Terms Related to Digital Files
Myself, I state in my terms that, when a licensee's project is complete, all digital versions of my images must be destroyed. (I adapted my terms from Jim Pickerell's "Negotiating Stock Photo Prices," which included the returning of physical images as well as the returning or erasure of digital versions.
First, a preface: just about any book written before the digital age is mostly obsolete. I read Jim's book many years ago, and while I had only mild objections to his over-protectionist attitudes (which I'll get into more detail later), I found it to be useful at the time. However, today, the industry has changed so much at every level, that books like his (with apologies) are just not in line with how business is done anymore. Not that some of the "advice" isn't true, it's just dated. For example, "returning film" is understandable and needn't be explained. But, "destroying digital copies" is completely impractical, and doesn't make business sense on either side of the relationship. The concepts between "film" and "digital" just doesn't map over... and neither do most of the concepts those books present.
The initial reasoning for destroying digital media is, as you stated, understandable: you don't want your images stolen by someone browsing through an image library. But what's the real risk? What's the work and other impositions you impose upon the licensee? How do these actually affect the end business relationship, and by consequence, your longer-term objectives?
The risk of an image being improperly lifted exists the moment you give it to them, and the likelihood does NOT increase significantly over time to outweigh that initial risk factor. Now, it sure happens that people lift images--but there are so many people and so many steps in the production process of a document, that by the time it gets to archival, if anyone had any intent, it'd have happened in those first rounds. So, when it comes to archiving them, the risk factor has already been realized.
From a practical point of view, licensees SHOULD be making backup copies of all their digital media, just as you should for your own photographs. It'd be stupid for them not to, so it's inappropriate for you to expect that they NOT do so. No wonder they'd be upset with you if you asked them to destroy them. It happens on occasion that I am contacted by a client, asking for another copy of an image they already licensed because they inadvertently misplaced it (lost either by human or computer error). *I* don't want to be bothered with that--nor should you. That's just an inefficient use of time. To wit, you say:
As far as I'm concerned, if they're contacting me for a relicense, they can ask me at the same time to provide them the image again.
You're asking for more work that you shouldn't have time to bother with. If you actually have time for this, you're not spending the precious, little time you DO have on far more important things. Anything and everything you do should be justifiable in the longer term. Consequently, anything you can do to remove time obligation or work on your part should be regarded as a good thing.
What's more, this can actually generate business. I have several publishers who always archive my images in their internal intranet image library, and as new uses for it come up, a purchase order just magically appears in my email box from the editor for that new book. If they were required to remove the image, there's a lot of orders I wouldn't be getting.
So, where's that balance? Are you further ahead because you PREVENTED someone from stealing an image? Or are you ahead because you tolerate that risk for the benefit of getting additional sales that you would have otherwise not gotten?
Yes, you'll hear horror stories about how people's images are stolen in certain instances, but one can find horror stories for everything. There has to be a weighted balance between what's actually a sustainable risk and what's not. In fact, the company is itself at risk if someone steals an image at various levels: first, if the image is used again within the company, they are culpable for copyright violation, and there are heavy fines with that. If the image is stolen and used outside, they could be held accountable by virtue of one of their employees having done it. The point is, there's always a trail that leads back to the violator in one form or another. Chasing it may or may not be worthwhile -- you'd have to gauge that for different scenarios.
But, this gets back to my premise: spending a lot of time preventing people from stealing images doesn't generate revenue. Worse, it takes time away from doing things that DO generate business. People who are going to steal are not the types who are going to license anyway, so they aren't your potential customers. Spend your time with "clients" and make it easy for them to do business with you.
So, now let me quote your final point:
(Frankly, if I didn't need to replace my dying monitor right away, I'd tell them to forget the whole thing. They've been a pain every step of the way and have numerous other niggling objections to my standard terms.)
My perspective is this:
While I don't know anything of your standard terms, I'm guessing I'd be siding with the licensee here. Your "terms" should be so brain-dead simple and enumerated with one-liner bullet points, that anything more than that makes you "a difficult supplier." There's too much competition to allow yourself that luxury. I have basically four items on my license terms,
You can't use the image for anything other than how stated you'd use the image when you requested it.
Photo credit must be given as "Photo © danheller.com"
Licensee indemnify licensor against third parties.
This license agreement is not transferable
I talk about this more here.