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Creative & Licensing Fees

You got to hear from my rep, Maren Levinson from Redeye and now we are adding my wife, Nichelle, who is the business manager at Keatley Inc. and she is the one that keeps us locked down. There is a lot of stuff that she does behind the scenes, and even when I'm speaking and doing Creative Live, like I'm getting up here and talking, but this would not be happening if it was not for her. She takes kind of all the craziness in my head and keeps it organized and is communicating with the clients and working with Maren. So she's gonna be up here kind of adding to the conversation as we're talking about things like invoicing, and creative fees, and billing clients, and all that kind of stuff that goes along with that side of running the business. So, again, as usual, if you have any questions at any point, please throw up a hand and take advantage of this wealth of information that is up here. I'll let you give a little background on how you got into this mess. (audience laughing) Well, I ...

do like to preface all of my interactions with people around the subject that I did not go to school to be an accountant so it kind of came upon me when I married John and I would start opening the mail. And we'd have these notifications from the friendly IRS or Washington State with these notifications that we owed, or he owed, significant amount of taxes or whatever, and be like, "What's this?" And he was like, "I don't know." And I'm like, "How do you not know?" (laughs) it seems like pretty basic, if you're running a business, don't you need to be doing these things? I mean I think it just became apparent and I think probably a lot of artists feel this that like your brain is in the creative space, it's not necessarily in the like details of business. I love the world when it's very orderly and, you know, things have their place and I can kind of keep track of things pretty well. So when I realized that those things were actually gonna directly impact me, I was like, "Why don't I just take over that part of the business?" And he was like, "Sweet!" (laughs) So, anyway, it was a pretty, you know, easy for us to divide that and he never once was like, "Hey, let me do that." And I never had the desire to be on the creative side of it so naturally it just worked out pretty well for us to do that. But, again, I'm not a lawyer and I'm not an accountant and so I do like to preface for people that if there are questions that you have that I don't actually have the answers to, I'm always happy to look into it and find the answers. But any information that we're giving you is things that I've just learned through the practice of working with John and my knowledge has grown over the years and then working with Maren has been amazing because she's a wealth of knowledge that we... You have to acquire it somehow in this industry, there's not like a rule book that you just purchase that says, "When you're a photographer you need to do all of these things." So, anyway, that's kind of my role here amongst the three of us. Cool. So we're gonna start off by talking about creative and licensing fees which even for me sometimes it's like it's a very nebulous kind of idea. I know a lot of people want to know how do I know what to charge for what I do? Like what's right for me? Or what's right in the industry kind of thing. So hopefully, we can talk a little bit about breaking this down a little bit and where to start, depending on, I guess where you're at in your career. Well, Nichelle and I were actually just talking about this. This is one of those things that's changed over time. It used to be that you had a day rate for showing up and then usage on top of it. More and more now people are starting to combine day rate and usage. So when people ask me about what's John's day rate for something, I usually respond with, "What is this being used for? Who is the client?" And all those things are different. I mean, I would not charge the same for a major national or international brand as I would for my neighbor who's starting their new clothing line. Like it just doesn't make any sense. So there are market rates for these things. But it used to be when you guys were starting that it was separate, right? That John had a day rate and then usage on top of that per image. Nowadays more and more people are wanting libraries. They don't want to take stuff down from their websites or social media, they can't really track it for a year or two. But the basic questions you wanna ask are what is this being used for? How many images do you want? How long will you need it? What are your thoughts... Something that we hear a lot is, you know, should I put my rates on my website or whatever? You've kind of just answered that a little bit but... (Maren laughs) No. Because I think people think it's shady when I ask all of these questions like well, rate just is rate. But it's really not. I mean, it's what goes into it, how many days of travel is he gonna have? You know, how long are the days gonna be? I mean, standard day is a 10-hour day, but sometimes people say, "Well, we actually have 100 shots," and we just figured he'd stay as long as he could to get it done, you know? And so the more you find out at the beginning, the more questions you ask, the less sort of disappointment or confusion. It's so much more comfortable to leave things nebulous and gray, not for you but for most people. It's very comfortable to like not have to talk about that. But it's our job, Nichelle's job and my job to really ask those questions so that it's all in the paperwork and then we can say, "You know, the agreement was for 20 images and you've asked for 55." And I've actually gotten a lot of those calls from Nichelle, not even from John, Nichelle's the one who notices it and says, "You know, I saw in thee contract that you had 20 images and John just gave me a print order for 50, is that a problem?" And generally I will say, "Yes, that's a problem." It doesn't have to be a scary problem but I usually just gently tell the client, "You know, this was our agreement, this is how much it will cost to go over that." I never spend more money without asking client first, but I usually say, "Do you wanna go ahead and order those 50 or do you wanna pay this amount of money?" And give them the option for that. But, you know, these basic questions are the things that we generally will ask at the very beginning. What is exclusivity like... So exclusivity means... Let's say you shoot a gallery of pets for one company Let's say you shoot a gallery of pets for one company and then another dog food company says, "I saw that you had all those great pet pictures on your site, can we buy those for our brand?" So if a company wants exclusivity, it means that no other company can use it and we charge for it. So generally... Nowadays, more and more people will just say, "Well, we just wanna buy out." And I always kind of walk people through, you know, a buyout means that basically you'll pay for the licensing for the life of the image and we can't give it to you for the same rate that we would if you just wanna use it once. So we... We charge more. And a buyout, traditionally speaking, was always triple the day rate, that's what you used to charge for a buyout. So it's good to just keep that... It's good to keep these little rules in your head, even if that's not what they ultimately pay. But it's nice to know what these rates are based on. I don't know if now is a good time to talk about different ranges of rates or if we're gonna get to that later. I think this would be a good. Yeah. But roughly, when I'm walking a client or somebody new through pricing, I will say, "You know, for a social media shoot, we tend to do somewhere between like $3,000 and $7,500 day rate. For a catalog or marketing shoot, we tend to be somewhere between 5,000 and 8,500. For advertising, we tend to be somewhere between 7,500 to 10,000." Now, this is for the people at the top of their game who are working with like basic commercial rates. And Nichelle and John have gently explained to me that you have to be kind of conscious of where you are in your career. And, you know, if you're just starting, you shouldn't necessarily be charging what John's charging after 10+ years in the industry. Has it been 10+? Yeah. Okay. And I think there's times, too where... Experiences a little bit with directing. Even I've had some people say, "Well, directors get paid this, like that's just what it is." And from my perspective... I mean, I've never... That's just the way it is, it's never sat well with me in any aspect. And I know sometimes you have to deal with reality on certain levels, but if I find myself bidding against someone else and I know that what I do is unique and not something that can be replicated easily, or I know this person's work is at a different level than mine, like I'm okay with charging more or being more than someone else because I feel like if you can justify that, why should I stay at some number just because that's what's someone perception of. What do you think? Yeah and John and Nichelle do a really good job sometimes... I mean, I think people always think that the agent's gonna ask for as much as they can. But I'm actually very accommodating. (laughs) And I learn from my artists and from my artists' business managers because sometimes Nichelle will say, "You know, I don't think you realize what it costs for us to do this shoot." I can be very cavalier and say, "Okay, we'll have the day rate," and then she'll point out to me, "Well, we actually had to take a ferry, we had to pay for the digitech setup, we had to actually rent lights for this," or whatever it is, I'm using random examples, maybe you can talk to some of the costs that go into it. But I don't always appreciate what the photographer has to do to make a living. And it's really up to them to tell me so that I can better represent them. Yeah. I mean, if you wanna switch to the next slide. So knowing what your cost of doing business is is hugely important. We call it either cost of doing business or your shoot minimum. But that has been something that over the years as we've realized if we wanna have a sustainable business, we actually need to be making a certain amount of money to be paying the bills so that we can live in the house that we're in and have the studio and the gear that he needs to make his job happen. So I don't know, I mean it hit us maybe like seven or eight years ago, we were like, "How much do you actually need to make for a job to like come out of it without like having enough money to pay all of those things?" And so NPPA has a calculator which is amazing, it's the cost of doing business calculator and I would recommend everybody going and taking a look at it. But it's a very comprehensive breakdown of all the different expenses that a photographer might come across throughout the year. And so you put in your rent and you put in your utilities and you put in your salary what you hope to make that year and then you put in about the number of jobs you think you'll get done, be able to do in that year. And at the end of it, it spits out a number that tells you, you know, you need to make at least $850 on that job for you to come out with a little extra money in your bank. And so John and I did that probably eight years ago and I think our number at that time before having kids and I don't know... Before we had a studio built in the backyard, I think the number came out to $850. And that was like kind of mind-blowing to us 'cause we were like he was doing jobs for like a local university and the average creative fee was $500. And we thought we were doing great because he'd gotten enough of those jobs. Well, having that number helped us realize, "Oh, like we really need to be thoughtful." And like John talks about the fact that you can't necessarily turn a $500 client into a $5,000 client, you can't just like change how much your day rate is. But it's insightful to know like then who do you need to start marketing to so that you can get those $5,000 jobs if that's what you need. And so we did that and that helped us define our marketing and who our clients were gonna be. Well, fast forward probably five years, we thought that, you know, we knew the number that we needed to work for. But then, at that point, we probably had a kid or two and we had an employee and we now had a rep that we were having to pay a quarter of our creative. (laughs) But you pay a quarter of your creative fee or... That's significant. I mean, it depends on each rep, each rep has their own percentage, but when we realized that there is John, an employee... I don't think I was actually getting paid at the time. And a rep, suddenly your creative fee is now paying salaries of three people and not just one person. And so we were feeling really tight with our money and we were like, "What is going on?" And finally a light bulb went on, "Oh, we probably need to figure out what our cost of doing business is." And we pulled out that calculator again, I threw in all our numbers and we've been living under the assumption that probably like $1,500 was like adequate to cover our expenses. And when we came out, it was like $4, and we were like, "Oh." It was more than that, your number keeps getting low, but it was like significant. Yeah. It maybe was even when I was actually getting paid, I mean, at that point it was like six... This is really illuminating to me because there was a time in our office where we would be getting... We were building John's commercial career and we would be getting jobs, possible jobs and John would say things like, "Well, you know, really, in order to make any money I really need to be making $5,000 as a minimum day rate." And it wasn't obnoxious, it was like, "Oh, okay, I can abide by that rule." And it was really helpful to me, as an agent, because people did, you know? Like they would say, "Well, we have $3,000 a day rate," and I'd say, "You know, I'm so sorry, for a job like this we really need to charge $5,000," and they'd come back a couple of days later and be like, "Okay, let's do it." It made me a better agent because I would have been liable to just say yes and it'd became known in our office with the other agents John doesn't work for less than this amount of money. (Nichelle laughs) And it wasn't obnoxious like... You know, there are always exceptions to the rule and if it was something he really wanted to do he'd be like, "I don't care I'll lose money on this job, I want to do it." But it was a good marker for us. It was a marker for you but it was actually a good marker for us, as well. Yeah. And so, I mean I think that number A, is a good starting point for you but I think it also it can help you make some decisions. I mean, they can help you decide who you should be marketing to so that if you know I need to be making $1,500 for every job, that's your creative fee, just to be clear. That doesn't even include the expenses that are gonna be coming out of it. If you need to be making a minimum of $1, you have to know who you wanna be targeting. And the other thing is if that number is too high, then you need to figure out, "Do I need to be getting more jobs?" You know? You can decrease that number in a couple of different ways, but you either need to change your expenses, so cut out some things that you don't need anymore or figure out how to start working more so that that number can be decreased. But that has been like a really eye-opening for us and being able to communicate that with Maren. But for any new photographer, that's really our starting point for you. Like first figure out what that minimum number is and then there is other factors that can go in like what Maren was talking about as far as licensing. Those can help you then kind of fluctuate that number to figure out, you know, what's the appropriate number in this case for this company and the marketing or the licensing of it? Did you wanna... A caveat I think with that is I mean, you kind of hit on this, but you have to be realistic. So you might get a number that's above what you can justify because of where you're at in your career. So like Nichelle said, you might need to sit down and make some tough decisions. Like do we need two cars anymore, you know? Like we love having two cars, but we might need to have just one car, you know? Or, you know, we might need to stop going on this vacation, you know? Or whatever that is, you have to make... It's a business, you have to make difficult decisions. It doesn't mean that you're gonna get to do everything that you wanna do so you do have some control over that. Then the other thing, just to reiterate, is with this cost of doing business calculator it's really important to do this, not do what we did and just assume I did it, it's the same. Life changes, so you move or have a higher rent or you have a significant other or whatever. Like every time you make a significant change, you need to make sure that you're operating off of real world numbers, not just some feeling that you think 'cause that's where you can really get into trouble. The other thing, I guess, Maren, maybe if you can talk about like aside from maybe the artist's name, like status even sometimes, like does that come into play? And that kind of gets back, I guess, at being unique and having something that they can't get somewhere else but how... Yeah, of course. Yeah, I think level of experience is important. So, you know, you have to think about where you are as my brother calls it core awareness, is sort of where you are in the field and where you are in the industry. If this is your first commercial job, you should not be charging the same amount as somebody who's been doing it for 10 years, it's not fair to the client and it's not fair to you because you'll miss out on a lot of work that will help build your experience. So if you use the tips that Nichelle was talking about and just realize what you need to do to get it done and not lose money, then that's a good place to start and then keep on checking in. I mean, the industry changes in both ways, you either keep on growing and it gets higher and higher. Sometimes there are times in your career that it... And this really messes with your head in the freelance industry and it's happened to all of us where you expand, expand, expand and grow and grow and grow and then there's a recession and it has nothing to do with you and how well you're doing in the business. But you might have to get rid of that second car and go backwards. And then reassess again in five years and it might be a whole different thing. I mean, until recently, my best year in my career was the second year I was in business. And it had nothing to do with how good I was at my job because I wasn't that good at it at that point. It was just lucky, it was the economy and the way the industry was working and then everything changed. And I've slowly built back up again to, hopefully, be on where I was, but it's a little bit of a mind trip that you can be doing better and better and there are picks and valleys in your career, especially in a creative career. And Nichelle said this, too, but to just doubleback. Again, as we see people do this and they kind of start to get some more information and work off of we frequently see, the natural inclination, as well, I was charging this client $200 and it's been a client of mine for a long time and, obviously, when I realized I need to be making, let's say, $2,000, you're never going to change $200 into a $2,000 client. I mean, maybe you'll change a $200 client into a $300 client, that might be like the range, but that's not your job, it's not gonna happen, it's just gonna end in frustration and badly. You might need to keep doing those jobs a little bit to make some money, but what you need to do, as she said, is you need to find a new $2,000 client. And they exist, that's gonna have to come from you, the work you create and then your marketing. So that's definitely a big part of the equation. Before we switch, I'm curious to have you guys talk about half day rates and if... We don't do it. I mean, from my perspective we don't, because we have crew members, we can't pay them... My feeling is that it's a day that you're booked that you can't take another job. So if somebody books John at a, you know, at let's say, a $5,000 day rate and then another client comes and they might have a $2,000 day rate and the $5,000 day rate parson says, "Actually we just want him for a half day." Well, that's really not fair, you know, he's saying no to other work. Whether that second job is real or not doesn't matter but it tends to be when a photographer gets busy. So we basically just don't do half days. Now, we might scale the fee down in general because it really is 15 minutes or something like that but it also never really is, by the time you set up and break down and you can't pay crew members half rates because they're not making enough money to-- I think also it devalues the fact that, you know, let's say Zen might be just so talented but she's capable of creating something in 15 minutes because of her 15 years experience in this doing. Like she's a master, so she can do that and someone else, it would take three or four hours or something. So just because she's become so capable doesn't mean she should get paid less, you know? It's like it's that investment that she's put into her work and her craft and it's not just... Tell the Picasso story. What's that? Tell the Picasso story. Yeah, I mean, there's a story about Picasso and he's at an outdoor cafe in Paris and someone walks by and recognizes him and they say, "Oh my gosh, I'm such a huge fan, would you, please make a drawing for me?" And so he just quickly sketches something on a napkin and he hands it up while asking for a significant amount of money and the woman says, "My god, you know, it only took you 30 seconds, how could you charge that much?" And he said, "No, it took me 30 years." And it's the same principle, it's like it doesn't matter that he was capable or able to do something that quickly, like he was only able to do it because all the investment that he's put into himself and his art, so that's kind of how we look at, as well, is it's not just like an hourly thing. Like to them it's like, "What's the big deal?" It never is. But it's the difference of being sort of a crew member and an artist, right? I mean, if it really... If you are replaceable, then you are a crew member who could work on an hourly rate. Although some crew members are not replaceable. But if you are a destination and an artist, it's just a creative fee.