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License It

by Cheryl Phelps

Licensing is a 70 billion dollar industry and “Art Licensing” makes up 10% of all licensing. Art licensing is growing everyday with a variety of products focused on brands, and identifiable artists being collected by name and style.

Art Licensing isn’t just relegated to those in the group of “Top 100 Licensors,” such as Mary Engelbreit, Paul Brent, Flavia, and even Jim Benton of Happy Bunny™ fame who beat them all out to win “#1 Top Art Licensor” at the 2005 Licensing Show in New York. From edgy to sweet and everything in between, all styles have a home on products. I’ve joined the ranks of Art Licensors and so can you.

The Licensor and the Licensee

We all get way too caught up in our titles when it comes to art. So, in addition to all your other possible titles—designer, illustrator, cartoonist, painter, photographer, etc.—you now can add “Licensor.”

I swear it took me years to get straight which one I was. Was I the Licensor or the Licensee? And, all the legalese in contracts mystified me too, until I took contract classes at the New York Graphic Artists Guild to understand the big mystery behind a licensing contract. So here’s the breakdown of “Licensor” vs “Licensee.”

Licensors are “us”—the creative image makers, the holders of Intellectual Property (IP), our licensable images. Our work is our intellectual property, and we alone hold the right to grant the use of our images on products. We may have signed a contract with a licensing agent or rep to act on our behalf and they can negotiate contracts for us, but we still have the end word on accepting the final contract.

Licensees are “them”—the client, the company, the product manufacturer, the entertainment provider, and the middle man between us and the retailer who provides the public with our work on either products or entertainment content.

Licensing Art Basics

 

Art Licensing entails any creative image that is contractually licensed to appear on any manufactured product or entertainment vehicle.

The complex “Licensing Agreement” basically gets down to what I call “your stuff on their stuff.”

The terms of an agreement in a nutshell are:
1. Who are they and who are you?
2. How long does this agreement last?
3. What products will my images be on?
4. Where will they be sold?
5. How much are ya gonna pay me in advance and in royalties?
6. How often am I getting that check?
7. How do I get outta this deal if I want to?

Then, of course, there’s all the other legal hooha boilerplate terms to support that we’re each gonna do what we say we’re gonna do, who’s accountable and how if we don’t, and what state rules if we have to go to court and such.

For the artist, the main objective of any licensing agreement is to receive a fair and sizeable advance and a great royalty percentage. A successful partnership of Licensor and Licensee is that the contract is mutually beneficial to both parties.

The royalty rate is usually figured on the wholesale sales of the product, unless of course the company maintains retail locations or a Web presence with retail sales. In those cases, the percent may be calculated with partial wholesale as well as retail sales figures.

There are industry standards for advances and royalties. The Graphic Artists Guild Handbook: Pricing & Ethical Guidelines (the Handbook) can help you determine the basic parameters of pricing. When a company wants my work, I’ve always consideredthe Handbook a great starting point with which to begin the pricing conversation.

Aside from the Handbook, the figuring of a royalty percentage and advance rate— and the amount of each— is based on asking some very important questions of the potential Licensee.

I call these questions “The Five Questions,” and anyone I ever speak to about licensing, I tell, “As a Licensor you must get the answers to these five questions from the Licensee before you can proceed to even considering signing any licensing deal:”

1. What products does your company produce?
2. Where are your products sold?
3. What are the wholesale prices of your products?
4. How big is your first production print run?
5. How often do you go into multiple production runs?

1) The type of products sold determines the industry standard percentage for that product range. Art Licensing is usually a royalty range of 3-10%. Brand and character licensing can go as high as 15%.

2) Where it’s sold determines the percentage as well. Mass markets (such as Target, K-Mart, Wal-Mart), start as low as 3-5%. Volume sales, but closer cost margins, set the standard percentage lower than it is for “Specialty” markets. Stores with fewer locations fall under Specialty markets, and royalty percentages range from 5-10% of sales. The quantities of products manufactured can also be lower in the first production run if the product is only sold in the specialty markets.

3 & 4) The product’s wholesale price multiplied by the quantity produced in the first production run will give you the information needed to help you determine your fair advance and potential royalty earnings. For example, the math equation for a product that sells for $10.00 wholesale with a first production run of 1000 units would be: $10.00 x 1,000 units = $10,000 total wholesale sales. A 10% royalty would give you $1,000 if the licensee sells only the initial 1,000 units. A fair advance for this equation would be $500-$1,000. Of course, any additional production runs beyond the first one will increase the total royalties earned over time.

5) Knowing how often the company reruns the product in subsequent multiple production runs will help you forecast the long-term income that will possibly be generated by the success of this licensing deal.

If licensing contracts aren’t your strong point, seeking the advice or counsel of an Intellectual Property Attorney or Licensing Contract Consultant before you sign is highly recommended.

Potential Crossover Markets

I know you’ve been a successful illustrator, designer, or creative image maker up until now, so why on Earth consider the possibility of licensing your work at this point in your career?Because it’s there, Blanche, because it’s there. And “there” can be making money while you’re asleep!

“There” can be going to your mailbox and finding checks for art that you did 10 years ago, which a company decided last year was the perfect fit for their product — a product you never imagined your work on, but nonetheless, a product that the company saw it was great for.

Licensing your art to new markets is a way of generating long term income for yourself and the inheritors of your art. I call it “gravy money.” The first advance is the potato, the royalties after the advance, the gravy.

So if you can begin to see the potential for crossover markets for your work, you can begin to see the potential for licensing revenue to appear in your mailbox, too.

What’s in Your Store?

I tell everyone I coach in my workshops and classes to “imagine opening the door to your own store.” What products are in that store? Which of your existing images are on those products? What new images do you want to add to build on existing collections of images? What new lines do you want to create to license? Talk to any Art Licensor and you’ll find an artist, designer, photographer, or illustrator that believes in the mileage of his or her images on products.

Your work doesn’t just stop with that one thing you might have done for an assignment. Perhaps the sketch that you did of a character years ago gets revisited and suddenly starts its journey to become the next Saturday morning cartoon. Entertainment licensing builds from art licensing and ideas that you help generate. Your spark of an idea finds a home on products, and you begin to develop lines to license, complete with supporting product placements for backpacks, lunch boxes, bed linens, and paper party goods. An image that had a former home on a magazine cover can find secondary homes as posters, prints, journal covers, calendars, cards, gift items, t-shirts, and more.

The entire world shops, and recent statistics show we ain’t stoppin’ shoppin’ anytime soon. So where does that leave you as the creative image maker? In line to have your images be the next “It” thing—that’s where.

Licensing Your Archive

First, take a hard look at your own existing art archive. Brainstorm with it: Do I see 10 products with this one image, or pushed to the limit, I can only think of two?  Successful licensing collections are built by many products supporting the use of your images.

Can I take one existing piece and bring in supporting designs, illustrations, or works that evolve into a collection?
I call it the “prom queen and her court.” The “queen” is the star illustration or design, and the “court” are the elements that support the collection. An example of this concept: in a Winter Holiday art licensing collection, a snowman may be the “prom king” and the supporting “court” are his friends: the cardinal, the snow flake, the pine trees, and snow gal pal. They all contribute to telling a visual story to be broadcast across product lines.

I have a Christmas collection of products with Frances Meyer, Inc. The starting point was one 9˝ x 11˝ Christmas design I painted in gouache on paper at a painting tea party up in Santa Rosa, CA, over 11 years ago. That one design has found its home on more than 15 paper products. Over the course of 9 years on the market, that same Christmas design along with a single birthday design (see segments from both in box at right) I did for them have earned me over $55,000 in 5% royalties. That means the product sales generated from those two designs have made over a million dollars in revenue for the Licensee. And, that’s just one licensee.

The two designs are still available to license to other companies. And, I still have lots of other designs and illustrations to license from my existing archive. Can you see how valuable your own art history is?

Developing New Licensing Lines

Not only do I have my own archive of existing art to license, I also have ideas waiting to come out of my hand to be created. I tease that they are stacked up like planes waiting to land and take off from New York’s LaGuardia Airport. What idea from the cosmos keeps knocking on the side of your head to create next?

Pay attention to your own instincts and vibes about what is trying to manifest into your creative reality. Your own work is trying to tell you something.

I tell my students to be trend setters, not trend followers. Yes, pay attention to trends, but don’t be ruled by them. Start your own. A character you drew as a child may have been trying to get itself on product for years—it’s just waiting for you to learn what you need to know to make the best licensing deal for yourself.

If you’re into character-driven art, develop the character profiles and a point of view for your characters as a whole and individually. Create a world that they live in and a series of plots they can play out to generate an audience fan base and convince a Licensee that they have marketing and product potential.

If you see your work as patterns, illustrations, or photographs, your art tells a visual story on product. Develop lines along thematic buying or sending occasions that drive the sale of the products. Is a line driven by style, character, print, pattern, type, motifs, or icons of the genre —winter holiday, floral, edgy, kiddo, bright, monochromatic, color, B&W, realistic, landscape, graphic, illustrative, portraits, scenes, etc.? What drives the look? Who is the audience fan base? What is their demographic? What products do they buy? And, yes, your stuff can be on that stuff.

Once you decide what great new lines you want to create, you need to employ, barter, or get yourself computer savvy enough to prototype your wonderful work onto product templates. Draw a cartoon template and place your image in formats, such as:
1) plate, cup, napkin
2) gift bag, gift wrap, gift tag
3) comforter, pillow sham, dust ruffle
4) t-shirt, backpack, hat, and more

Show the Licensee that you understand your work on itsz Licensee to see your work on their product, you first have to be able to envision your work on any product at all and see the possibility and potential of building a licensing program.

Tradeshows for Licensing

So you look at your archive and you get excited about the pieces you have that can start whole collections, or you have a great collection of amazing solo pieces that you visualize being spread across multiple product lines…now what? What are ya gonna do with these wonderful creative masterpieces? You’re gonna get yourself to a licensing tradeshow, that’s what.

There are two international shows based in the United States that support licensing: Surtex and the Licensing International Expo. Surtex takes place every Spring at the Jacob K. Javits Convention Center in New York City.

Surtex runs concurrently with the National Stationery Show and has 400+ exhibitors. It is divided into two main exhibition areas: Hall 1E and the Galleria/River Pavillion. Surtex art exhibitors show characters as well as print-driven inspired themes and illustrations that appeal to a broad product client base. Because Surtex occurs at the same time as the Stationery Show, it brings in attendees from all kinds of gift and paper manufacturers, as well as many companies buying and licensing images for textiles, apparel, home furnishings, toys, and much more.

Licensing International Expo is a stand alone show. The Art Licensor needs to be in the “Art & Design” section of the show. Art & Design is made up of more than 250+ exhibitors. While the Licensing Expo is predominately character driven, the exhibitors in Art & Design showcase all kinds of images to license as well. The rest of the main floor of the exhibition space is taken up with what I call the big boys of entertainment and licensing—Viacom, Nickelodeon, Time Warner, Scholastic, American Greetings, etc. — and big reps, such as United Media, Cop Corp, and Art Impressions. The latest Harry Potter, Batman, or animation movie all the way to retro revival characters like Strawberry Shortcake or the ever famous Sponge Bob compete for the attendees’ attention.

Either you or your rep has to be standing in front of your work on a booth wall at one of these two shows within the next five years if you actually plan on being a successful Art Licensor. I exhibited at Surtex for 10 years—with my rep and then on my own—and at the Licensing Expo for 3 years. After 13 years in a row of tradeshows, I’m on a tradeshow exhibition break, but even I know I’ll have to go back to doing them again to really get my work out in front of the licensees.

Tradeshows are the biggest advertising vehicle that I have used to drive my licensing career. You stand still and the world walks by; they stop if they’re interested in what you’re offering to license. It’s an amazing marketing tool, with instant feedback.

Licensing deals, however, can take months or even years to manifest from even one show. Deals tend to be bigger and generate more income in the long term, but the contracts alone can take months to negotiate. Patience and a career goal plan are key to seeing beyond the immediate assignment that may have shaped your income before.

I always recommend you walk a show prior to exhibiting to see if this whole licensing world still appeals to you after seeing the scope of where it can go. Some folks say “yes” and jump right in; others say “forget-about-it, it’s not for me.” And then there are artists who might say, “I could find a rep to do the biz stuff, and I’ll do the art stuff.” So, you can walk the shows and see which licensing agents or reps you vibe with and want to submit your work to.

Licensing Agents and Reps charge from 30-50% to act on your behalf at tradeshows, doing marketing, making licensing deals, and negotiating contracts. A great rep is worth every penny of that percentage to grow your licensing business.

To License or Not to License

Today’s art market calls us to be not only creative image makers but creative thinkers as well. I have attended all four ICON Illustrators conferences and taught the two-hour licensing workshop at ICON4, the morning prior to the conference starting. For me, the common thread winding through all the conferences is our industry is changing; now what are we gonna do about it? I have been inspired by the other speakers reminding me that, as I too daily reinvent myself, I need to validate my own art history and look to the future to new venues, so I can keep creating my art.

Whether it’s my illustrations, designs, or paintings, it’s basically just “my stuff on their stuff,” so licensing, instead of flat out selling, my stuff to companies just makes sense to me. So, make it; then license it!

Cheryl Phelps has been licensing her art for 20 years onto a vast array of cards and products. A former artist at Hallmark Cards in Kansas City, she went freelance in 1987. Her clients include Hallmark, American Greetings, Keds, Crayola, Target, Kodak, Mikasa, and Scholastic. Phelps teaches as an Adjunct Professor at The School of Visual Arts and soon at FIT in NYC. She also contributed her licensing expertise to the Graphic Artists Guild’s Pricing & Ethical Guidelines, 12th Edition. In addition, Phelps conducts workshops, lectures, and licensing consulting nationwide. She offers her “Greeting Card, Licensing & Art Biz” workshop in New York City and in San Francisco. For more info about workshops and consulting, visit www.cherylphelps.com.


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