How to License
Now, this is what I was talking about, guys. This is how you turn a $2,000 project into a $6,000 project without doing any additional work. Does that sound cool? Yeah? Okay, so, let's talk about usage rights. So usage rights are your selling power behind your designs. Like we talked about, we have a design fee and then we have a usage rights fee. Now, if you're doing business to business products, where you're going ahead and you're charging them value and they're gonna repurpose that design, you need to be able to sell the usage rights to it. Okay, so let's go over promotional and commercial rights. These are the two major branches of usage rights. Now, if there's anything about what I'm about to say that is unclear, please grab that microphone and ask me a question. It can be a little hard to understand, so I wanna make this as easy as possible for everybody. Okay, promotional rights. You need this for every single illustration drawing that you make, no matter what, unless for person...
al use, obviously. So, you need to be able to have this and you need to be able to make sure that even though you're allowing a client to showcase that design and use it in a promotional way. Promotional way could be, I'm using your illustration to promote a blog post that I just wrote, or you created a tagline, or one of those very motivational phrases I see all the time on social media, especially when it comes to my business. So I'm giving you those user's rights, but I still wanna make sure that I have the right to continue to use that illustration for if I wanna showcase in galleries, if I wanna go ahead and use it in my portfolio, you always wanna have that in writing. Now, you have to decide whether or not you wanna force them to put your name attached to it, 'cause if I'm going ahead and I'm creating a featured image for Envision, it's a pretty big blog, if I put my name on it, that's gonna help me promote my brand. 'Cause people are gonna be like, I like that illustration. Who made it? Oh, Dina? Let's call her and give her money. But if I'm removing attribution, you're taking potential dollars out of my pocket, so I would charge you more to remove attribution. Last thing, depending on how they're using that final image, you wanna make sure that you get approval on all use cases. What if they resize it? What if you created a landscape illustration and they wanna switch it to portrait, and they just blew it up, and now it's all pixelized and looking gross. Now, if your name's on it, that's not acceptable, man! You can't have your name on something that you can't control, that is looking all gross and just not clean at all. So if you wanna go ahead and keep approval on all uses, you can. That's not something that's unheard of in the design industry at all, and again, you have a client coming up to you saying, what? I've never had an artist ask me for usage rights. This is what you say; I'm so sorry that you've never worked with a professional illustrator before. (woman chuckles) I mean it. 'Cause who wouldn't want usage rights? It's just 'cause they didn't know any better. I didn't know about usage rights until two years ago. It's such a money-maker. Okay, so we have promotional rights. There are all different kinds of ways to promote yourself and keep in mind, promotional rights are usually non-exclusive, so they have the right to use that art to promote themselves, but you can still keep the main rights, so there's nothing preventing you from putting that design on t-shirts and selling it, going ahead and selling it to other stock sites because they have non-exclusive rights. But if they wanted exclusive promotional rights, you would probably charge a lot, 'cause it's all about them taking money out of your potential pocket. Okay, let's go over commercial rights. Any time you have commercial rights, you always wanna start with the most restrictive. Let me explain that; when you have commercial rights, you can use territory, time, and product, so let's use an example. We have a t-shirt; you obviously are gonna make money off this. You're gonna be selling it to make a profit. That's commercial use, okay? Now, I'm gonna give you very restrictive permission on how you can use that design. I'm gonna let you only use it in the United States to sell. You can only sell it in that one continent. You only have rights to it for a year. And you can only use it on t-shirts. So that way, nothing's stopping me from printing out posters of that design. After that year is up, I can start making my own t-shirts. You wanna stay restrictive, and this also is something you can include in your packages, which we'll get into. It's like, hey, do you want usage rights for a year? This is the price. Do you want usage rights for two years? It's gonna be a little bit more pricey 'cause remember, having packages and options is the difference between hey should I hire you versus what should I hire you for? Okay, so, commercial rights, we wanna start with the most restrictive based on the territory, the time, and the product. We wanna offer packages of different options. And finally, if they want exclusivity, that means more sales for them, and more money out of your potential pocket. You wanna charge the most for exclusive rights, 'cause you just wiped your hands of it. Now, again, if you do still do exclusive rights, still make sure you can use that project in your portfolio and you can still use it on social media. You're not selling it, but you're still allowed to promote yourself. Always never remove that, even if the client's like, okay, well, you can't talk about it until it launches. That's fine, do your key study, it's ready and available once that product does launch, hit that publish button, and you can start using it to promote your services. Now, I made the mistake where it was that situation. I went ahead and I made a couple, a series of greeting cards for American Greetings. It was this little hot sauce packet and you squeeze it and he goes You're Awesome! And it was like this whole thing, it was very cute. Now, they said you cannot use this in your portfolio until it launches. It didn't launch for a year. And I made the mistake of not creating a key study as I went. So that piece to this day is still not in my portfolio because I don't remember my design decisions. I don't have those files that I created the process for that greeting card. I went ahead and I created this project for a huge greeting card company and I didn't even save any of my images. It was a year down the line! Don't make that mistake, okay? Throwing that out there. Okay, so let's talk about, more specifically, exclusive rights. This is the most expensive. They get everything, so you need to charge a lot for it. So how do you decide whether or not you wanna give non-exclusive rights or exclusive? Well, can you repurpose it? If it's something like a logo design, obviously not. You can't use their brand name to promote yourself. Or if somebody's wanting you to do something that maybe you don't necessarily believe in or it doesn't match with your values, then you probably won't repurpose it. But if it's something like Dream Big, Work Hard, a lot of people would buy that phrase. I would know because that was the first piece that everyone viraled from me. And I'm gonna be a little bit more hesitant to give you exclusive rights because I know I can make money off that design. That's how you have to think of it in terms of. Again, ask you question is, is it worth removing my name? Because you can give them the rights, the exclusive rights, but it's your decision whether or not you want to remove your name. For the most part, if they do want exclusive rights, they more than likely won't want your name on it. But if you remove attribution, that's more expensive. So you have to think about all these different things and how much money it could be potentially be taking out of your account, and that's how you're starting to charge for it. And then the very last thing, you have to trust your gut. If there's something in here that's like, don't do it! Don't do it. (laughs) If you're losing sleep over it, obviously your body, your subconscious is trying to tell you something. Listen to it, okay? All right, let's go into these different kinds of package. Now we're gonna go over royalties in a second, but let's use an example. Now, what you're gonna charge for each one of these things, again, is something you're gonna have to decide on yourself. You can look up industry standards. You can look up a couple articles. So we have package one, all right, so what example should we use? Let's do t-shirts, yeah ... Okay, no, actually, we'll do a blog post. Say I'm creating a featured image for Envision. I use this example 'cause I just did that a few months ago. So Envision wants me to create a featured article that's the art of hand-lettering. They want me to explain and visualize why hand-lettering has kind of had this revolution over the years, how it's more of a so many people are trying to be a part of it now. Most people actually know what the word lettering means. So, I'm creating this piece for you. I'm only going to give you promotional rights, so you can't sell it, okay, but you have to include my name. I want approval on all revised concepts. It's only available for publishing. And you can even be more specific. It's only available for online publishing versus printed publishing. Also, you only have rights to it for a year. That's it; now, that way if someone else comes along and they wanna buy the rights to it, it'll be available after a year. 'Cause don't just think, how can I make money off my own work, but how can other people possibly license that work too? 'Cause that will happen. Once you start creating illustrations, once that usage rights timer is up, there is nothing preventing you from selling that to another client, or putting it on a stock site. Package two: okay, I'm gonna give you the option for promotional and commercial rights. So up here, I just gave you promotional rights and they're pretty restrictive. So I'm starting with the most restrictive. I'm only gonna charge you an extra $250. And remember, this is on top of my design fee. This isn't the entire thing. Package two, so you get commercial rights, so now you can start making a little bit of money off of me, so I'm gonna charge more. For this one, I'm not gonna give you attribution. You can go ahead and you don't have to use my name. You have the right to repurpose it, revise, and edit it without my permission, 'cause Envision, they have their own design staff, I trust them, they probably have the technology and the skills to resize something, so I feel comfortable being able to give them that. You only have the rights in the U.S. for publishing and apparel, so now you can go ahead and use this graphic on a book, you can do it for more blog posts if you want, and you can make t-shirts out of it if you really want to, but only t-shirts, so there's nothing preventing me from putting posters or magazines with that, another way to make money. You have rights for three years, so more than one, now you have three years. And I want a royalty. That's extra money, now let's talk about royalties. Royalties, you have a rate based on the industry standard. So let's go over it, let's use two samples. We have a greeting card; greeting cards cost, what, two or three bucks? So the royalty rate is gonna be two, three percent, 'cause it's not a very expensive product, so in order for that company to make money, they need to sell a lot of it. You're dealing with volume, so that two, that three percent might not sound like a lot, but if someone like American Greetings sells 20,000 of that card, it's starting to rack up. Now, what's a royalty? So a royalty is, you get a piece of the pie. I go ahead and I get a percentage of your sales, 'cause what makes me more invested in my own work? It's when I can continue to get money off of it. Especially when you start to get more popular. You have a following on social media. You yourself can become a brand advocate for your client. That has value, so if you want me to continually to promote your product, or for me to feel really invested in this product, I want a royalty. So not only do I want a royalty where you guys are paying me quarterly payments of that royalty rate, I also want an advance. So, design fee, usage rights, and a royalty advance. What does that mean? Whatever you think you're gonna sell in your first quarter, if it's for t-shirts, you're gonna sell, you think you're gonna sell 300 shirts, great, I wanna royalty rate from that, and whatever you think that's gonna be, I want it up front. I wanna know that you're serious. Just like how you ask for a deposit from a client to make sure you feel secure, same thing with royalties. I wanna make sure that you know what you're talking about so even if they don't make that first quarterly estimate, you're still fine, and then after that, that first royalty rate, that just comes out of it. So you go ahead and you can start making money after they've reached that upfront payment. Now, you have to make sure you can trust them with this royalty rate. They can be paying you direct deposit, a check. You wanna make sure they're not lying to you, so you need records. You can have access to how many products they've sold with your design on it, and how much profit they made, to make sure that they're paying you accordingly. There is nothing wrong with that. There's no way you can do business unless you can trust the business you're working with, just like how you wouldn't do work with a client without a contract, same thing, you can add that in your contract, that you always have quarterly records that are associated with that quarterly payment. So you're getting paid every quarter, sounds pretty good. Now, how do you figure out your royalty rate? Well, you have to, it's the same thing with how do you figure out your hourly rate. You have to see what the industry standard is. Like I said, greeting cards, two, three percent. For something like t-shirts, now, that's like 20, $30, $40 for even the nicer ones. That can be more like eight percent, 10 percent royalty, 'cause again, what will get you more invested in a project is the more money you can make off of it. So, when I get to package two, I want a $500 royalty advance, and I want a ten percent royalty if you go ahead and you turn this into t-shirts. Because I know my products can sell. I'm confident, I've done it before, and I can do it again for you, but I want a piece of the pie, 'cause the more money I make, the more money I can make for you. 'Cause remember, I'm only getting a royalty. I'm only getting a little sliver of the profits. You still get the majority of it. So why can't I benefit a little bit too? Now again, don't forget, clients are gonna be like, what? You want a royalty rate too? No other artist has asked me for a royalty rate. What do you say? I'm sorry you've never worked with a professional before. Now, this is common knowledge in the illustration and traditional art industry. This isn't as common in the design industry because you're not creating original content. When you're a graphic designer, for the most part, you're pushing existing elements like photos and text. You cannot charge royalty rates or usage rights for that kind of content. I mean, you can, but it's gonna be really hard, okay? So this is only for you guys who like to draw and create beautiful things that have never existed before out of your brain. 'Cause that's really valuable, 'cause if everyone could do it, they would. So package three: notice, we've jumped from $250 to $1,000; that's a pretty steep jump, but hey, I'm giving you exclusive rights. That means I can't even touch this thing for infinity. So you can use this design anywhere you wish for any product and territory forever. So I'm telling you, you're taking literally all of the selling power behind this graphic, so I'm gonna be charging you a pretty penny for you to use it, and I still want my royalty rate. So I'm still gonna be able to make money off of this for as long as that product is in existence.