Usage Rights & Royalties

**Pixelestial** · May 7th, 2007, 11:19 AM

I've grown to have a pretty good idea what my art is worth (if that's even possible). What I'm not clear on, is the additional cost for the transfer of usage rights. Is there some professional industry standard for this? I'd feel better hearing some real-world input on this than just pulling some random number out of my ass.

So here's my situation. I'm doing some designs for a major game journalism website who plans to use them on t-shirts. At this time, they haven't indicated what their budget is for this merchandising, but it's otherwise a fairly straightforward job. I understand (and will include in my contract) that no rights are transferred until I'm paid in full, but I need help figuring out what usage rights are worth these days for a project like this. Is it a set number? Is it a percentage? Does it fluctuate with the complexity of the design? What if they decide to use it on other merchandise besides t-shirts in the future?

Also, about royalties. I'm under the impression that royalties simply aren't worthwhile, and that I should just get a lump sum for my work. I'm okay with that. But are there any situations where royalties are generally included in the contract for licensed work?

**Verithin** · May 7th, 2007, 12:22 PM

You can go a few ways with this:

a) Work for hire (just straight pay, nothing else)
b) Work for hire + IP (Intellectual property) buyout
c) Work for hire + royalties

a = Whatever you negotiate as a base working salary ... a lot of people who KNOW ahead of time that they won't be able to get a deal like (b) or (c) try and charge more so that they make sure the capitalize on some of the revenue that the client will get when they sell the work.

b = Whatever you negotiate as a base working salary + a negotiated sum that transfers usage / ownership rights to the company. This can be any sum but usually is a base fee per illustration / character.

c = Whatever you negotiate as a base working salary + back end participation / royalties. Royalties can be amazingly complex BUT, if you can... regardless of the royalties offered try to get them based on GROSS profits... not NET profits. NET profits are the money left AFTER all expenses have been paid... which is usually $0.00. As well... ALWAYS make sure that your contract includes a reporting period from the client that shows accumulated earnings and your %.

Bottom line:

A contract can consist of all three (a), (b), (c) elements. Some things to remember for each specific type:

a) IF you know that the company doesn't do (b) or (c) then try and charge a larger base fee.

b) This can be anything and is a touchy subject with a lot of clients so be careful how you proceed. Usually, as with (a), you're trying to make sure that you're getting a piece of the pie from potential earnings in the future. Reputable companies are used to this type of a set-up and, in fact, would probably prefer it to avoid any potential legal issues down the road. The more prominent the contract the higher the buyout fee usually is AND, the more reputable the artist the more they can ask for.

(c) A lot of people will negotiate a lower upfront fee for a chance to get royalties. That's up to you. Royalties can be fairly complex and based on usage (type of reproduction) to placement (type of apparel, item, media, venue) to amount (originals = a %, reprints = a % etc.) to area (area of usage = a %, different country = another % etc.) etc. Really, you can get royalties written in for almost anything... then you'll need a lawyer to track it all.

With ALL of the scenarios your "Moral rights" (your ability to protect the usage and representation of your work that does not in any way reflect badly upon you or the integrity of your work) are yours for life UNLESS they are specifically called out and made part of the buyout / royalty agreement. Most clients will want to ensure that their ownership includes moral rights... but if they don't, they're yours. So, basically if they buy your work and you still own the moral rights and 1 year later you see that your artwork has been modified or used in a way that you did not agree to... you can challenge that modification / usage. Of course... if you do that you may never work for that client again but, sometimes you have to stand up for yourself.

**ALWAYS bring up these elements BEFORE you sign a contract because you'll rarely get a chance to retrofit an existing deal.

***IF you're an in-house employee (full-time, salaried) (b) and (c) usually do not apply as you're employer will own EVERYTHING you create at work, period. With that in mind be careful of what you work on at work.

Good luck!

**Qitsune** · May 8th, 2007, 05:42 AM

For a good idea o what the standards can be these days, have a look at the GAG handbook

**kendi** · May 8th, 2007, 03:48 PM

yes, quitsune is quite wise.

**Pixelestial** · May 10th, 2007, 09:49 AM

Thanks for taking the time to type that Verithin. That's some great information to have. It'll make my final decision that much easier.

Qitsune, kendi: Yeah, that's probably worth ordering. However, I needed the info right away and didn't have time to wait for the book to ship. But it'll be a good thing to have in the future.