Business Musings: Money 2 Licensing Out (Rethinking The Writing Business Part 11)
So, those of you who regularly read this blog are thinking, now are we going to talk about how much we can earn?
Yeah, kinda sorta. I want those of you who haven’t yet read this series to read two posts: the decision tree and the first post on money. (Actually, I’d love to have you read the entire series, but that’ll take some time. So scan those two first.)
In the first money post, I had you look at the cartoon at the top. I’m not using a cartoon this time, much as I want to. I’m using the cover to my latest French release, Quartre jours de rage.
I licensed the translation rights to L’Aube twice now, first in the early part of this century, and then again a few years ago. L’Aube, based in Paris, is rereleasing my Smokey Dalton titles three per year, as it preps to release the “newest” title, Street Justice, which appeared here in 2015.
(Yes, Nelscott fans, there will be more Smokey. No, Nelscott fans, I’m not sure when.)
To have this French translation right, I licensed out, and did so deliberately.
Let me back up a bit.
When we set up WMG Publishing, I had many goals for the business. We tried to manage most of them, but we were too early.
I wanted an in-house audio department. We hired the wrong person to run it, not that we could have found the right person in small town Oregon. I regret that, but we did make some connections. Just not as many as I hoped.
My biggest want, though, was an “in-house” translation department. I even knew who I wanted to hire to run it. The reason in-house is in quotes is because the person I wanted to hire lives in France. He knows pretty much everyone working translations in Europe, and he is fluent in many languages, so he knows who is good, who can copy edit the volumes, and so on and so forth.
I knew that would be a costly proposition, and that we wouldn’t be able to set up that department immediately.
So I did not actively pursue translation rights for my various series, but if a foreign publisher came to me, I would investigate them, and then, if I liked what they were proposing, we would negotiate a deal.
Every foreign rights deal I have negotiated on my own, without a book agent, has a term limit. For you traditionally published writers, term limits are standard in translation deals. (Term limits are also standard in licensing deals.) Agents negotiate the term limits out of the contract, to keep the agent’s hand in the money. (If the contract terminates, so does the agent’s percentage.)
When I did my first foreign rights deal after we started WMG, I thought long and hard about the seven-year term that the overseas company proposed. Would we be able to set up a translation department in seven years?
I figured we wouldn’t. So the license, I figured, would make me money, get my name out into the public, build an audience, and do what I couldn’t do right at the moment.
It’s eight years later, and we still don’t have a translation department. So my calculation was correct. I’ve renewed the contract on that particular deal (which is not the one above), and am quite happy with the way things are going.
So many of you have asked me how much money you can expect when you license your works, as we’ve been discussing these past few weeks. And you get so frustrated when I tell you that I don’t know how much you can make.
What I do know is this: Once you start licensing, your earning potential is limitless.
I recently went to a (stupid) leadership conference (you’ll see a blog on that soon), and one of the speakers gave some good advice, although she framed it in a sexist way. She said that once she started earning money, she didn’t buy shoes; she bought real estate.
Why would she do that? she asked the group rhetorically. So that her money would earn money while she slept.
And that, my friends, is what you can do with your IP. If you manage it right, it will earn money for you in your sleep.
Too many writers think only of the book. While writers do know that the book can earn day in and day out, without much goosing from the writer herself, they don’t think about all the other ways the book/story/IP can earn money.
When you license out, you have the opportunity to earn even more money on that book than you did from its initial publication (or appearance). You need to look at the decision tree again, and realize that each of those things will make some money, if you handle the negotiations right.
Here’s the problem: writers tend to underestimate what they might earn on certain kinds of licenses (think apparel, for example) and overestimate what they might earn on other kinds of licenses (movies/TV).
If you think about money when you make your licensing out deal, you’re making a huge mistake.
However, if you’re ignoring the money on your licensing out deal, you’re also making a mistake.
And if you “take pity” on the person who wants to license your IP because they’re “taking a risk” with you and can’t afford to pay you, run away from them. Run. Fast. And never work with them. Ever.
They don’t respect you, and they think that because you’re a writer, they can rip you off. You don’t want to be in business with those people, no matter how charming they might seem up front.
So, how do you handle money in a licensing deal?
You make money part of the deal, but not the essence of the deal.
Let me explain.
Before you enter into any licensing relationship with someone, you need to figure out what you want from that license. If all you want is a boatload of money, then you negotiate for a boatload of money. But you have to watch all the other contract terms to make sure that you are not losing more than you gain.
Usually deals that pay you a boatload of money up front—whether that deal is with a gaming company or a movie company or a book, apparel, food, hell-anything, company—will take as much as they give. They pay you a boatload of money, so they’ll ask for (and usually get) a boatload of other licenses in return.
In the case of the movies, TV, games, and publishing, they’ll often license every aspect of your copyright that you haven’t already licensed. And most writers (and writers’ agents) let that happen.
Don’t you let that happen to you. Make money part of the deal but not the heart of the deal. No matter how broke you are.
(If you want a cautionary tale on this, read Michael Connolly’s essay “Betting on Bosch,” in Hollywood Versus The Author. There are a million other such cautionary tales, if you only know where to look. And most of them were in agent negotiated deals, because all that most book agents care about is how much money they can make up front.)
Here’s how you think about money in your licensing deals:
You are the licensor. That means you have IP that someone wants to license because they believe your IP has enough value that they can use that IP to make money.
Got that? They can use your IP to make money for their business. They might get other value too. For example, partnering with someone of your caliber might enhance their business’s reputation. A partnership might grow the size of their business, by bringing in your audience. A partnership might save them money because they don’t have to hire someone to create a new, fresh story. Rather, they have an already established story with a built-in audience.
And so on and so forth.
In other words, before they approach you, they know what they want from the deal.
You need the time to think about what you want as well.
Here (in no particular order) are some of the things to consider:
Exposure: will this partnership bring you before a new audience? Will it help grow your audience?
Advertising: similar but not the same. Will this partnership advertise your existing property in anyway?
Can You Do This? The licensee might be offering to put your work in a form that you desire (in my case above, a French edition). Can you create that form yourself for minimal cost? Do you have the same reach? Will you make as much money as they will pay you? Or will it cost you more money to produce the same product than it will cost them?
Is The Licensee Reputable? Do they have an established business? Are they beginners? Do they want to experiment with your IP or do they have a business plan?
Does The Licensee Have the Capability To Do What They Say They Can Do? Yes, that means you need to research them. In the case of my French publisher, I needed to know if they were a start-up (they’re not), if they can distribute books to French speaking territories (they can), if they have a good reputation (they do), and so on and so forth.
Yes, this means you need to do some research. Sometimes the research is easy. (Meet my friend, The Google.) Sometimes the research takes some work. If you get movie/TV interest, then join IMDBPro, so that you can start easily researching the people who contact you from that world. (Not that everyone who is affiliated with movies/TV is on IMDBPro, but many are. That, combined with Linked-In and The Google, will get you quite a bit of information fast.)
Are There Intangibles? Sometimes the more products/things you’ve licensed, the more other companies will approach you. Your IP has become a marketable commodity, and the other licensees want a piece of that action. This happens even if your book isn’t popular in English.
Is The Term Short? You don’t want something for the lifetime of the copyright. You want to be able to get out of this, if it turns out to be a bad deal.
Is The Term Long Enough? When you’re dealing with other formats—from movies to t-shirts—you have to factor in production and distribution time. It can take years to make a movie, for example. Then there’s the whole distribution side. Once the item is produced, it must be available to the customer somehow. And you need to give your licensing partner enough time to do the best job they can, but not so much time that they forget they even have your project or don’t put the effort into it that the project deserves.
And there are many other considerations, some of which we will deal with in the next money post, which is on negotiation.
But here’s my rule of thumb: If someone contacts me, particularly with something new, something I hadn’t thought of or hadn’t planned on doing, I research—and then if they seem legit and have some money, I say yes to the project (pending agreeing on terms, of course).
I’ve gotten a lot of intangibles from those yeses. Sometimes, it’s just a cool product. Often, though, one license from one company leads to a license from another one.
And in the movie/tv realm, the more licenses you have and the better they perform, the more valuable your IP is for them. I put together a list of the countries that one of my projects had been published in or had some connection to, and it turned out to be over 170 countries. That project had more than 35 translations over 15 years, and those helped as well. That really impressed the studio we were dealing with, and we ended up with an option (which got renewed several times).
My French sales figures helped with another movie/TV deal because I was dealing with a European company that was trying to secure French financing. When they saw the French numbers—which are bestseller level in Europe—they were extremely excited and wanted to back the project.
So you never know how these projects will interact with each other.
You, the IP holder, has to let the others know, though. It wasn’t until my European partner in that last deal mentioned he was trying to get French financing that I thought to tell him about all the French licensing I’d done. Sometimes I’m ahead of the information game, and sometimes I’m behind it.
If I held out for a lot of money (as my agents did, back in the day) I wouldn’t have had half the deals that I have. The agents usually don’t understand how one license can lead to another either, or how much money you can make on license renewals.
Go back to the idea of making money in your sleep. A lot of small licenses can add up to more than one big license, and smaller licenses feed off each other (as I mentioned above).
If you look at the previous post and see how much money Andrew Genn (probably) made off CanStock Photo alone on cartoons that would otherwise have stayed in the drawer, you’ll see what I mean.
Because his art is so suited to business PowerPoint presentations, I know several companies hire him for originals. (I saw some at the Licensing Expo.) I can guarantee you he made a lot more money on those than a few dollars.
The other thing that having his art available on sites like CanStock Photo and Dreamstime does for him is add to his discoverability. Did those corporate individuals find him through a Google search or because they’d been using his work like I have from the shared site? I’ll wager they used his reprints before commissioning something.
One last thing about money. Before you come to terms with anyone on any license, know what the market will bear. Not everyone gets paid 5 million to license a book to television. Some people make no money on it at all because they have a bad deal.
Find out what the range is. That way, you know if the offer you’re receiving is fair or if it’s exorbitant or if it’s an attempt at ripping you off.
Before you discuss any terms, know what the terms are for that particular industry. I know movies/TV, but not some aspects of gaming or miniatures or challenge coins. I do know that I can learn all of that, though.
Licenses build. The more you have, the more you’ll get.
And they also go in waves. Sometimes you’ll get a lot of translations, sometimes you’ll get a lot of comics. Some years you won’t get anything.
There is no right way to do this. And if you make a mistake, learn from it and move on.
But try not to be greedy. If you’re only focused on the money, you’ll make too many mistakes. Focus on the entire deal and what it means to your business, and you’ll do well.
As you know, all this work on licensing made Dean and I revamp our business. We’re deep in the middle of that right now. It means that we’re focusing the Business Master Class on licensing, among other things.
We have Deidre J. Manna-Bratten of the Global Licensing Group doing quite a few sessions and answering questions, and role playing how-to with an experienced licensee. There are still five slots open in the class, but I don’t know how long they’ll last.
I “outlined” the rest of this series, and still have about six (or more!) posts to go. So much for my idea that I will finish in the summer. I also have some extra posts on things that irritated or excited me from the past few months.
So the last part of the year will be very interesting.
Thank you all for the support. Since I know you’re here, I’m doing a few more things than I usually would.
Dean’s also doing a learn-along as WMG Publishing makes its transition to a more licensing based focus. Licensing Transition: A Year-Long Journey From IP To License is something you can sign onto, and interact with him and others taking the course.
I’m also doing some extra blogs on Patreon, and will continue to do so as the year progresses. Many are focused on licensing.
But I’ll be finishing this series here, so no worries if you don’t want to go to Patreon. The series will be free on this site, and will remain here. I suspect I’ll make a book out of it as well.
So…here’s the standard plug:
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Which I am going to say right now. Thank you!
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“Business Musings: Money 2 (Rethinking The Writing Business Part 11),” copyright © 2019 by Kristine Kathryn Rusch.