Dan Heller's Photography Business Blog Industry analysis from www.danheller.com

The photography world -- the business, the culture, the art, the politics, the technology.

Site Feed

Subscribe to
Posts [Atom]

My Photo
Location: Santa Cruz, California, United States
My Books on the
Photography Business

Monday, May 09, 2005

Why Avoid Big, Catch-All License Agreements?

So, you're looking for a license agreement, and you come across one used by a major stock agency. It's natural to think, "well, if the big guys use it, it must be good."

The problem with this analysis is, "good" isn't your objective. The real question is whether it can help you the way it helps them. The only analysis necessary is this simple equasion:

(A) The costs in time and resources to pursue a violator of an agreement.

(B) The potential financial return from that pursuit.

The difference between (A) and (B) has to exceed a certain threshold to make it worthwhile, or this is all for naught. However, you also have to calculate the intangible costs, such as the effect it has on the time it takes to close the deal, whether the deal even closes, the impact on the negotiation tone, and above all else, the congeniality between you and your client.

To illustrate the point, we'll take an example, but start at the end of the scenario: you sent a letter demanding money from a company that licensed an image for "print use," but later found that they also used it on their website (against the terms of your agreement). What do you think their reaction will be to your letter? Whatever your answer is, test that against what their response would be if it were to have come from a large, well-known law firm.

Most individual photographers in the course of their careers have learned that letters to contract violators rarely yield as good of a response, or nearly as much money, as to what a lawyer (or firm) can produce. In fact, statistics show that you will find it far too costly in both time and money to pursue contract violators to bother with, unless you use an outside firm. And the only time you'd use an outside firm is if there is "real money" involved. How much is that? Well, considering that lawyer fees for this type of work ranges from $200-400/hour, and it's going to take between 5-10 hours to write the letters, negotiate a settlement, and recover money. So, you need to recover at least $4000 just to cover your expenses. Otherwise, you're throwing your money away. (And even then, you're not making any money yet.) Are your license agreements worth that much to bother with all this? Probably not. The value of most typical stock license agreements that everyday photographers engage in on a day to day basis is considerably less.

Since you're unlikely to engage in legal wrangling with a violator, one might ask, why bother with any sort of agreement? Well, you need something to establish what your business relationship is; I'm just arguing not to go overboard with language, especially when most of it doesn't apply to your business arrangement.

Ok, so if you need something, what's wrong with using those agreements that big agencies use, even if they are an overkill? The answer to that gets into the "business sense" of it all. That is, smart business people know that business is about being efficient and effective. Your objectives are:

Negotiate for the largest amount you can,

Close the deal and collect payment as quickly as possible, and

Assure that the client is comfortable with you.

In this last case, many photographers feel that, unless they show strength, they are showing weakness... That, unless you present a strong, iron-clad contract, you will appear weak and amateurish. True, if you're negotiating a multi-thousand dollar agreement, that may be appropriate. But, if you're doing all that for a $200 license, you're just appearing naive and ignorant. What's more, chances are that the person you're dealing with at this level is unaware of such posturing: he or she only wants to get your image, pay you money, and get back to work.

It serves each of the above objectives to present your client with license terms that are as easy to accept as possible by the lowest-ranking employee that has signing authority for expenditures. Anytime you present a contract with terms that has to be passed up the management chain, you risk slowing down the process, engaging more people that don't need to be part of the discussion, and frustrating the real decision-makers that want to move on with business. If you present a document that contains terms that possibly end up on the company's lawyer's desk (or worse, their law-firm's desk), you not only slow down the sales process, but could actually cause it not to happen. Somewhere within that business hierarchy, someone with no patience for this is going to act on his perception that the photo market is saturated with content, and another source that's easier to work with is right around the corner. If that happens, you and your contract will yield no money at all.

And to think: all this fuss over a contract that you have very little resources to actually defend anyway.

What makes all this even more insane is that, in the end, any violation that the client may do would still require the exact same actions on your part. If you were to write a letter, you'll write it anyway. If you were to hire a lawyer, you'll hire one anyway. And here's where the rubber meets the road: no matter what you do, your position is no better because you've got a big, bulky, catch-all contract full of terms that, most of which, have nothing to do with your actual agreement. The best thing to have is what I recommended in the first place: a short, concise, briefly enumerated list of what the client is licensing the image for. That's it. This saves you time, hassle, negotiation conflict, and potential annoyance to the client. What's more, it's easy. And, the easier things are, the faster and better business negotiations are.

So, if all this is true, then you might ask, "so why do the big agencies use these big, catch-all contracts?" Several reasons, all of which stem from the exact same foundations: efficiency and effectiveness.

First, these agencies have thousands of clients doing tens or hundreds of agreements on an ongoing basis. Unlike you, who can customize the terms of any given contract because you only do one "every so often," these agencies can't spend that kind of time with customization. They construct these catch-all agreements because it's more efficient to do so.

As for effectiveness, it's the same thing: their lawyers--who are extremely ready to write letters and file papers in court--are well-versed in how to argue and defend the very language of their own contracts. The wording in those agreements are intentional and precise for a reason: they wrote those words. A contract is almost like one side of a dialog--the other side is spoken in court, which is where it all comes together. Your adopting a contract that you haven't written (and don't have the background for), would be like trying to ad-lib a character's part in a play that you've never seen.

Lastly, it is not only more likely that a large company will pursue violators, but their cost in doing so is much lower. Not only is it distributed among a greater number of "cases" to pursue, but the investment in that legal infrastructure has already been made; the legal engine wants to remain engaged so as to pay off that investment.


When it comes to business terms and contracts, keep it simple. Just because the big companies have big, catch-all agreements is not reason enough for you to follow in the same tracks. Spend your time and resources on the big-ticket items, and leave the "little-ticket" items as just that: simple tickets. If you have a contract or license agreement that's a low-end, basic use, you shouldn't be investing the kind of time and attention that would normally be warranted by one that exceeds several thousand dollars. If you do have a pricey business opportunity, and you feel there may be some exposure to not having a lawyer-backed contract, then by all means, consider using one of these agreements. But don't do it uninformed--it may be time to hire a real lawyer. The rule of thumb, however, is also one that your clients instinctively know: no one is going to take legal action on a use or agreement unless that violation can yield at least as much as it costs to litigate it (plus a premium). If most of your agreements are for smaller amounts of money, treat it as such. Otherwise, you're doing yourself no favors.


Post a Comment

Note: Only a member of this blog may post a comment.

<< Home