commercial licensing - example

A band hires their favorite photographer to make photographs of the band. The photographer charges $1,000 as a creative fee to make the photos and create the final image that represents the band's brand. The band plans to use the image in two applications,

  1. 1000 posters for advertising engagements at local establishments where the band receives $500 for each night's performance,
  2. a CD cover for 20,000 units to be mass produced, sold at engagements and on the Internet for $20/ea.
The photograph has a different commercial value for each application.

The band expects to earn $50,000 over the year for performing two nights each weekend. The band distributes 20 posters each week to get people to attend their performances. They pay a printer $1000 to print posters for the year. The cost of the print media is used as a proxy for the intrinsic market value of the advertising and the photographer licenses the image to print the posters at 20% of the printing cost ($200). The license is limited to printing 1000 posters.

The band expects to earn $400,000 from the sale of CD's. They pay a CD manufacturer $5/ea to bulk manufacture 20,000 CD's at a total cost of $100,000. The cost to manufacture the CD is used as a proxy for the commercial value of the image. The photographer licenses the image for use on the CD cover for 20% of the manufacturing cost ($20,000). The license is limited to producing 20,000 CD's