive the sale of the products. Is a line driven by style, character, print, pattern, type, motifs, or icons of the genre —winter holiday, floral, edgy, kiddo, bright, monochromatic, color, B&W, realistic, landscape, graphic, illustrative, portraits, scenes, etc.? What drives the look? Who is the audience fan base? What is their demographic? What products do they buy? And, yes, your stuff can be on that stuff.”
Also, make sure that you have a website that shows off your licensing styles. You never know whether a decision-maker will pass your name on to someone else. You want people to be able to find your work easily. Maybe “licensing” is merely a menu item or if possible, create a website just for licensing. It will give you the opportunity to focus your message and let prospective licensees know that you are serious about licensing. Use of ‘look books’ for clients to download directly from your website. They are also very shareable on social media.
Use social media
Social media provides an excellent way to connect to the people who can make business opportunities happen. Follow prospective companies and their key employees on Twitter, especially the decision-makers in charge of licensing or the product management team. You’ll learn a lot about what is going on in the companies as well as key personal information. You may find common experiences that will allow you to connect with these people on a personal level. Find fellow licensors on Facebook, Twitter, Instagram, or even eBay. Along with those people who possibly know key people you need to meet, you can also avoid pitfalls if you learn about them first from fellow licensors. Tom Robinson, director of Handsome Frank Illustration Agency, has said that “Buyers often use Pinterest or Google images to find new and interesting work that’s relevant to their target audience.” So try to get people to post your work, whenever possible.
Personalize Your Communications
Hopefully, your connection to the licensing agent or other decision-maker comes with or after, an introduction. Either way, you will be sending a letter or email. The letter should be short; three to five paragraphs at most. Anything longer won’t be read. Start the letter by mentioning who referred you to them, and thank them for taking the time to look at your work. Say something about the products the manufacturer produces so that they know you have done your research. It will let the person know you are someone to be taken seriously. Transition into a discussion about why you think your art is right for them. For instance, you could focus on the fact that there is a trend toward flat, minimalist designs but that the industry has yet to embrace it. Offer the idea that the company could be the first one to use those designs, which could give them a competitive advantage over their competitors. As noted earlier, it is a good idea to take an online marketing class. Provide your website info and some samples of your work. Put the letter on your letterhead. (On a side note: entering into a licensing agreement should be done by your company not you personally, if possible).
Just writing one letter to a manufacturer is usually not enough. You must continue to write letters showcasing different and new art. So end each letter by stating that you will contact them again, either by phone, by e-mail, or by snail mail. Also tell the buyer when they will hear from you again, in a week, two weeks, a month, and then make sure you do it. Follow-up is very important as is being reliable. I recommend sending hard copies of your work, it is much more impactful than email. If they do not respond, try again in a week, and maybe a week after that. Then try again in 2 weeks, and monthly thereafter. Unfortunately, people are busy and won’t often take the time to respond. But the key is to be in their minds when an opportunity arises. However, bothering them isn’t going to help. If you rub them the wrong way, they probably won’t hire you, regardless of how amazing your work may be.
Hiring a Licensing Agent
Like just about anything, the more time and effort you put into the process, the more success you are likely to have. But not everyone has the time. For those people, hiring a licensing agent may be more productive and lucrative. An agent will identify potential licensees; representing represent you at trade shows, present proposals to potential licensees, and negotiate license agreements. Some agents may also help you develop and position your work so it will be a suitable and attractive candidate for licensing. These people have experience, so they know how to write the proposals and are already likely to be attending appropriate tradeshows for other clients. Just make sure that your work is unique in the agent’s roster of clients. You don’t want the agent putting you on the back burner in favor of another artist. Agents are usually paid on commission so they only get paid if they sell your work, but if they can sell someone else work to that buyer instead of yours, then they don’t lose anything. However, if they have no alternates because your work is unique in their roster, it will make them work harder for you.
The Agency Agreement
Always get a lawyer to review any agreement before you sign and ask anyone you know with experience in these matters to take a look at the terms as well. You don’t want to sign anything that binds you too heavily if the agent is not getting you any work. If you can’t fire them without penalties, you may be stuck with them despite their poor performance. Below are a few areas of the agreement that you deserve special attention.
Scope of the Agency
This section defines what work the agent will be authorized to present, as well as the product lines and territories covered. Some work may have the potential for publishing, software, film, or other uses that are not typically licensing merchandise categories. You may want to have another agent who specializes in those areas, or you might have one agent for the east coast and west coast depending up their reach.
Other than the areas mentioned above, most agents would be exclusive within their defined scope. This means that the agent is the only agent that can represent the licensor in those areas. In most cases, an exclusive agency means that the agent is entitled to a commission from any license entered into during the term of the relationship, regardless of whether the license resulted from the efforts of the agent, you, or some third party. That is because those licenses may come as an indirect result of the agent’s performance, such as helping develop your portfolio, which may have been instrumental in securing the license.
Ownership and Control
Make sure that nothing in the agreement transfers ownership to the agent. You should retain the ownership and copyrights and should have final approval over all license terms. Don’t give the agent the general signing authority on your behalf. You should retain final approval rights over all artwork and product prototypes and samples. Additional, the agent should also not be a party to any license agreements you may enter into, other than as a designated party to receive communications and payments on your behalf.
Commissions and Expenses
Commissions for the agent are usually between 30% to 40% of gross licensing revenue but can run as high as 50%, especially before you have a track record. Some agents may require you to pay certain expenses incurred such as trade show costs, costs of creating promotional packages, and travel costs. Make sure that any expense over a pre-agreed upon amount is approved by you before incurred or put a monthly cap on payments. You don’t want to get surprised by high invoices at the end of the month. Where possible, list any expenses you both know will be paid by you, and those that will not, in the agreement.
Most agents require a minimum initial term of two or even three years since it often takes that long to develop your work and make the necessary contacts and get into your stride. No agent wants to put in all the work, and then get cut off after you start making the big bucks. However, you may be able to get the right to terminate the agreement earlier if certain performance benchmarks, such as a minimum amount of royalty income or a minimum number of new licenses, are not reached by a specific date.
Termination of Agreement
Termination is one of the most important clauses. You don’t want to be stuck with someone who is not pulling his or her weight. However, an agent cannot guarantee success, there are too many things out of their control, such as the economy, for example. Most will be reluctant to early termination clauses, and if you do not have a track record of success, you may not have the power to overcome this point. However, termination should always be available for breaches of the agreement, such as not paying you your royalties or signing agreements without your final approval.
As mentioned, your success may be due to the agent’s efforts and when the agreement is up, the agent may feel that for a limited time, they should be compensated. Of course, you do not want to pay someone when they are not working on your behalf. One middle-ground position is that the agent can continue to receive commissions on licenses entered into during the term of the agreement, including renewals or extensions. Also included would be licenses that the agent was negotiating on your behalf before the termination, but those negotiations should have some milestones, such as a draft agreement or some documentation that show the likelihood that the art will be licensed. After all, a discussion with a buyer that you initiated a week prior to the termination should not be included. You may also want to specify that commissions on renewals, extensions, or modifications will be at a reduced rate, and only for those directly related to the licensee for that particular property. So, if you get a license from another buyer in the same company, it will not be included in the agent’s post-termination fee. As well, the agent’s commission rate should decline over time so that you are not indebted to the agent forever. For example, 40% for the first year after termination, 30% for the second year, and 20% thereafter; ending after 3 or 4 years.
Artists are usually paid through royalties, depending upon the type or licensed product. If a royalty is to be paid, be sure it is based upon gross sales, not the net receipts (profit). Net sales, which are the gross sales minus expenses, can often be an area of contention because what companies choose to consider expenses can often make the profit negligible. Nonetheless, the typical deal is to give the artist 5 to 12 ½ percent of the net wholesale price received by the manufacturer from its distributors. However, certain types of products can go higher. For example, typical royalty rates for prints and posters are around 10-15% whereas licensed gadget cases or similar can be around 4-7%. These rates are all negotiable; although it is a lot easier to negotiate once you have a track record.
To find out what others are being paid, connect with artists who are experienced. Check out LinkedIn groups. Group members tend to be very vocal about their royalty percentages. Ask the members what the average royalty rates are, for a particular product type and for which companies. Another important factor in determining rates is the expected sales volume. The higher the volume, the lower the royalty: If the products will be sold in mass-market retailers and in mass quantity, the royalty rate will be lower because the retailers, especially companies like Wal-Mart and Costco, demand lower prices, which means less profit for the manufacturer. On the other hand, smaller shops with higher margins will have higher royalties. For example, A t-shirt manufacturer that sells in mass-market stores (Wal-Mart, Target, chain stores) might pay 4-6% royalties. A t-shirt manufacturer that sells in smaller channels such as core skateboard shops might pay 6-10% royalties. However, with much less product being sold, your overall royalty payments will be smaller. It all depends on how much the manufacturer gets squeezed and another reason why receiving gross profit percentage as opposed to the net is more attractive.
A good resource for royalty rates by manufacturer and product line is the Graphic Artists Guild Handbook: Pricing & Ethical Guidelines (the Handbook). According to the handbook, a product’s wholesale price multiplied by the quantity produced in the first production run will give you the information needed to help you determine your fair advance and potential royalty earnings. For example, the math equation for a product that sells for $10.00 wholesale with a first production run of 1000 units would be $10.00 x 1,000 units = $10,000 in total wholesale sales. A 10% royalty would give you $1,000 if the licensee sells only the initial 1,000 units. A fair advance for this equation would be $500-$1,000. Of course, any additional production that runs beyond the first one will increase the total royalties earned over time.
Art licensing today is a lucrative industry that is a great way to supplement your art income. Of course, like most industries, the internet has put pressure n the old ways of doing things and those who can embrace networking and social media will be the ones that can stay in the game, but those that can efficiently target the right people and then find a unique way to attract their attention, will be the most successful. Do your homework; find a good agent if you need one, but don’t become a mere cog in the process, where pricing pressures make your efforts worth very little. Companies will often try to take advantage of your lack of experience. The more you know about the market, and the smarter you are about entering the market, the fewer companies will be able to take advantage of you. Instead, you will be poised to take advantage of them.
If you have any questions, comments, or stories that may help readers understand the licensing industry, please feel free to leave them in the comments section below!
As a photographer and Patent Attorney with a background in marketing, Steve has a unique perspective on art, law, and business. He is currently serving as the Chief Product Officer at Artrepreneur. You can find his photography at artrepreneur.com or through Fremin Gallery in NYC.