One of the most hotly discussed issue among professional photographers, is "to combine, or to not combine? Whether 'tis smarter to join together fees for creative and use, or to separate them out." Here, I shall endeavor to address this issue with several concrete examples, and some insights into the issue.
Warren Buffett once said "price is what you pay, value is what you receive." This is true across every spectrum of business transaction. Is the price too high? Well, it may be for some, but no so much for another. While some may scoff at the cost of a smartphone, saying the extra data plan and phone features are just not worth it, almost every day the price of the phone and connectivity charges are a drop in the bucket compared to how having that phone keeps me connected to clients and booking jobs. Recently, I was on assignment, and booked for a shoot to photograph an auto accident that was staged and set up, because the client said they couldn't find good images of cars having an accident. To the client, it cost them tens of thousands of dollars to stage the accident, from stuntmen to actors to totaling a car. Could they have searched among the 70,000+ images on flickr (here) that turn up for the search term "car accident?" Sure, and they could have possibly gotten the image for next to nothing. However, to this client, the value of what we delivered was worth the investment of all that went into it. (And they did search Flickr,Getty, etc and did not find what they wanted - I asked.)
Magazines value photography because it entices readers to subscribe of buy single-copies, which ensures that there are eyeballs looking at ads, which pay the bills. Advertisers buy ads and use images because almost always a well used photograph tells a story and sells a product better than any written words can. These advertisers make their investments in ads and images to sell products or services, increase their bottom line, and make a profit for the company owners, whether a private company, or one traded on the stock market. It's all business all the time, make no mistake about it.
While it used to be that breaking apart the costs to produce an image (creative fee) from the costs to use an image (usage/licensing fee) was common, more and more these fees are being put together, and not separated. Consider that the combined fee is not full compensation for the image's coming into existence, but rather, the least that the photographer will accept for the initial work and effort. On more than one occasion, I have done a stellar job or delivering far above a client's expectations, and the client (especially when they are on set) begin to see things far and away beyond what the original intent of the shoot was. Usually, I overhear a client saying to their colleague "oh my god, we could do a whole campaign around these images, instead of just the one we were planning - these visuals are great." Usually, the negotiations for the additional licensing fees for extended or expanded uses of the photography are handled after the fact, but not always.
Yesterday, we went into great depth about a license as a "window of opportunity." If the client wishes to expand their window of opportunity, then additional fees should be paid. However, if the photographer delivered as required, and then, say, the client does a focus group on the commissioned visuals, and decides to kill or scale back the project, they are not entitled to a refund. This is the client's right - to control the exploitation, or lack thereof, in the work you created. This does not mean that you can't give back money, or bill for less. If you determine that it is in your own best interests to do so, then, by all means, do so.
Here's a case where keeping the fees together made a huge difference. This is a real example, but I'll change the industry/client for the sake of the example.
The problem is taxes. The government is trying to impose taxes on a variety of snacks - chips, cakes, and cookies. Enter the American Snack Foods Association. I get hired to photograph all the snacks (which means that while my client is the ASFA, the end client is Frito Lay, Enteman's, Hostess, General Mills, Altria, and so on. You get the picture - a lot of people who usually compete, having to work together on an issue) together. We do, and we get sign off from ASFA. The bill - $10k for the creative and usage, combined. I do this job on a Friday. Sunday, I get a call - one of the Frito-Lay bags is the old branding, and we need to re-shoot on Monday. No problem. We send another contract for $10k. We get on set, ready to go, crew at the ready, computers and lighting ready. The client doesn't even turn up to the shoot, and scrubs the shot. No problem. Send a bill for $10k. We are told Monday afternoon we are to finally shoot Tuesday. Send another contract for $10k. We do the shot, and the client again signs off on the job, and this time, they mean it. Total bill? $30k. Paid in a week. This client is an ongoing and repeat client for me. If I had separated out creative and usage fees, it may have been more challenging to argue that they still needed to pay those fees.When putting together estimates, keeping fees together, wherever possible, ensures a greater amount of revenue for your business, and thus, has a significant impact on your bottom line.
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