Many artists who are new to licensing ask this question.  Art Licensing is primarily done on a royalty basis – meaning you will receive a percentage of sales.

This is great when sales are high, because you stand to earn substantially more than you would have been paid on a flat fee or work-for-hire basis.  However, there is always the risk that the product won’t do well – for one reason or another – and you will earn little to nothing.  This is simply the nature of licensing and you need to decide if you are ok with it.

In art licensing, you share in the success or failure of a product featuring your art with the manufacturer.

This of course means, that artists in licensing spend a lot of time creating art, not knowing if they will earn a dime.  We aren’t exchanging time for money, but rather creativity for opportunity.  This will feel strange at first, to artists who are used to being employed in a traditional sense or billing by the project or by the hour.

That doesn’t mean having some basic understanding of what to expect in the way of royalties isn’t important.

When you are first starting out, you won’t have as much negotiating power over royalties as when you are a larger business with more name recognition and consumer demand for your art.  In my experience, there is little wiggle room on rate, and more on other terms, such as including your name and web address on products or packaging.

The Graphic Artist Guild’s Handbook of Pricing and Ethical Guidelines* is a great resource for all things art fee related.  For example, I’m looking at p. 138 of the 12th edition and looking at comparative fees for Greeting Card and Novelty Design.  It gives a range of flat fee and royalties for Calendars, Gift Wrap, Greeting Cards, Mugs and more… there are many tables like this in the book.  It’s a handy resource I think every artist should have in their library.

Royalty rates vary by industry and by distribution channel – meaning, what kind of store the products are sold in.  So if you have a manufacturer who specializes in higher end boutique stores – you should expect a higher royalty than from a company selling into Target.  The amount of product sold will vary GREATLY so you need to be compensated differently.
Here’s to your creative success – now go get a copy of the Handbook at your local bookstore or order through Amazon with the links provided.*
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– Tara Reed

* FTC disclosure: these are affiliate links to the Amazon listing of the book, if you click it, I will receive a small commission for the referral.  This helps me be able to spend my time blogging and is much appreciated!