Monday, January 25, 2010

On Commercial Photographers - Everything Is Relative

Anytime people get together to focus attention on the critical matter of the business aspects of photography, even when they are misguided, I applaud it. I applaud even the misguided discussions because someone will come out and get it right, and others will alteast spend some of their otherwise mis-focused thoughts on business for a change, and eventually, they'll get it right.

It is to that end that I applaud Rob Haggart's A Photo Editor, who poses the important question - How Much Money Do Commercial Photographers Make?

And I thought I'd take and make commentary on much of what was said, correctly, or incorrectly.

"One commercial photographer told me he was bringing in $250,000 in profits and another said he has several million in billings."
This is a loaded statement, because someone could have $250k in profits and next to no expenses in a number of circumstances. Further, someone could have several million in billings and be running at a deficit.
(Continued after the Jump)

"So, what do successful commercial photographers make? I’ve always believed it was a lot."
Success is not always defined by what someone makes. For example, the owners of LifeTouch - the business that does a large number of school portraits across the country is a commercial enterprise, bringing in millions each year. Yet is that success? For the owners? For the commercial photographer that runs the on-tripod camera with formulaic strobe setups?
"How has the economy effected the way people price? "
While you might seem to think that there would be an effect, and erroneously, there is, it isn't a long term solution - because when you're a $1,000 photographer for X, and you do the job for 1/2 of X, that client will remember you at the 1/2 price rate when the economy rebounds.
"Are photographers starting to base their usage on their cost of doing business instead of the cost of the use?"
This too is a flawed question - usage should never be based on the CODB, it should be based upon the use. However, one's photographers fees should have, as an absolute floor, that photographer's CODB when it comes to a photographers creative/assignment fees.

Amanda Sosa Stone and Suzanne Sease wrote:
"we had 1 photographer bold enough to give the answer everyone has been waiting for."
I'm not sure which one they are speaking about, so knowing this would be helpful.

The "Hot Emerging Photographer" (HEP) states "...My rep basically bids on what the client’s budget is..." and that's a problem. Knowing what the client's budget is is critical, and it's a question I always ask. However, when the budget is too low to properly do the assignment, then bidding on that can be a problem! Further, sometimes prospective clients will mis-represent the budget for any number of reasons, not the least of which is to see if you come in at a proper number that is well above the stated budget. I understand the point HEP makes when stating "...we push the production as low as we can to do a good job then create the fee out of the gap..." but that gap has to be a number that includes your CODB as well as a fee that compensates you for whatever creative talents you bring to the assignment. Lastly, HEP suggests "...I vote to keep an industry standard of fees..." and that's not going to float from an anti-trust standpoint. However, resources like FotoQuote/FotoBiz, Hindsight, and others are great resources for photographers to refer to outside of and formal establishing of prices by the trade organizations, which legally cannot happen.

The Established Photographer 1 (EP1) suggests "...250K in profits! I want to be him. In my best year, I grossed 225K and I was quite pleased. I can’t remember what I net’d but would have to guess around 1/3 of that." Most businesses look at a 3% - 7% net profit after taxes. If your net profit is 30%, I'd suggest that either you are the most amazing business person of the year, or you're not factoring in overhead items that you should be.

EP1 goes on "...It’s also difficult to compare me to most; I was away from business from 2005-2007 and have had a very challenging economy to grapple with upon my return so there’s no steady recent history for me to gather information with." So, we're to rely on the insights of someone who's been out of business for 2 (or even 3) years, with no steady recent history? This alone should be reason to discount these insights as valuable.

EP1 concludes "...I have estimated jobs based on usage, and I haven’t won many of them :-(" which to me that EP1 isn't doing a proper job of conveying usage to clients, or calculating it.

Next up Established Photographer 2 (EP2) reveals one of the reasons that this industry - especially assignment-type work, is in the current state, when they state "I have always tried to avoid talking about this kind of stuff." Whomever EP2 is needs to be talking about the business of photography with atleast their assistants, if not their local colleagues.

Then EP2 says "Even though I bill well over a Million Dollars in gross billing annually. What you actually pay yourself is much, much less....I am at the top of my game and probably make about what a halfway decent Attorney makes...It is quite exaggerated what photographers make." According to Payscale.com, the median salary for an attorney with 5-9 years ranges from $70K-$114K. An attorney "at the top of their game" can expect a salary of $200k or more coming out of a top-end law school.

Established Photographer 3 (EP3) seems resigned to the fact that they "... can’t say I am a poster boy for usage fees either. " Atleast EP3 acknowledges the possibility (hint: reality) that "..... Maybe I am getting played, but it usually happens in competitive bids where they say the other guy will do this usage for this money, so to be competitive I need to come closer to that number – that kind of thing. I typically but not always cave into it..." THAT is the definition of getting played - that they are playing you against the others, and the others against you.

EP3 does, however, suggest "... in that sense my cost of business does figure into it, but I only consider it when pressed to meet another person’s price." and in doing so, hopefully isn't accepting creative/assignment fees that are lower than their CODB.

EP4, while the least of the providers of information, does include a few details that are worthwhile. EP5 on the other hand, has it right in handling his money properly through a corporation, and I think EP4 was asked the flawed CODB question. EP5 concludes with one model that works for a lot of photographers "...License model, combined with photographers fee (shown as one line item!!) is the way the top guys estimate."

The EP with actual salary numbers provides succicint numbers, however is that a wedding photographer, an event photographer, or some other type? It seems to me that it is a wedding photographer.

The Very Established Art Buyer (VEAB) has some great insights. They know that "... top photographers do gross a million or more in fees.", but those fees cover overhead, and, as they acknowledge, "...agent commissions come out of that, but it’s still a nice living." It's refreshing when they reveal "...I don’t see top photographers any more willing to compromise on pricing than before the economic downturn." and that should be a guide for the rest of us.

The VEAB notes that "...Usage pricing is all over the board and there seems to be no rhyme or reason to it." and this is something that I, along with others (including Leslie Burns Del'Acqua) have been trying to promote for some time now, and that is that usage fees should be a percentage of media buys for advertising, anywhere from 5-7% down to 2% or so for large buys. Heck, if an ad buy is $2,000,000, is it unreasonable that you'd be paid $40,000 when it is your heroic picture selling the product? I don't think so.

I agree with Amanda and Susanne when they say "...you have to do your part to get those jobs and keep those clients and ask for what you are worth – NOT WHAT IT COSTS TO PAY YOUR BILLS!" However, you have to know what it costs to pay your bills before establishing your fees, or risk setting them below your CODB.

Commenter Jacob wrote "...I’ve noticed more and more that major ad campaigns are now crediting the photographer in ad work." and then Suzanne responded "...I am on the phone with Amanda right now and the answer is yes..." and it is important to note that the advertising landscape will change whenever the Orphan Works legislation gets through, because most of the versions I've seen will need photo credits in order to properly protect the work, even in ads.

Glen Wexler commented, on this subject ".... With ad work, a comparable level of freedom rarely exists, and the photographer’s vision is often shaped to the “greater good” of the brand. The process of making an ad is much more collaborative than editorial. An editorial photo credit is a must..." and then he goes on to point out, quite accurately, "...the media buy almost always dwarfs the photo fees" and then makes a huge point "...If photographers begins to reduce fees in exchange for exposure gained by ad work, where is the payoff? Wouldn’t you simply be setting a precedent of reducing fees to gain more reduced fees?"

Edward McCain seems quite fatalistic when suggesting "...I hope young photographers in most parts of the U.S. realize that they probably won’t ever net as much as a school teacher or plumber." If that's the case, the photographer has only themselves to blame. McCain also suggests "...I only know a handful of photographers that actually net more than $25-50K." I do hope ( but doubt) that he's referring to a net on their business income after having paid themselves a reasonable salary.

In the end, the discourse is of significant value, and I do look forward to Amanda and Suzanne's continued contributions.

Please post your comments by clicking the link below. If you've got questions, please pose them in our Photo Business Forum Flickr Group Discussion Threads.

7 comments:

kevsteele said...

Thanks John,
Regarding net profit- I think many consider net in a few different stages: the net after expenses from gross billings which would determine what is left for you as salary (here it is the 1/5th to 1/3rd of gross) and then net profit after salary and all expenses (capital expense, equipment) and finally net profit after taxes which is the 3-7% realm.

davidpaullarson said...

Well said.

I also think that with the economic times that many photographers are trying to compete based on price. You will never get ahead by competing on price. There will always be someone who will do it for less.

Compete based upon your vision and what you bring to the table as an artist/businessperson.

You dont get what you deserve, you get what you negotiate.

Adam said...

Well compiled! With several years experience in the electrical estimating field (totally unrelated, I know) I am beginning an attempt a "back door" transition into vocational photography. ie keep the day job till the photography work necessitates quitting (per David duChemin). There isn't much in the way of "vision" in pipe and wire and light fixures, it's labor units, commodity pricing, and skill in execution and planning. There is a customer service aspect to be sure, but that often comes thru more in the service electrical world than in winning a "big job", where it's about hitting the "number".

I've mostly shot weddings thus far (my preference) and have wondered what I would charge for advertising, or corporate work. I know it's common practice (in our industry) to mark up the CODB by 20-40% on projects that require hard numbers (competitive bids) but that net needs to be able cover mistakes in estimating (god forbid), and build back into the profit margin of the company, as well as pay for salaries and other "overhead". My stomach turned when one of your "subjects" talked about being asked to match another photog's number. That kind of price sharing, in the electrical industry, it's not un-heard of, but typically it's done by individuals who's business practices are miles from ethical. It just encourages us to eat each other to survive. Not very long term healthy. At the most, we offer to match a price, but with a scope (bill of goods) that matches that price. "well if you don't want to pay the leather heated seat price for the car, we make one with vinyl, it's closer to what your looking to spend."

Thanks again for putting this together. I'm still sorting out the minutia of pricing. I certainly can "afford" to shoot a $500 wedding (Scott Borne's recent post) but I would forever be the "cheep $500 wedding photographer" among other issues. It's hard to loose a reputation, especially in an industry where credibility, trust and reputation are slowly won and lost in an instant.

Jacob said...

John,

I'm commenter "Jacob" from the APE thread you mentioned.

Can you expand more on how the Orphan Works will change this landscape? I'm only vaguely familiar with it at this point, and would be very interested to know more.

Thanks,

Jacob

Nicholas Critelli said...

As an "emerging photographer" myself I appreciate your take on this. The only way for the value of what we do to grow, or at least not decline further, is to stop competing based on price alone.
This is an industry with a lot of amateurs and weekend warriors who constantly drag the perception of what we do down with their $500 weddings and "it's free if you publish me!" editorial prices.
The proliferation of "cheap" dslr's allows anybody's Uncle Bob to shoot weddings, portraits or whatever on the cheap.
We need, as a community, to continue to stick to guns, and fire our price-shopping clients.
As self-employeed professionals, we're only worth what we say we're worth.

Debra Weiss said...

John - I have to disagree with your take in the first paragraph - I believe it's important to get it right from the beginning. That said, I'm glad you wrote about this on your blog.

Anytime anyone comes up with a series of comments that have no names attached, the degree of seriousness with which I can treat the piece with is limited.

Of particular interest to me was the comment from the Very Established Art Buyer in reference to the notion that usage fees should be a percentage of the media buy. As someone who presents programs throughout the country with art buyers, this is the first time I've heard an art buyer in any way be supportive of this concept. By the way - this concept was around for many, many years and that is all it is - a concept.

There are real solid reasons why this system has never been implemented. There is no way the agency will open their books to photographers. Media buys are confidential agreements between the agency and the publishers so even if they wanted to, which would be extremely unlikely, they couldn't divulge the information. Additionally, art buyers more frequently than not have no clue as what the media buy will be as most media is handled by an agency other than the creative agency and communication between the two is sometimes non-existent. Also, there is no system in place that would turn this from concept into a functional model. And while I wrote about this in an article almost ten years ago, I still believe that the chances of this actually becoming reality are slimmer than slim and unlikely to happen anytime in the near or distant future.

Until then, the most equitable method of compensation for the photographer is the licensing business model. It is shocking to me that with all of the education available to photographers, "day rate" is still being used, especially in advertising. It is sad and troublesome that so many don't use it and don't understand the model. What will happen eventually is that they will lose it as a viable means with which to base their fee and that will be very unfortunate as the model not only allows an effective means with which to negotiate, it insures future revenue.

photography said...

There are more photographers who would argue that there is absolutely no limit to your imagination, and photographic improvements have all been superficial.

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