Recently an artist emailed me asking what a standard royalty was in a category I never worked in… so I couldn’t answer and as I mentioned before, I have a new Individual Question Policy that I am resolved to stick to. (Click here if you don’t know what I’m talking about)
The question also included an interesting point about percentages… if you really look at how the money is divided up from the sale of a product, you might never get into licensing. 🙂
The artist was having trouble understanding why the manufacturer would get 50% of the sale price, a sales rep would probably earn 15% while the artist would only get 8-10%. Simply put – because that is how the business works.
Retailers MUST get a 50% markup – sometimes they want more. There has to be room in the price to create the product, to pay the employees and sales reps of the manufacturer and of course they need to make a profit. The cost of the art is part of the cost of goods and unless you are the NFL, Dora the Explorer or some other very sought after brand, you simply aren’t going to get a royalty that is as high as the sales rep who sells the product featuring your art.
You could sell original art and make a higher percentage per piece…
If you paint and sell original artwork, you would keep 50-100% of the sale price. I assume (and it is an assumption because I’ve never done this) that if you sell your art through a gallery, they will get about 50% of the sale price as their commission. If you sell your art through your website or directly to a consumer in some other way, you might get to keep 100% of the sale price.
Making a few more assumptions, let’s assume you sell a piece for $300, your cut will be between $150 and $300.
If you sell handmade products on Etsy, you pay 20¢ to list the item and a 3.5% sales fee. Add to that the fee to collect the money – usually via PayPal and you will earn over 90% of the sale price. Then deduct the cost of creating the product and you will have your profit.
Now let’s look at licensing your art…
If you instead choose to license your art to a manufacturer to put on a mug, you will earn between 2 and 12% of the gross sale price – depending on where the product will be sold and what type of product your art is going to be on. You create the art, they do the rest. No selling, no cost of goods, no time making products to sell on Etsy, etc.
Let’s assume your art is going on a coffee mug (to keep things simple) and you will make a 5% royalty. If the coffee mug is going to retail for $9.99, the wholesale price to the store is going to be about $4.99. 5% of $4.99 is 24¢. To make $150 – the manufacturer will have to sell 625 mugs and to make $300 – they will have to sell 1250.
Art licensing is a numbers game – you make money by assuming the manufacturers will sell large volumes of products with your art on them. In addition, artists strive to have the same art on multiple products so there is more than one company paying them for the same effort it took to create the art.
In the end, it is up to each individual to decide how they want to market their art. If you choose to license your art and you aren’t sure what a standard royalty is for an industry – by all means do your research! Ask in social media groups and forums, look at the Graphic Arts Guild’s Ethical Pricing and Ethical Guidelines book, do Google searches. I don’t have a list of standard royalty ranges on my blog but I believe others have blogged about it.
Here’s to your creative success –
– Tara Reed