I recently got this question in my inbox:

Usually an artist would license their art to be used on physical products, but what if a Licensee wants to sell it as digital files?

I design printable party decoration kits and was approached by a website owner who wants to sell them on her site – in this case the digital art is the product itself. Does this work differently than other licensing deals?

This isn’t the first time it’s come up so I thought a quick post about it would be helpful.

Licensing is licensing – whether it’s for physical products, digital products, games, apps and more.  Some things will vary by industry – royalty rates often vary both by industry and by distribution channel – where the products are being sold.  Art Licensing includes the word “licensing” because it is done through the use of contracts.   The artist grants a license, or permission, to another person or company to do a specific thing. Just like states grant licenses to drive cars, we grant licenses to use our art.

It’s true that most discussions of art licensing relate to physical products but the same basic rules apply to digital products or media (games, apps, etc) as well.

Through the contract, both parties decide the rules of the agreement:

  • What is being licensed.
  • How can it be used (what products – again, physical or digital)
  • How long?
  • Where? Worldwide or in a certain country, region or store?
  • Is it exclusive (they are the only co that can use this art for this purpose) or non-exclusive?
  • How and when do you get paid and how much?
  • What happens if things don’t go as planned?  ALWAYS have termination – or “out” – clauses in your contracts.

Those are the basics and they apply in any situation where you are licensing your art.  You may decide on a set amount of money to be paid up front (a flat-fee license) or a royalty based agreement where you are paid a percentage based on sales.

In the specific example asked – I would assume the artist would want to negotiate a non-exclusive license since she is already designing and selling the printable party decoration kits.  If the website wanted an exclusive – the artist would need to make sure the contract had some terms that would ensure she would make more than she is by selling on her own – stopping selling will mean lost profits – make sure they are recouped!  That could be in the form of an advance that is more than she usually makes on a kit or a guarantee – the website owner could guarantee she would get a certain level of royalties regardless of sales but be paid more if the sales merited it.  This is where negotiation comes in and keeping the best interest of your business and profitability in mind.  Sometimes people get flattered and make bad business decisions.  No matter who the company or website is, be willing to walk away if it isn’t going to be good for you.

Another thing to consider with the many new digital and print-on-demand opportunities popping up is the expected sales volume.  If a website is new and unproven, your sales won’t likely be the same as if your art is in a more traditional or known location (be that a store or website).  Because the risk is higher and the volume of sales will likely be lower, it’s more important to get an advance (non-refundable) and a higher royalty rate so it is worth your time and effort.

Hope that helps!

Here’s to your creative success.

– Tara Reed