I recently had to turn down (or be turned down for, depending on your outlook) an illustration job due to an incompatibility with a potential client’s pricing structure. The illustration in question was to form part of a logo, and so I was dealing with a designer ‘middle man’, so to speak, rather than the end-client, which is where the complication came in.

The disagreement was one of whether or not the illustration should be charged on a licensing basis — the idea that as you increase the duration, instances or locations of use, to name a few factors, the compensation for that work should appropriately increase.

My argument was that it should be, and the designer’s (let’s call him John) was that it should be a flat fee.

Now, as a disclaimer, I’ll point out that John’s contract and quote with the end-client was already in place, so he couldn’t really budge from his viewpoint, and I totally respect that he has to keep true to how he feels he should run his own business. I did, however, think that it raised an interesting discussion that I thought better placed in a blog rather than our emails to each other.

In favour of a flat fee

I’ll start first with John’s argument. His standpoint is that a designer should simply charge based upon the value of the project when it’s commissioned, and that he feels that a designer who expects ongoing payment is somewhat akin to the issue of clients pushing for cheap work with the ‘promise’ of more work later if things go well.

To quote John, he doesn’t “think a designer deserves any recurring licensing income, whether they design a logo for a local coffee shop or if that coffee shop turns into Starbucks. It’s the client that made the business a success.

“With the internet, global business, etc, I feel like I’m just being a realist in that even if a designer decided to have a license on the work, with terms and duration of use, it would be virtually impossible to protect this, unfortunately. I understand my views may be quite progressive, and while I am 100% on board with protecting the industry of design and designers, I can’t ignore the shift that’s happened in our industry, and where I believe the future is going.”

John also wanted to point out the views of respected logo designer David Airey:
“A logo should be developed for the duration of a company’s lifespan, and sold as such, too.” (Source)

Also, David’s pricing model for design: http://www.davidairey.com/design-pricing-formula/

In favour of licensing

I do sympathise with John’s opinion to a degree, and in fact agree with David’s point of view — a logo is best serving a company if they can use it unencumbered, and that’s fine if the client has paid an appropriate amount for the logo in the first place. Most companies, though — especially start-ups — can’t afford to shell out thousands of pounds on a logo in their infancy, which is where licensing comes into play.

Rather than being a way to keep on charging increasing amounts, the idea behind licensing is that to transfer all rights to a design would be very expensive — and usually prohibitively so, considering that all of those rights probably aren’t needed at any one time — so, to become affordable, one would limit the rights that a client has for a design, and so accordingly reduce the amount you charge.

To help me explain my own views on the subject, I have a couple of comparisons to use. Let me start with the example of Nike, a global brand that famously got their logo for a pittance.

The Big Boys

In 1971, when they were starting out, Nike had a student, Carolyn Davidson, design their logo for $35. They weren’t a big company, and she was probably happy for the money at the time. Fast forward a few decades, and we have a corporation now worth many billions of dollars (I know Carolyn has apparently been repaid since, but let’s ignore that for now, as Nike didn’t have to do so).

Yes, it’s true that the founders and employees of Nike put in the hard work to get it to where it is today, and they’d very likely be in a similar position had they chosen a different logo. However, the logo still has done some work for them. With a global brand like Nike, image and recognition is extremely important, and if you were to suddenly change their logo overnight (ignoring all the logistical expenses that that would require), they would undoubtedly suffer a loss in revenue.

And if that’s the case, then the logo is an asset that has increased in value in of itself — income is continually being generating for the company by the designer/illustrator’s work, but he doesn’t get any compensation for that.

And yes, it’s also true that most businesses are never going to reach Nike’s level of success, but the potential is there and, in any case, the concept is scalable.

The Software Licensing Model

The other comparison that comes to mind is that of software licensing. Web services that use a subscription model are a good example of this. It’s cheap to use an application if I’m a one-man band — the likelihood is that, as a sole trader, I’m probably not earning a massive amount. As my company grows, though, and I hire employees, I’ll need to upgrade my subscription — more money allows me to expand my usage of the application, and thus (hopefully) increase my income.

It shouldn’t really be any different for logos (and a good number of other design projects), but because they’re such intangible things, it’s hard to force a limit on the usage, which in turn makes it harder to explain why ongoing payments are a fairer option.

As for John’s “more work later” argument, I don’t think that’s a good comparison. A client getting cheap work now and assuring you that more will come is discounting your value based on a non-specific future scenario that might never happen, whereas it should be possible, with licensing, to give clients an outline of how costs should increase over time, so that they don’t get nasty surprises.

What do you think?

I do have more that I could add to this, but I’d love to hear your opinions. Where do you stand on the issue of licensing vs. flat-fees?