|
Page 10 of 14
Minimal Share of Revenues
A shock to most photographers is that Royalty Free contracts offer them such low royalties, usually netting them TEN PERCENT or less of total licensing revenues.
While the royalty rate stated in the contract may be higher (up to 25%), that does not figure in the standard “distributor’s cut” that can be as high as 50% off the top. So, the photographer’s share of the license fee is actually at best 12.5% (and often under 10%) of total licensing revenues. That’s because RF transactions involve two middlemen – a content developer AND a distributor - who take a combined share of 90% of the revenues.
Why are RF royalties so low? A commonly heard rationale is that RF has higher “marketing costs” than RM. Yet, RF and RM images are processed, uploaded and delivered by the same electronic systems. RF companies have also claimed to need the much higher share of the RF license fees because RF prices are lower than RM. Yet, a common claim to photographers is that the volume of sales offsets their lower share.
SAA asked one industry insider who’s been involved on the distributor side for both RM and RF the question: Why are Royalty Free royalties so low? Here was their response:
“Royalty-Free is all about marketing and economies of scale. It’s expensive to get it rolling and reach critical mass. Once established, each agency between the photographer and the end-user charges whatever the market will bear. To RF agencies, photographer royalties are a major expense to be reduced whenever possible. It’s much cheaper today to acquire existing picture collections or contract inexperienced free-lancers than it is to create quality content in-house RF agencies will take any advantage they can get.”
In short, it appears the only reason why this inequitable RF royalty deal persists today is because it was offered by the RF companies and then accepted by enough photographers to make it stick.
|
