We recently extended the licensing of images from a hotel shoot for a third time (this time for $15,000). While that by itself is not so uncommon, there were some interesting facets of the negotiation with the client and the photographer, and the photographer’s agent (not to mention a little drama), so I thought it would be useful to share this for photographers who are grappling with similar situations.
Producing a shoot is an exercise in trust, threading a needle through an interlocking puzzle of commitments with dozens of people – some you’ve never met, perhaps all over the world, and often on short notice. Everyone involved has to make promises and then keep them. It’s the agent/producer/production company’s job to get everyone in place, deliver a high-quality result, collect all the money, and disburse all the payments. Imagine the level of trust that a client or agency would need to have, to send a production company a couple of hundred thousand dollars in advances, expecting that in return the production company would simply make it all happen – on time and on budget.
Back in 2018, we got a call from one of our hotel clients who needed still photos for their website and a variety of other marketing applications. In a situation like this, where the client is hiring us to take responsibility for a project, we tend to operate as a production company. That is to say, we negotiate a fee with the client, and separately we negotiate fees with the photographer, crew, and all the other production expenses, and we assume the risk of going over or under budget. In these situations, rather than charging a commission to the photographer, we charge a production fee to the client (at least on the initial shoot). That’s different from an agency relationship where the photographer shares the risk with the agent and they share a commission on the net revenue from the job.
After we agreed on the overall budget with the client, we worked out a fee for the photographer. Here’s a summary of our agreement with the photographer (which we negotiated with their agent):
Here’s the purchase order we sent to the photographer’s agent (which they signed):
Here’s our invoice to the client for the initial shoot (with the first year of licensing), which included our $18,690 production fee plus $72,650 in other expenses. Since the client had already signed off on all the expenses, we were just charging them flat fees for these items, so there was no need to break out actual costs. Since the photographer ended up handing over raw files, there was no post-processing fee.
After the client saw the images from the shoot, they extended the term of the license for an additional year, for $25,000.00 (which we had already negotiated). We collected that fee from the client and paid it to the photographer. Here’s that estimate:
You may be wondering at this point, if the initial creative fee (including the first year of licensing) was worth $20k, why is a one-year extension worth $25k? It seems counter-intuitive that it would be more (when the work is already done) but another way to look at it is that the total cost to the client for that first year was $114,840 ($23,500 + $91,340), so $25k seems pretty reasonable.
A year goes by, and the client calls up and says they’d like to extend the licensing for a third year. Well, if the first year was worth $114,840 and the second year was worth $25,000, what is the third year worth? Our logic was that there wasn’t anything so special about these photos that would make them more valuable over time, so it seems logical that they would gradually decline in value as styles change and as people get tired of seeing the same photos. Our producer discussed it with the photographer (who had recently left his agent), we agreed on $15,000 and the client accepted.
But when our producer then told the photographer they were getting a 50% share, he was quite upset. When he called me to express his concern, he told me that he had never heard of an agent getting a 50% cut of a licensing fee. I told him that it did seem like a lot and that I’d dig out the paperwork. What made this conversation even more difficult was that not only was the photographer’s agent no longer around, but our producer who had negotiated with the agent was no longer working for us. That left Craig Oppenheimer (our executive producer) and me to scratch our heads and wonder why this contract was written this way.
As with every contract, there are the actual terms that are written in a document and then there are the negotiating conversations where people share their reasons and justifications for the terms that they want. In this case, the contract was really clear. There would be a 0% commission on the first $48,500 of photographer fees ($23,500 + $25,000), and then there would be a 50% commission on any subsequent fees. Before signing a contract, it’s important to have those conversations so that both parties can be clear about what they’re agreeing to (if not why they’re agreeing to it). And if both parties are good negotiators, they can work towards a good (but not perfect) approximation of what’s reasonable. But after the ink is dry and both parties have moved forward and made other promises to other people based on that promise, it’s hard to go back and renegotiate because it would create a cascade of other renegotiations. So ultimately, a contract isn’t really about what’s fair, it’s about what you agreed to.
So I had to ask myself, even though the contract was a bit unconventional, was there any reason we shouldn’t honor it? I decided no. While the $7,500 commission looked like a lot for one $15,000 fee, when compared to the $63,500 in total fees that we brought to the photographer, it was effectively a 12% commission. Was this the conversation that our producer and the photographer’s agent had? We will never know. But that’s the beauty of a written agreement, we don’t have to know the logic, we just need to understand what the words in the document said.
Last month, the client returned again to extend the license for a fourth year, for which we charged $15,000 and split 50/50 with the photographer.
Most photographers work without contracts. However, what we’ve seen is that like with any risky behavior, you will probably be okay in the short run, but you will regret it in the long run. Since there are so many different variables to set in place with any photo or video shoot, and since every project is different, it’s important to have a document that clearly explains what everyone is going to do and what they’re going to get in return. What makes contracts “good,” is that they minimize conflict because everyone can clearly see what promises everyone has made. By minimizing conflict, you can maximize the chances of a long-term, mutually beneficial relationship.
Most photographers work without contracts. However, what we’ve seen is that like with any risky behavior, you will probably be okay in the short-run, but you will regret it in the long-run.
A written contract is also essential when you’re working with a team. While there may be times when a “handshake” deal can work between two people, it’s impossible for organizations to work without written agreements because individual people can come and go, but the organizations need to function without them.
In the past, there were photo agents and there were production companies. Photo agents made their money by charging a commission to the photographer (and often not charging a production fee to the client). Production companies would charge a production fee to their client but they wouldn’t usually charge a commission to their photographer/director. Now that most projects require a combination of stills and video and now that most visual artists are able to deliver both, these cultures have started to merge. Whether you’re working with an organization that you think is an agent or a production company, there are no rules, there are only contracts. As a photographer (or director) you simply need to be able to understand your own negotiating leverage and negotiate your best deal.
Many photographers are intimidated by contracts. But if you simply tackle one contract at a time, one paragraph at a time, you will gradually become more and more comfortable with all the different items a contract needs to include and what everything means.
Limiting the licensing allows you to deliver cost-effective solutions to the client while providing the photographer with compensation that’s proportionate to the value the client is getting. This sets up a classic “win-win” situation where the client can hire the photographer for a modest price, in exchange for modest use of the pictures. Then when they find that the photographer has delivered a lot of high-quality photos they can get additional value from, the photographer can get compensated for that additional value. There are times when a client is willing to pay a lot of money upfront for the convenience of just “owning everything” and not having to worry about any additional licensing in the future. But for more cost-conscious clients, and for photographers who are willing to learn how to negotiate, limiting the licensing will be the most sensible solution for both parties.
There are 3 main ways you can limit licensing:
The nature of any business (and perhaps even more so with the photography business) is that there is no intrinsic value to what we do and there is no book where you’ll be able to look up what a fair price is for a certain type of shoot. That being said, you can find your own fair market value by shooting a lot of assignments, sending out a lot of estimates, and testing the limits of what you can charge.
While we all want to get good at negotiating so that we can protect our own interests, if you want to nurture long-term relationships, it’s important to imagine how your contract looks to the person on the other side of it and make sure that it works for them too. The only way to have a long career is to have repeat customers. And the only way to get repeat customers is to build trust.
For those of you who are NBA fans and also nerds for negotiating (imagine sounds of crickets chirping here), there’s a great segment of the ESPN documentary The Last Dance, about how Scottie Pippen’s contract ended up looking worse and worse as he and the Bulls became better and better. CBS Sports explains it in their article: “Scottie Pippen contract explained: How the Bulls managed to sign Hall of Famer for pennies on the dollar” or you can read New York magazine’s explanation in this article “The Last Dance Recape: The Second Fiddle.“
In short, Pippen agreed to a long-term contract before he and the Bulls were great. Then when they became great, he wanted more money and the Bulls’ owner Jerry Reinsdorf refused to renegotiate. Some people thought that it wasn’t fair. But the takeaway for me is that there’s no such thing as a perfectly equitable contract, and it’s a lot better than having no contract at all.
When George Washington appointed Alexander Hamilton as the United States’ first Treasury Secretary, one of the first things he had to do was figure out how to pay the soldiers who fought in the Revolutionary War. At the time of the War, soldiers were paid in the form of an IOU. After the War, when it was questionable whether the U.S. Government would ever pay back those IOUs, the soldiers started selling them to speculators for a fraction of their face value. Several years later, when Hamilton was actually in a position to settle those debts, there was debate over whether the government should pay the speculators who owned the IOUs or the soldiers who had sold them, and there was debate about whether the government should make partial payments or payments in full.
This is a classic question of how one thinks about “fairness.” Is it fair for a speculator to profit from a business transaction? Is it fair for a shaky new government to pay out all that money? For Hamilton, his decision hinged upon whether the U.S. government can create financial instruments that people could buy and sell (in this case, the soldiers owned IOUs), and in general, are they allowed to make agreements with one another that the government will enforce. Hamilton’s answer to all of these questions was yes, and so he paid all of the IOUs in full to anyone who had them. This policy contributed to the economic success of the United States because it gave people a reason to trust that the U.S. would repay their debts. If you haven’t read it yet, I recommend Ron Chernow’s biography of Alexander Hamilton, which explains all that in great detail (and which also inspired the musical by Lin-Manuel Miranda).
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