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Real World Pricing & Negotiating

Monday February 11th, 2013

by Bill Cramer

Introduction Photographers often feel overwhelmed at the thought of putting together an estimate for a new client. But it doesn’t have to be that way. This article will introduce you the information you’ll need to create a proper estimate for commercial photography assignments and to speak confidently with your clients about those estimates.

Please take my advice with a grain of salt and implement it at your own risk, knowing that I am neither a lawyer nor an accountant. I am only speaking from my personal experience as a photographer, with some additional help from our producers at Wonderful Machine. Though there are prevailing rates and actual invoices that I will share with you, no one can tell you what to charge. Every pricing situation involves a unique combination of photographer, client and subject that must be evaluated on its own merits, and everyone must negotiate their own best deal. The dramatic changes that digital media have brought us, and the turbulent economic times that we’re still experiencing have created an atmosphere where there is often no rhyme or reason to photography pricing. And just as there’s no “right” way to make a photograph, there’s also no “right” price for a given assignment, or “right” way to structure an estimate.

However, by understanding the factors that drive value, by sharing honest information with other photographers and through your own trial and error, you’ll become better and better at creating estimates that will allow you to get full value for your photography. (Please do not share this information with your clients in an effort to convince them to pay you the rates I suggest. It will only annoy them and make you look foolish. It will be much more effective to simply learn as much as you can and make your own case.)

Here’s what I’ll cover:

Concepts
Terms
Contracts
Pricing
Negotiating

CONCEPTS

Copyright The fundamental driver of value for commercial photography comes from the copyright law. In the U.S. and in many parts of the world, the moment you create a photograph, you own the reproduction rights to that image. A client can only legally use it with your expressed permission. That simple fact allows photographers to negotiate fees based on how the photographs are being used (hence the value to the client) rather than simply the time it takes to make them (the value to the photographer). While you don’t need to register your copyright in order to own it, you will need to register your copyright with the U.S. Copyright Office in order to fully protect it.

Language = Power Language is what separates humans from other animals, and it’s why we’re in charge. Many photographers are drawn to photography because it doesn’t seem to require the use of language. But no matter how good your pictures are, you’ve got to use language to get paid.

Language x Pictures = $ Whatever your skills are in life, your ability to use language will magnify the value of those talents. Commercial photography is no exception. By and large, people don’t get paid what they’re worth, they get paid what they negotiate.

TERMS

Proposal Most times, when a client asks a photographer to quote on a job, what they expect to get is a proposal consisting of a cost estimate, terms & conditions and a delivery memo. The cost estimate is normally a one-page document that lists the fees for the photographer, the licensing agreement, and all of the production expenses. The terms & conditions page explains boilerplate information like when you expect payment, who owns the copyright, who is going to indemnify whom, what the turn-around times are, etc. The estimate and terms & conditions pages are typically combined into a single PDF and attached to an email, with the delivery memo written into the body of the email. At a minimum, that delivery memo will say something like this:

Jane,
Thank you for thinking of me for your ABC project! I’m attaching a cost estimate for your consideration. Please let me know if you have any questions. Otherwise, if you’d like to move forward, kindly sign and date both pages and return to me. Thanks!
Bill

For many projects, it will also be helpful to say a little bit about how you plan to execute the shoot, when it isn’t completely straight-forward.

Licensing Agreement A licensing agreement might sound complicated if you’ve never written one before, but it’s really simple. With commercial and editorial photography assignments, the photographer isn’t selling the pictures to the client, they’re licensing those pictures for a particular use. The licensing agreement simply describes that use. It’s often just a couple of sentences describing the pictures you’re going to take, how long it’s going to take to make them, how the client can use those pictures (and how many) and how much they’re going to pay you. For example, for a basic annual report project, the licensing agreement might say: Fee, for Bill Cramer to create environmental portraits of 8 customers over a period of 4 shoot days, and upon payment in full, the following rights are granted to Comcast Corporation: one-time use of 8 images in the Comcast Annual Report and Publicity Use forever…9500.00

Treatment For more substantial assignments (especially for national advertising), a simple proposal will not be enough to get you the job. In those cases, you’ll have to work up a treatment to provide more detail to help support the idea that you’re the best person for the job. Not only will you have estimate and terms & conditions pages, but you may want to include samples of your photographs that are similar to that assignment, possibly a mood board of other pictures that offer inspiration and style references, you’ll talk about how you plan to execute the shoot (from a creative and technical perspective), you’ll map out a production schedule showing each step of the process, and you’ll say something about your experience, capabilities, facilities, crew, and clients.

RFQ (Request For Quote), Creative Brief, Spec Sheet, Creative Call For small shoots, you might get all the information you need to put together a quote in a single phone call with the client. But for big shoots, especially advertising, the estimating and selection process is going to be more elaborate. The art buyer will typically send the photographer a creative brief that describes the photographs they want you to make and/or a spec sheet detailing the licensing they need, logistical considerations like deadlines, and other important production elements (together, these make up the Request For Quote or Request For Bid or Request For Estimate. The photographer, agent and/or producer use that information to produce a cost estimate. At some point during the process, you’ll participate in a conference call with some combination of the art buyer, art director, your producer, and sometimes even your stylist or other crew members critical to the shoot. For big shoots, that creative call can be a big factor in determining whether you get the job or not. It’s like an interview where the agency will want to hear more about how you’d approach the job and gauge your level of enthusiasm for the project. Perhaps most importantly, they’ll want to find out whether you’ll be fun to hang out with for the duration of the shoot. For smaller projects or for photographers they’ve worked with before, a creative call often happens after they’ve already chosen you for the job and it’s just all about ironing out the details of the project.

Media Buy The media buy describes how many ads the client is going to place and where they will appear. It’s perfectly reasonable, when quoting an advertising assignment, to ask the client what the media buy is so you can adjust the licensing fees accordingly. You won’t always get it though, whether the client knows that information or not.

Cost of Doing Business Knowing what it costs you to run your business on a daily basis can be a helpful guide when deciding whether a particular job is worth doing. You calculate your CODB by adding up all of your yearly fixed overhead costs (like staff, office/studio rent, equipment, supplies, insurance, etc.) and dividing by your average number of shoot days per year. So let’s say your fixed overhead is $100,000 and you shoot on average 2 days a week (100 days/year), that means that your cost of doing business is 1000.00/shoot day. So in order to make any money at all, you have to bill at least 1000.00/day. Now that’s all well and good. But some photographers misconstrue this to mean that their fixed overhead costs should determine their prices. Well that’s about as foolish as going to your boss and telling him you need a raise because you just bought an expensive new house. So while it’s good to have that number in the back of your mind, it’s independent of the value of the assignments you’re bidding on. Your revenue dictates what kind of overhead you can handle, not the other way around. Sometimes your overhead will make you more competitive. Other times it will make you less competitive. For example, if you’re a food photographer and you have a professional kitchen and a room full of props, that will make you more desirable than an equally skilled photographer without those things. But by the same token, if you’re bidding on a location portrait, you’re going to have to charge more to make the same profit as another photographer without his own studio.

Bid, Quote Sometimes a photographer might prefer to send out (or a client might prefer to receive) a bid rather than an estimate. With an estimate, the final cost to the client might be a little more or less than the estimate, depending on actual costs to the photographer. A bid can look just like an estimate, but you simply specify on the Terms & Conditions page that the client is going to pay the bottom line regardless of actual costs. If the photographer comes in under budget, they make more money. If the photographer comes in over budget, they make less. Sometimes a bid can simply describe the details of the shoot, the licensing and just show one line for the fee. There are times when a client will ask for an estimate, but then say that you can’t go over the estimated amount. That doesn’t work. It’s either an estimate or a bid, but it can’t be an estimate when you come in under budget (heads I win) and a bid when you go over budget (tails you lose). A quote is a general term that could describe an estimate or a bid.

Estimates vs. Contracts Estimates typically cover a single assignment. Contracts cover any number of assignments over a specified period of time. There are some clients (magazines especially) where it’s more convenient to craft an ongoing contract rather than writing an estimate for each individual assignment. This allows the photographer and client to negotiate once and then do lots of assignments without additional negotiations. Editorial assignments lend themselves to this type of agreement because they tend to be fairly uniform. Commercial assignments can be so different from one another in terms of execution and licensing the the assignments are so sporadic, that individual estimates are the norm.

Licensing vs. Usage The terms Licensing and Usage are often used interchangeably, but there’s a subtle difference. Licensing refers to the way in which a client is allowed to use your photos. Usage refers to how they actually intend to use them (or how they’re actually used). So while a client may want to pay for the convenience of licensing “collateral use forever,” they might only use the pictures one time in a brochure.

Sub-Contractor vs. Agent Many photographers have agents who help them get assignments. The client will typically pay the agent, then the agent will pay the photographer when they get paid. When a photographer is working directly for an ad agency, that’s a sub-contractor relationship, not an agent/client relationship. So it’s not reasonable for the ad agency to make the photographer wait to get paid until they get paid by the client. The photographer’s contractual relationship is typically with the ad agency, not the end client. The ad agency owes the photographer money independently of getting paid by the client. In the same way, when a photographer hires an assistant, that’s a sub-contractor relationship, not an agent relationship. The photographer owes the assistant payment independently of their payment by their client.

CONTRACTS

Get it in Writing There are many advantages to getting a signed agreement between you and your client, and no disadvantages that I can think of.

1) Memory. Even the simplest photo shoot has so many variables, it’s impossible to remember them all.

2) Posterity. Even if your client has a perfect memory and is perfectly honest, they could switch jobs a month after your shoot, leaving you with no record of your agreement.

3) Clarity. A written contract forces both client and photographer to be clear about their expectations of one another. Vagueness and ambiguity lead to misunderstanding and conflict, which are not good for healthy long-term relationships.

4) Guide. A good contract will guide you and your client through the negotiating process. It not only prompts you to consider all the different elements of the project so you don’t forget anything, it provides you and your client with lots of different ways to negotiate a mutually beneficial deal when budgets are tight.

5) Signature. It’s not enough to put your agreement in writing. You’ll want your client to actually sign it. Most estimates require several revisions. A signature makes it clear which of those is the final, agreed upon version. Without a signature you have no agreement. You will occasionally run across clients who resist the signature part. But you should take that to mean that they don’t like your terms. So it’s best to continue negotiating until you can actually agree.

6) Before. It’s better to figure out what it is the client doesn’t like about your terms before you shoot rather than after. Negotiating after the shoot can be very awkward.

7) Enforcement. When push comes to shove, your signed contract is what will allow you to prevail in a court of law. But even better, a clearly written, signed contract provides a lot of incentive for a client to fulfill their commitments to you so things don’t have to get ugly.

Contract Templates You can download templates for some typical contracts by clicking on this link: http://www.billcramer.com/asmp_real_world_pricing_contract_templates.zip

Types of Contracts. Contracts come in lots of different forms. For commercial assignments, the photographer normally generates an estimate that the client signs off on. However, it’s not unusual for an ad agency to send you their contract to sign once you’ve agreed on the pricing and terms. Increasingly, editorial clients like newspapers and magazines have their own contracts that they ask photographers to sign. Though, photographers should be prepared to offer up their own contract when the client doesn’t have one. Magazine contracts come in three varieties: Day Rate vs. Space, Flat Fee Plus Expenses, and Flat Fee Including Expenses.

Day Rate vs. Space Plus Expenses. This structure is the most win-win for photographer and client. It scales the fee up and down depending on the time required to shoot the assignment and the space the photos end up occupying in the magazine. The fact is that art directors rarely know how big each story or picture will be until they actually send it off to the presses. Between the time an assignment is made and when the magazine gets put together, changing events will affect the relative value of different stories. And when pictures or articles are unexpectedly good or bad, their prominence in the magazine will grow or shrink. By paying photographers a minimum guarantee for their time, plus a predetermined bonus for extra pages (plus expenses), this contract allows photographers and clients to negotiate just once, then proceed with subsequent assignments with minimal negotiations. For most magazines, $500 per day vs. $500 per page plus expenses is reasonable for first editorial print use and concurrent web use. So if they end up using one 1/2-page picture (or no picture at all), the fee is $500. If they use one full-page picture, the fee is still $500. If they use two full-page pictures, the fee would be $1,000 instead of $500. A guideline we use to normally price cover space is $1,000 to $2,500, and the price of smaller pictures is often prorated:

»» up to 1/4-page: $200
»» up to 1/2-page: $300
»» up to 3/4-page: $400
»» up to full-page: $500
»» up to full-cover: $1,500

Flat Fee Plus Expenses. Some clients want the convenience of paying the same rate regardless of how many pictures they use or how big. That will make sense for the photographer if the fees are high enough or if the fees are moderate and the photographer is shooting regularly for the magazine. Sometimes they’ll win, sometimes they’ll lose, but in many cases, magazines offer a rate that’s reasonable for one 1/2-page picture, but not bigger. So this creates an awkward situation where the more productive the photographer is, the less they get paid per picture. This is not a recipe for a long-term relationship.

Flat Fee Including Expenses. Other clients offer a flat rate including expenses. That can work fine when the expenses and the usage are very predictable and when the fee is generous enough. But photographers can be easily seduced by offers that seem great at first, but then when they actually back out all of the expenses, reality sinks in. It’s important even in these cases to work up an estimate in the usual way to see what your fee really comes out to.

PRICING

What factors drive assignment photography prices? Assignment fees are a function of time, usage, expertise and competition. The amount of time it takes to shoot a job tends to determine the minimum value of an assignment (the value to the photographer). The way the client is going to use the photos tends to determines the maximum value of the assignment (the value to the client). These upper and lower limits represent the range of possible prices, which is negotiable. Your expertise as a photographer will push the value up. Competition drives the value down.

Time:
Pre-production, shoot, post-production

Usage:
Type of use – editorial, commercial, (publicity, collateral, advertising*)
Prominence – number of pictures, size of pictures, placement, importance, size of client
Volume – number of copies of publication, ad insertions
Duration – how long they will be used (one time, one year, forever)
Territory – where they will be distributed (local, regional national, international)
Exclusivity – how long before photographer can license them to another client
Photo Credit

Expertise:
Technical, creative, connections, experience

Competition:
Uniqueness – how many other photographers could do this assignment?

*Publicity, Collateral, Advertising We divide commercial photography into these three categories. Publicity use is when a client gives your photos to publications for editorial use (in an effort to get free advertising.) Collateral use is when a client produces and distributes photos (normally in the form of a brochure, annual report, newsletter, poster, etc.) for promotional use. Advertising is when a client pays somebody else for media placement, such as in newspapers, magazines, billboards, bus shelters, point of purchase displays, etc. These terms allow us to describe usage effectively in licensing agreements.

Asking the Right Questions

There are three main types of questions you’ll want to get answers to before you create an estimate: creative, production, and usage.

Creative – What pictures do we need to make?
Production – What do we have to do to make them?
Usage – How will the pictures be used?

Some questions you’ll ask the client, others you’ll ask yourself.

The type of photography you do (and the nature of the assignment at hand) will dictate what questions you ask, but here are a few to consider:

What’s the shoot concept?
What are we trying to say?
Who is the audience?
Do you have a shot list and/or comps?
Who is the client?
What type of use (publicity, collateral, advertising)?
How many photos do you expect to use and at what size?
Cover, inside (corporate, editorial)?
Media buy (advertising)?
Bundle creative fee and licensing fee or keep separate?
How long will you use the pictures?
What geographic area (local, regional, national, international)?
What’s the circulation (or print run) of the publication (editorial, corporate)?
How many insertions and what publications (advertising)?
How long will the client want the photos exclusive to them?
What level of production is appropriate (hair/make-up, wardrobe, props)?
Who else is quoting on the job?
Have you established a budget?
How many shoot days does the job require?
Price by the hour? Day? Image? Project?
Your contract or theirs?
Is the intended use different from the licensing they’re asking for?
Are there special technical or creative skills required for the job?
How complex or difficult is the job?
How many of your competitors could do the job?
What’s in it for you? (portfolio, experience, relationship, money)
Will this job yield valuable stock photos?
Can you shoot it on your schedule or do you have to do it on theirs?
How busy are you?

Our producers use an Estimating Worksheet that prompts them for many of these questions. You can download a copy of it here:

Estimate worksheet

estimating_worksheet copy

PRICING

Typical Fees: Stills

Editorial: $500-750/day vs. $500-750/page plus expenses (for one-time print use and concurrent web use)
Flat fees run $1000 – $10,000/day depending on the size of the magazine and the size of the photographer.
Internal Corporate and event photography: $150 – 200/hour plus expenses (for publicity and collateral use forever)
External Corporate: $2500-3500/day plus expenses (for one year’s use)
Corporate Library: $5000 – 7500/day plus expenses (for publicity and collateral use forever)
Catalog: $2500-3500/day plus expenses (for use limited to that catalog)
Advertising: $10,000/image plus expenses (1 year national advertising)

Typical Fees: Motion

Still photographers are increasingly shooting motion. As a rule of thumb, we’re finding that the motion assignments are worth about the same as still assignments with comparable shoot time and usage (though the expenses are often more).

Scaling Fees Over time, you’ll determine your own rules of thumb for different types of projects. But it’s impossible to create benchmarks for every type of assignment and every possible licensing arrangement. But what you can do is create a matrix that helps you think about the relative value of different types of licensing compared to one another. This is useful not only to extrapolate pricing based on your rules of thumb, but it also helps when a client asks for different pricing options and you want them to be consistent with one another.

Expenses

Assistant (200.00 – 400.00/day)
Digital Tech (about 500.00/day plus workstation as necessary)
Digital Fee (about 300.00 for a web gallery)
File Prep Fee (25.00 – 50.00 for a reproduction file with basic touch-up)
Retouching (150.00 – 250.00/hour)
Producer or Photographer Production Days (750.00 – 900.00/day)
Hair/Make-Up Stylist (600.00 – 900.00/day)
Wardrobe Stylist (600.00 – 900.00/day)
Wardrobe
Prop Stylist (600.00 – 900.00/day)
Props
Backgrounds
Food Stylist (900.00 – 1200.00/day)
Food (to photograph)
Equipment Rental*
Studio Rental (500.00 – 1500.00/day)
Location Scout (700.00 – 800.00/day)
Location Fee
Models, Casting
Certificate of Insurance, Permits
Meals, Catering
Mileage, Parking, Tolls
Vehicle Rental
Hotels, Airfare, Cabs, Tips

Pricing Guides There are a number of pricing guides that can help you determine assignment fees. Blinkbid makes pricing recommendations based on your licensing criteria and it allows you to output an estimate with prompts for your expenses. FotoQuote has stock photography pricing and extensive coaching articles on assignment pricing. Getty Images allows you to get a price quote on stock photography with comparable licensing terms as the assignment you’re quoting on. None of these guides can be taken at face value; they simply offer a starting point. You’ll have to use your experience and gut instincts to transform those numbers into reasonable prices.

Pricing Consultants There are a number of companies and individuals who offer a la carte pricing services for photographers, including Wonderful Machine, Frank Meo (The Photo Closer), and Seth Resnick. Freelance producers often work with photographers to generate pricing on production expenses, but not on licensing fees.

(For more on pricing, you can find a tutorial on pricing magazine assignments at this link: http://www.photoshelter.com/mkt/research/pricing-your-work-magazine-photography and you can find one on pricing corporate and industrial photography here: http://www.photoshelter.com/mkt/research/pricing-your-work-corporate-and-industrial-photography)

NEGOTIATING

“Why can’t we use the pictures any way we want?” Most sophisticated clients understand that photography fees are proportional to usage. But many other clients either don’t know this, or they pretend not to know. In these cases, the photographer may have to educate the client on the licensing model. When a client asks you why they can’t simply use the pictures any way they want to, you have to be prepared to give them an intelligent answer. The simplest answer is that you don’t want to overcharge them for the shoot, and that the more modest their intentions are for the photos, the more modest the price will be. Some clients will ask for unlimited use because they want to hide how they plan to use the pictures. Other times, they genuinely don’t know how they’re going to use the pictures. Mostly, they just want the convenience of not having to come back to the photographer to renegotiate subsequent use.

Tips

Never give a price over the phone.
Put contracts in your own words.
Itemize everything – at least for your own information.
Does the intended use match the licensing?
Production responsibilities (what can the client do to help?)
Avoid vague terms like “buyout” and “unlimited.”
Be clear when you use the terms “digital” or “print.”
Web isn’t a usage, it’s a medium.
Specify items the client is providing.
Say, “plus applicable sales tax.”
Find a win/win.
Share pricing information with other photographers. Ignorance drives prices down.
Don’t give up something for nothing.
Negotiating doesn’t need to be contentious or adversarial.
Size up your client. Give and Take.
Low bid doesn’t always get the job.
Opportunity cost.
If you’d not willing to turn down a bad deal, you have no negotiating leverage.

Sometimes, it’s effective to send two pricing options so the client can choose from a more expensive option with broad licensing or a less expensive option with more narrow licensing.

There are lots of ways to structure “unlimited” in a limited way. Unlimited use of a limited number of pictures, unlimited use for a limited amount of time, unlimited use within a particular type of use (publicity, collateral, advertising).

More Information:

ASMP has lots of great business guides:
Copyright: http://asmp.org/content/registration-counts#.URgN0-hh4fI
Licensing: http://asmp.org/tutorials/licensing-guide.html#.URgN3-hh4fI
Contracts: http://asmp.org/tutorials/bad-contract.html#.URgN9Ohh4f
Paperwork: http://asmp.org/tutorials/business-forms-and-contracts.html#.URgOAehh4fI
Terms & Conditions: http://asmp.org/tutorials/terms-and-conditions.html#.URgODOhh4fI

PLUS has a glossary of industry terms:
http://www.useplus.com/useplus/glossary.asp

Wonderful Machine has lots of helpful info:
Examples of commercial estimates and editorial contracts: http://blog.wonderfulmachine.com/?s=%22pricing+%26+negotiating%3A+%22&x=19&y=16
Expert Advice articles by our staff: http://blog.wonderfulmachine.com/?s=%22Expert+Advice%3A+%22&x=16&y=9
Lists of all kinds of resources: http://blog.wonderfulmachine.com/how-we-help-photographers/resources/
Videos of print and iPad portfolios: http://www.youtube.com/user/wonderfulmachine

6 Responses to “Real World Pricing & Negotiating”

  1. Adam Bacher says:

    Excellent presentation in Portland, OR, this evening. Thank You! There’s a lot of great practical information I’ll begin using on my next assignment, and incorporating into all future business practices.

  2. Bill,
    We always learn something new when we see you. John and I added a few new steps to our estimating process as of this am. Thanks for coming to Portland!

  3. ronfya says:

    Very thorough and excellent article here ! Thank you wonderful machine !
    I still have two questions though.

    1. I read regularly that as photographers, we should base our price on added value for the client instead of out time. However, you are mainly using time based numbers here. Am I missing something ?

    2. How do you handle negociations with an advertising agency which is not the final user/client Because, in order for the ad agency to approve your price, the final user must agree to pay it. Hence the need to convince the final user of the value of my work.
    My problem arise when I remember that my client is the ad agency, not the final user … and I do not want to bypass the ad agency.

    Can you help me with this? Thank you so much for your insights.

    All the best.

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  5. Jim Castro says:

    Great article Bill! You definitely covered so much about pricing/negotiating. Thank You for sharing your experience and knowledge. Very Much Appreciated!!!

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