• 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.

• Is the potential agent passionate about your art?
• How do they market their artists? Do they have a website, if so, how does it look?
• How many other artists do they represent? You may be able to find this out on their website, otherwise ask them.
• Do the other artists work align with your art? You want you are to be different, but you wouldn’t want to sign with an agency that represents artists that paint all florals/patterns if you paint whimsical characters.
• Do you see their current artist’s work in the marketplace? Do a google search for some of the artists they currently represent to see if there are any products in the marketplace. If so, are they quality products?
• Ask for referrals from their artists and manufacturers. Call them, talk to them, ask questions.

Questions to ask your potential agent.

• How long have you been an agent?
• What made you decide to become an art agent?
• What did you do before becoming an agent?
• What product categories do your artists license to?
• Is there a product category that you focus your efforts on?
• How do you see my art fitting into these categories?
• How long have your current artists been with you?
• How many agents work within the agency? If there is more than one, who would be working with me and how do you decide that? (then have a conversation with that agent too)
• If I were to sign with you, how long is the contract for? (2-3 years is standard) Have them send you their artist/agent contract as well as a licensing agreement they use with manufacturers.
• What is the royalty split? Most agencies get paid 50% of the royalty from the manufacturers. The royalty payment is sent from the manufacturer to the agency, they keep their percentage and send you your percentage.
• When do you send royalty payments? Get specific dates. Usually quarterly.
• Will I get a copy of the manufacturers royalty report? This is a MUST!
• Do they have a graphic artist on staff to make changes to digital files? If so, is there a fee for this service? Will I get to approve ALL changes made to my art before you send it out?
• Do they have a booth at Surtex every year? Do they attend trade shows? How do they meet with manufacturers?
• How will they keep your new art in front of licensees? Do they send a monthly newsletter? Do they advertise in trade publications?
• Do they have a password-protected database so licensees can look through all of your art?
• Do you allow your artists to work directly with the manufacturer when designing product lines?
• Have you ever had one of your artist’s copyrights infringed upon? If so, do you send a cease & desist letter or is that something you let your artists handle?

It’s kind of like courting. Your conversations should feel comfortable, not awkward or forced. The relationship between artist and agent has to be built on trust. If something doesn’t feel right, move on.

An artist friend recently made the remark that she and her current agent interviewed each other with questions back and forth through email after their initial verbal conversation. The agent should want to make sure you are a good fit as well, so you both benefit from the relationship. Take your time in making your decision, there is no rush. Don’t just interview one agent/agency, choose a few and find the one that fits you the best. If none of those few do, start again, find a few more. It’s a huge decision, don’t take it lightly.

Below is an excerpt from All Art Licensing Blog as to what should be in an artist/agent contract.

Art Licensing Agent Agreements should include:

• Complete contact Information—for both the agency and artist
• Grant of Rights—Also sometimes called the Appointment, it spells out what are you giving the agent the right to do, such as license, market and distribute your copyrighted artwork to manufacturers in certain product categories.

• Here you also define your “Works”, which describes the art pieces or collections included under the agreement. This is one of the most important areas, especially if you have multiple styles or prior collections/assets.
• This section is where the contract should note any restrictions to the general ‘Grant of Rights’ such as excluded product categories or existing deals with different conditions.

• Term— List how long the term is with the starting and ending dates, plus the renewal terms and conditions (automatic, benchmarks or renegotiated renewal).
• Territory—Most agencies will want worldwide rights for several reasons, which might include: the ability for manufacturers to include  internet sales, or because their marketing efforts may attract deals in other countries and the agent would prefer to handle those deals. Make your own judgment call as to what rights to give your agent based on their needs and reach; be sure to reserve any rights you can that won’t be actively used.
• Scope of Agency—Specify here whether the rights are exclusive or non-exclusive and describe in detail the agent obligations. Make sure you describe the process in which the artist (licensor) will be presented the License Agreements and will approve them.  For example, will you be required to agree to any terms the agency negotiates or can you turn down deals you don’t find acceptable. And what would the definition of ‘acceptable’ be? I also like to see a good description of the marketing and sales process in the Agreement, so there are no questions as to how the agency will be spending their time on your behalf.
• Artist Obligations – Now the tables are turned and there needs to be a very specific description of your obligations, such as what type of art you will provide to manufacturers and how often you will create and provide new collections for the agent to market.
• Credit/Copyright Notice—Make sure the contract states that you continue to own all copyrights and that credit will be provided on all products; then include exactly what the copyright notice will read, such as ©___Artist’s name_____. (example ©Teresa Kogut)
• Commissions—This simply defines who receives what percentage of the royalty revenue generated.
• Billing and Collection—Though agents are usually responsible for the billing and collection of payments and royalties generated by the License Agreements, put it in writing.  In addition, make sure to describe what will happen if money is not collected from a Licensee.
• Payments—Clarify exactly when payments received by agent will be paid to the artist.  I wouldn’t expect less than 30 days, nor accept more than 90 days.
• Expenses—Clearly spell out what expenses are the responsibility of the agent and of the artist.  I suggest you pay close attention to trade shows, travel, legal fees, and production of sales materials, where there may be additional fees and expenses charged.
• Inspection of the Books and Records—The industry standard is that the agent keeps the books and records and the artist can inspect them with reasonable notice to the agent.
• Representations and Warranties—Here is where the artist guarantees that you are/will be the sole and original author/owner of the artwork.
• Indemnification—It is common for the artist to indemnify the agent and its employees, to hold them harmless against certain loss, damage, liability or expenses; reasonable and mutual indemnification is preferred.
• Default and Termination—There are three important areas you need to make sure are addressed in this section:

• Language about what happens in case of bankruptcy,
• Breach of Contract, so that if either party fails to perform any of its obligations  the other party will have the right to terminate the Agreement upon thirty days written notice if the breach cannot be corrected within the time frame,
• and the Effect of Termination, which specifically describes what happens when the contract ends (who gets paid what and when and for how long…this is also known as the tail of the contract).

• Assignment—I recommend this state that the Agreement shall not be assigned by either of the parties without prior written approval  from the other party. This is an important clause because it protects you if an agency gets sold, or is taken over by another company, and prevents your art from being considered an asset of the agency.

I would highly recommend hiring an attorney to read over the contract between you and the agency AND the licensing agreement they use with manufacturers. You won’t have to do this for every licensing agreement. Once you have one approved by the attorney, you can compare all future agreements to it.