Make a Profit With Licensing

make a profitJackie Frerichs knows how to keep several plates in the air at once – plates and mugs and two kinds of napkins. She’s been juggling her designs on a variety of products since 1991, and it’s a trick she feels every artist should master.

Learning any new skill takes time and practice, but the rewards can be worth it. According to Frerichs, once you master the art of licensing, your income will multiply. “So many artists sell an illustration and think ‘that’s the end of it.’ It’s not – or at least it doesn’t have to be.”

You can parlay one illustration or design into sales on several different products – as long as you remember to retain the rights to your image. What’s more, if you negotiate a royalty agreement, you can continue to receive a percentage of the product’s sales for years to come.

As an example, Frerichs tells how after selling Santa illustration to a greeting card company, she transformed the same design into a Christmas plate by simply adding a circular border of candy canes. She then sold her “new” design to a company that makes party goods. By transforming her card into a plate design she earned – and continues to earn – a hefty sum. “In addition to a $1,000 advance for the plate design, I earned $6,000 in royalties the first year. It was my first plate and I was surprised it did so well.”

That doesn’t mean you can just take any of your designs, slap a circular border on it and “Presto!” you’ve got a paper plate design. It takes some forethought at the designing stage to plan an image that’s versatile enough to make the transition. “In the back of my mind when I’m designing I’m always thinking about the potential for other uses,” says Frerichs. So, when designing a rectangular image such as a greeting card, she tries to imagine how she could turn it into a circular composition.

make a profitFrerichs’s greatest trick to date is changing one card design into a place setting of 18. One of her Halloween designs, a scarecrow sitting among pumpkins, was originally sold as a greeting card. Now it’s with another company and will be used as paper plates and party goods. “As I was creating the original card, I could see the potential. I thought, ‘If I add more pumpkins, this would make a cute plate.’” But even Frerichs didn’t imagine the variety of party goods and favors Contempo Coulours came up with using her scarecrow motif. Frerichs is still amazed to see her lovable scarecrow and his jack-o-lanterns smiling back at her from party bags, placemats, stickers, napkins, bowls, cups and party invitations. Contempo even made swizzle sticks using and element from Frerichs’s original design.

To profit the most from your work, says Frerichs, you should be very mindful of the terms of your contracts with clients. Usually the forms are clear and straightforward, and most companies try to be fair. But she does have one warning: read your contract carefully. “If there’s a clause asking for an exclusive right, or all rights, you don’t want to agree to that.” A request for an “exclusive” to anything deserves scrutiny, says Frerichs.

Most greeting card companies have standard rates for images for cards. That’s fine, but remember to read the fine print and know which rights you are selling. “I sell greeting card rights only. I would never sell my designs outright to a company, because I [can] see the possibilities down the road for some other products.”

When signing contracts, try to obtain a royalty agreement – especially if you think your design could be a best-seller. A royalty just means that you will earn a percentage of the product’s sales in the future. On most of her projects, Frerichs will ask for and receive an advance on royalties. For an advance, she likes to – at the very least – make enough money to pay for her time, art materials, labor and expenses. Her typical advances range between $200-400 for a design.

make a profitRoyalties vary, but Frerichs says five to ten percent is the usual range. However, she will agree to reduce the royalty to three percent or in some cases forfeit the advance against royalties if she believes the potential for mass market sales is especially promising. “If I were selling to a factory card outlet – they have tons of stores – 3 percent could be a lucrative royalty, even if they sold the card for 39 cents.”

The best-case scenario is to obtain an advance against royalties, says Frerichs, but all companies do not offer royalties. Here’s where it gets a little confusing, because some artists think every licensing agreement comes with a royalty. “That’s not true.” Says Frerichs. “Every licensing agreement does not necessarily come with a royalty. But every royalty agreement is a licensing agreement.”

If you cannot get a company to agree to a royalty, you should at least try to negotiate a licensing agreement that limits the time period the company is allowed to use your work. Somewhere within your contract, you should also limit the types of products a company may use your work for. The more products a company hopes to manufacture from your design, the more it should pay you for it.

All licensing agreement means is that you, as sole owner, are “licensing” a company to use your work for a finite amount of time and/or for a specific purpose or purposes. After the finite amount of time expires, the rights to the artwork revert to you. In a typical contract you might grant a company the right to reproduce your design on mugs for three years. Even during the period when your artwork is licensed to that company for mugs, you still retain the right to license that same artwork to different companies as long as it’s used on products other than mugs.

Some artists sell all their rights to their design and illustrations because the company offers an attractive payment. But Frerichs has found it better to negotiate a licensing agreement, even if the amount isn’t as high as immediate payment for all rights would be. “It’s more important to me that I retain the rights to a design, as long as the advance is reasonable.”

Most companies are willing to negotiate on the percentage of royalties you will earn on sales, depending on whether the product will be sold by the mass market or in gift shops or department stores. Sometimes, companies offer what’s called a “mid-tier” contract, meaning the product is sold initially in mass market stores at a lower royalty, and later sold through gift shops or specialty stores at a higher royalty (or vice versa). Often, companies stipulate tat they receive the option to renew when the contract is up. On your end of the negotiating table, it may be important to you to have some control over the quality of materials used to manufacture a product and how profits are tabulated. Be sure to incorporate your concerns somewhere in the contract. Some artists even outline how they expect the company to track sales, so they are sure royalties are reported accurately.

make a profitEvery contract is different, says Frerichs, and some she’s signed have been up to 12 pages long. But when clauses sprout subclauses don’t hesitate to find legal advice. “I have a lawyer who deals specifically with artists’ contracts. An illustrator friend gave me the name,” says Frerichs. If you can’t get a referral from another artist, ask the Graphic Artist Guild or the National Cartoonist ociety for recommendations.

With your rights intact, your next step is to find markets for your work. Whil many artists send the same package to dozens of companies, Frerichs tailors submissions to specific buyers. She leaves nothing to th client’s imagination. She’ll redo a card design to favor the wrap-around panorama of a mug. She’ll add or subtract design elements to make her artwork fir the products of the company she’s shooting for. “Right now I’m putting together a portfolio mailing for a company that does giftwrap and giftbags.” But, instead of just sending card samples and tearsheets, she purchased a giftbag then pulled it apart and cut it down, and is using I as a template to make her own bag to submit to the company.

Where to begin? Frerichs suggests you start with the store’s most conspicuous inventory. “Greeting cards are a very creative outlet. It’s a lot of hard work, a lot of deadlines, but it’s good training.” In addition to welcoming new talent, she says, greeting card art directors will often offer advice on the essentials of producing work for reproduction.

Click to Purchase 2015 Artist's & Graphic Designer's Market!If Frerichs is not familiar with a company, she’ll make a few phone calls. “I’ll call the Better Business Bureau of that city, or have the library do search. They can find sales figures and credit histories. One business was going through bankruptcy; they had a phone number but it was the wrong phone number. I didn’t submit to them.”

In the beginning, Frerichs wasn’t always so diligent. “I didn’t research as much as I should have. Now I go to card stores and look for a specific company’s product, see what type of quality they have, and [check out] their criteria before wasting my time and theirs submitting inappropriate work.”

If you think all Frerichs’s product juggling is impressive, she has plans to toss more items into circulation. “I don’t think you should limit yourself. Don’t be afraid of new markets. I’d like to see my work as figurines. And I haven’t really submitted to textile markets, or wallpaper companies.”

Keeping your work aloft takes skill and dedication, but don’t be intimidated. Pick a company. Even the best jugglers begin with one toss.

*An excerpt from 1999 Artist’s & Graphic Designer’s Market.

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