Tom Zimberoff: Pricing Photographic Services - Part Six of Six
By Tom Zimberoff, © 2011 Tom Zimberoff - All Rights Reserved
The aggregate assignment fees you earn throughout any given year should be at least equivalent to the annual salary of an employee doing the same kind of work for someone else.
Suppose you have a friend named Fred who works for a graphic design company and earns $35 per hour. You should make at least that much plus enough extra money to cover the overhead of running your own business - plus a profit on top of that. Otherwise, you will make a lot less money than Fred. And Fred gets health insurance and other benefits paid by his employer too.
Because of all the time you have to spend on administrative, supervisory, marketing, and menial chores that Fred doesn't have to do, you need to make more money than he does to earn an income that is roughly the same.
The additional time and money you spend on marketing and administrative duties make it possible for you to keep your business running. Like a shark, you've got to keep swimming to stay afloat. You must constantly seek new work. If you pay for administrative help, you'll require even more revenue to pay those employees or contractors. But looking for work does not bring in immediate cash. Only performing photo shoots does that. So, consider that while you are trying to reel in new and better assignments and not getting paid for your time, Fred collects a regular paycheck. He doesn't worry about looking for new sources of revenue day in and day out. The company he works for pays other employees to do that kind of work. His employer also makes a profit on the work those employees are paid to do. Therefore, you should be earning what both Fred and the other employee(s) earn put together - again with profit on top of that!
Here is an exercise to illustrate how to find a starting point for both the amount of profit your business needs and to calculate a reasonable compensation for your freelance photographic services (i.e., an assignment fee) (See Footnote 1). To reiterate, since many people employed at larger companies work for an hourly wage, their example will be used for the sake of comparison, even though it is recognized that photographers do not work by the clock.
Determine Your Assignment Fee
Let's make up a term called shoot rate. There really is no such term. But for the sake of this exercise, a shoot rate is what you might charge per hour, if you could work and survive that way. It will help you arrive at a ballpark figure that measures what you earn versus other salaried professionals. It will give you a starting point to arrive at a competitive margin of profit.
- Take your monthly average of billed expenses (See Footnote 2) (costs passed along to clients plus a mark-up) and divide by 172 (i.e., 4.3 weeks x 40 hours).
- Add your fixed monthly overhead (business-related only!), including such items as rent, insurance, automobile, telecommunications, etc. and divide by 172.
- Add the rate per hour that you think you would be entitled to earn as an employee. Use someone you know and respect as a model, someone who works for a large company. Or if you wish, use Fred's hypothetical $35/hour figure.
- Now, estimate what you think is a reasonable percentage of profit and add that into the equation. (Avg. Monthly Billed Expenses x Profit %)
The result looks like this:
|Average Monthly Billed Expenses||$7,000/172||=||40.67|
|Fixed Monthly Overhead||$3,750/172||=||21.80|
|Comparative Hourly Wage||35.00|
This exercise indicates that you would have to charge a hypothetical shoot rate of $105.60 per hour, assuming you could bill a full forty hours each week. In that case you would earn the same take-home pay as your friend, Fred, who makes $35 per hour at a "regular" job. (That's less than an average attorney might earn, and only a bit closer to what a building contractor or a plumber might pull in.)
If you determined that you could bill only thirty hours per week, you would have to charge more per hour. Using the table above, that means you would have to charge $140.80 per hour (i.e., 40 hours x $105.60 = $4,224 ÷ 30 = $140.80).
The term shoot rate is, as you'll recall, a complete fabrication. It was made up to suit this exercise. Once you've done the math, though, you need to look at your own competitive market situation. If you find out, for instance, that another photographer has a shoot rate of $125 per hour, or maybe an even lower rate of $80 per hour, you may want to readjust your profit percentage. You must either increase or decrease your own shoot rate to arrive at a final figure that puts you in a favorable competitive situation when the buyer compares your bottom line-price to that of someone else.
Incidentally, you should adjust the profit percentage and not any of the other items in the equation. But what if your bottom line goes over the top? Or what if lowering your profit still doesn't get your "shoot rate" down to a competitive level? That tells you at least one of two things:
- You must cut either your profit margin or your overhead to the bone, because you are spending too much for wholesale materials and administrative services.
- Your competitors are engaged with you in a price war. One or more of them might be low-balling, and the first photographer to chicken out of the battle loses the client. If no one cries "Uncle!", you will probably all go out of business sooner or later.
Note: You can also figure out a hypothetical shoot rate on an annual basis by using this formula:
(Annual Overhead + Desired Salary + Profit) ÷ Actual Hours Billed = Shoot Rate
In general, you can refer to the following principles to keep yourself competitive:
- Ascertain that a market exists for the kind of photographs you want to make.
- Learn the size of the market.
- Decide how much profit you need to earn on the services you offer, enough to grow your business.
- For each job, determine the bottom line price (factoring in your salary) that meets your profitability goals.
- Continually compare your prices to the range of prices in the marketplace. Continually adjust higher or lower, based on profit margin and overhead, not fees.
- Maximize your price through marketing communications, developing credible arguments for the value of your products and services.
- Don't shoot unprofitable assignments.
A Name Game, The Real Meaning of a Day Rate
Many photographers have inconsistent ideas about what day rate actually means. And sometimes those ideas are incompatible with their clients' understanding of the term. In this text day rate is simply a synonym for an assignment fee.
All too commonly, at least in the worlds of advertising and corporate assignments, day rate is touted as some kind of almighty remunerative quotient that determines a photographer's pecking order. It's a medal that some photographers proudly pin to their chests, as if to proclaim "I'm a $500/day shooter," or "I'm a $3000/day shooter," or I'm an $18,000/day shooter!" That's their perspective. From your clients' point of view it can be used to impose price ceilings in markets where there is a lot of competition for assignments, as in "I don't care if you are Annie Leibovitz; this magazine only pays a day rate of $250!"
Both sides must be reminded that day rates do not reflect what it costs to produce and execute a photo assignment. Nor do they economically address the overhead of running a business in competition with every other photographer in the world.
Most photographers don't get to shoot paid assignments every day. You might wear an $18,000 day rate like a medal of honor because that's what you got for your last job; but it might have been the last job you shot; and it might have been five months ago.
Besides direct production costs professional photographers are obligated to spend a tremendous amount of time and money to promote their businesses just to stay in the game, just to get buyers to pay attention to them. And, frankly, while how much money a photographer spends or earns is none of his customers' business, a photographer's job is to make as much money as the marketplace will allow, day rates notwithstanding.
No Such Thing as a Half Day Rate
Commercial photographers don't punch a factory clock to tally up their fees. They are not paid hourly wages like plumbers and auto mechanics; and there is no such thing as a "half-day rate." That is a ploy used by some buyers to cut your assignment fee in half. If confronted with a demand to work at a half-day rate, you may politely explain that your fee will be based in large part on their use of your photos, not how long it takes you to shoot them. Whether it takes you thirty minutes or eight hours to complete an assignment, the buyer derives the exact same benefits from the use of your photos. And that's what they pay for: value derived from usage. Your day rate is merely a minimum booking fee, as far as they are concerned.
If their response is "But we only have a budget for half a day rate," tell them politely how sorry you are, but remain firm. Your livelihood is at stake. You can't be expected to perform charity work. You might suggest that such a budget-impaired customer should check out one of the royalty-free stock photo collections instead. But if buyers want to commission original photographic artwork and maintain any degree of exclusivity, they must pay for it.
The Origin of "Day Rate"
By now you understand that "day rate" is just a phrase. Its use has become common for the sake of convenience; but it has been applied to so many different circumstances that its meaning has become vague. Let's clear that up.
The term was coined decades ago to describe a trade practice that evolved in the magazine industry of guaranteeing a minimum payment to every photographer who was hired to shoot an assignment, even if no photo got published. This practice made it affordable for photo editors to send many photographers out to cover the news without knowing who - or what - might produce a newsworthy shot. It was a good compromise. It made sure the news got covered while keeping costs manageable. It also meant - and still does - that, if one or more photos shot by one photographer or another did get published, his minimum payment, which accrued for the total number of days he worked on assignment, would weigh against how many additional pictures were published and at what size. Or maybe a cover! The photographer was paid the greater amount - space rate versus day rate. That rubric still applies.
A space rate refers to the ratio of page size to picture size, as well as how many pages are occupied by a photographer's pictures. The greater the relative space occupied, the higher the corresponding fee.
A space rate is sometimes called a page rate. Both terms mean the same thing, although the latter obviously was meant to refer to print media exclusively, as opposed to, say, the relative size of a Web page.
As far as the amount of "real estate" allocated to a single photograph, the larger its size in proportion to the size of the media on which it is reproduced, the more money the photographer will be paid. Therefore, one photo occupying an entire page commands a higher fee than a photo occupying one eighth of a page. Alternatively, the greater the number of photos published on any number of pages within one periodical, the higher the pay just the same. The total fee for publishing three quarter-page pictures (whether on the same page or on three separate pages) will earn more than a single half-page picture and so on. Incidentally, space is not always measured literally. Full- page usage is always presumed when it's obvious that an image is being featured in a singular context or as the center of interest, even though it may be surrounded by a large border or other design elements, including text.
Space rates may be negotiated on a job-by-job basis or, alternatively, a photographer may accept a rate pre-established by the publisher. Either way, if it turns out that he worked for only one day but the magazine published six pictures plus a cover, he will be paid for that cover plus the five additional pictures that ran inside. A lucky shooter can earn many thousands of dollars on a single assignment but never less than the nominal day rate. Again, it's a guarantee.
Just about every magazine establishes its own day rate and space rate, although both or either of these rates may be negotiated. Such rates are not written in stone. The concept of space rate is particularly susceptible to negotiation because of its inextricable link to both usage fees and exclusivity. In that context, editorial clients, news and feature magazines in particular, engage in stiff, almost bitter competition for stories. They are willing to negotiate extraordinarily large sums to "scoop" their rivals. For example, if you happen to have shot the only existing photos of a plane crash or a celebrity committing an indiscretion (okay, even doing something nice!), you can find yourself, or an agent on your behalf, conducting a bidding war. Any material that helps sell magazines, which in turn helps sell advertising space, can drive fees astronomically high.
Back to Earth, it is a widely accepted trade practice that the payment of a day rate entitles a magazine to publish only one photograph, assuming the photographer worked for only one day (or any fraction of a day). If the photographer worked for two days, then up to two photos may be published; three days, up to three photos, and so on. It is also traditional for stock shooters to bill a minimum space rate of one-quarter page, no matter how small the picture gets published. Many photographers take that principle a step further and demand a minimum page rate for stock, no matter how small the circulation of the periodical.
Under the terms of a typical editorial assignment, the resulting photo(s) may be used only one time inside one issue of one magazine, and each instance of publication is limited in size to a fraction of a page. An editorial day rate does not typically include a full-page use without additional space-rate compensation.
Sometimes the photo(s) will be published in various foreign-language editions or in international editions, supplementary to the flagship edition. That essentially means your pictures will be distributed to a larger circulation. That might be reason enough to negotiate for a higher day rate. But, even if your day rate stays the same, to qualify as a single issue or a single use, all editions must be distributed to newsstands or subscribers simultaneously. Otherwise, additional usage fees will apply.
Photographers should resist publishers' demands to include electronic publishing rights in the day rate/space-rate deal. There is no implied agreement on the part of photographers when accepting a day rate to make such an inclusion. Do not let clients take it for granted that, by licensing your photos to publish in print, they are entitled to use them in electronic media too, even as so-called "revisions of a collective work," or in any other medium that has not been specifically agreed to beforehand. That includes a prohibition to publish in any other magazines the publisher might own. The United States Supreme Court has affirmed that prerogative as the law of the land in Tasini vs. New York Times, 2001.
When working for a day rate, your final fee will be determined by three factors (See Footnote 3):
- Number of days spent shooting
- Number of pictures published in one edition
- Size and placement of pictures published
The photographer will be paid the highest figure that corresponds to any one of the three criteria listed above for every assignment.
Pricing a Magazine Assignment
Whizbang magazine has established a day rate of $475. Their policy extends to space rates applied as follows: $1000/full page; $500/half-page; $250/quarter-page; $125/ eighth-page; and a cover rate of $3,500.
Photographer Otto Focus worked for two days. The magazine published four of his pictures, including one on the cover, and a full-page opening spread. Here is how much money Otto will be paid for that "day rate" assignment:
Magazine cover $3,500 Full page opener $1,000 Inside 1/4 page $250 Inside 1/8 page $125 Total $4.875
Had Whizbang published no pictures at all, Otto would have received only $950 for the two days he worked on assignment. His day rate, as you can see, is not added on top of the total space rate.
As an alternative example, pretend that Otto worked for eleven days on this assignment. In that case he would have been paid $5,225 (11 X $475) and just as many pictures, including the cover, would have been published.
Note: Neither of the examples above includes either a profit or a reimbursement for expenses. Those will always be added to the bottom line price of your invoice.
In the magazine business, as you can see, using day rates still works out according to the philosophy of licensing for usage. But editorial day rates are usually lower than advertising and corporate day rates, no matter what they are called, because they typically refer to limited and non-exclusive uses. However, despite the fact that editorial day rates have evolved as a trade practice, you might ask yourself how it is that photography is the only profession, or so it seems, in which business owners allow their customers to tell them how much they will be paid. Magazine publishers can only make such "policy decisions" as long as photographers are willing to accept them.
Corporate Day Rate Assignments
Photographers who specialize in shooting corporate annual reports often use the term day rate to negotiate assignment fees. But this is merely a linguistic convenience because buyers in the corporate-photography market do not try to set minimum payments against space rates, as editorial buyers do. Your fee is whatever the market will bear.
In corporate work, assignment fees change with the nature of the assignment itself and the predilections of the buyer, and those of the photographer too. Corporate photographers are nonetheless obliged to negotiate prices high enough to accommodate a sort of built-in usage fee plus as much extra money as they can get on top of that by virtue of their reputations. That means a usage fee plus an assignment fee rolled into one. (See Package Deals below.)
A final assignment fee is pro-rated for the number of days it takes to do the shoot; and corporate assignments often last several days - sometimes even weeks. That's one reason why they are more lucrative than editorial assignments. In other words, if you shoot an annual report at a rate of $3,000 per day, for six days, you have earned an $18,000 fee. That usually entitles the buyer, either a public corporation or a graphic design firm contracted by another company, to use as many photographs as you can produce during the course of that assignment. But that means for one time only and only in the one publication specified in your Job Confirmation, or contract. If the pictures will be used for additional purposes, such as public relations, or if they are to be used in next year's annual report too, or in another brochure later on, you have a right to demand additional payment.
Since corporate assignments can last for a while, it is not unusual for a photographer to offer a price break to the buyer. This might be a discounted day rate, explicitly for an extended assignment. Conversely, however, you should have no misgivings about charging as much as the market will bear for assignments that last only one day or a few.
Note: Make it a point to routinely ask for samples of corporate publications using your pictures in print. They make fine marketing samples. This should be considered part of your price, but definitely not in lieu of any money you expect to receive! Obtaining samples is especially important with corporate assignments because they are not available commercially to the public, nor are they produced in the same mass quantities as advertisements and editorial content in magazines. Moreover, they are often quite beautifully designed. If, for instance, an annual report features your work exclusively, it can serve as a portfolio. Make sure you ask for enough copies.
Quite a few photographers, primarily those who shoot corporate assignments, have adopted a practice of placing a usage fee and a separate assignment fee under one umbrella and calling it a day rate. It is invariably greater than an editorial day rate because it is the sum of both fees, and its usage aspect alone is almost always more extensive than that of a typical editorial shoot.
In corporate assignments the usage rights buyers want is rather uniform: the one-time publication of either an annual report or a capability brochure including, perhaps, some secondary distribution of photos to the business-news media for public relations purposes. The license granted in exchange for this kind of "day rate" often applies to the entire take photos shot during the assignment and submitted by the photographer. It doesn't matter how many days it took to shoot the job, and there is no limit imposed on the number of images the buyer may publish at one time or in one print publication. But to counter that kind of extensive use, the photographer's license will limit the number of copies printed unless an additional usage fee is paid; and the reproduction rights are typically granted for only a limited amount of time - say one year. And finally, this type of license is usually non-exclusive. That means the photographer is free to offer these images to other buyers. For instance, a business magazine such as Fortune might ask permission to publish the portrait you made of a company CEO, or that wonderful picture you took of a manufacturing plant might be used to illustrate a textbook, and so on.
In effect, this kind of day rate represents a package deal. But the photographer is still in charge, because you set the day rate yourself, and you will still bill separate line items for expenses plus mark-ups.
Another circumstance quite similar to the one described directly above involves quoting a package price without separating out the expenses and the mark-up fee. This is called a flat fee.
A flat fee is one price that includes all creative fees, production fees, expenses, and mark-up. Only one figure is submitted on the final invoice. No charges are itemized whatsoever. (Don't leave off the line item for sales tax, though, because you will be required to pay it to the state, whether you collected it or not (See Footnote 4).
Remember, too, that, while you won't bill a discrete line item for mark-up, you are still obligated to build some profit into your flat fee. Not to do so will starve your business of operating capital. It also has to be "padded" enough to include your pro-rated salary, or assignment fee.
There is no difference between billing a flat fee and billing the conventional way (i.e., itemizing all fees and expenses) except that you, the photographer, will be the only person who knows how all of the individual items break out. You will simply present one number on the invoice you submit to your client (with no backup) that represents a grand total. Some clients appreciate that kind of simplicity, while most of them want to see the billing details.
Sometimes the term "flat fee" is directly confused with day rate. The truth is, a flat fee is definitely not a per-day fee. If any kind of useful definition can indeed be applied, a day rate represents the minimum amount of money for which you will accept an assignment on a pro-rated basis; it is the threshold at which you will either accept an assignment or turn it down.
A day rate may include hidden production fees, or, in effect, do away with them altogether. It's your call. But a day rate will always exclude your costs and mark-ups on those costs because it should only be billed in addition to them. If it does not exclude costs and mark-up, then you really are describing a flat fee. But watch out! Your flat fee must still be lucrative enough to include your salary and a profit, even though they are not itemized on the invoice you submit.
How does one account for travel time if you are used to charging - or your clients are used to paying - a flat fee? The same rationale applies. If you expect to lose time in transit, that represents a cost to you. As costs go up, you must raise your flat fee to offset those costs.
Note: Weather delays are usually billed on top of a flat fee, unless you have agreed otherwise in writing with the client. Either way, you should reach an accord on this issue before you book the assignment.
A flat fee is simply a mask that makes invoices seem simpler to the buyer. But in the end, the buyer pays the same price, exactly as if all fees and expenses had been itemized. Day Rates, flat fees, package deals... It's just a name game.
Charging Special Fees
In addition to assignment fees, usage fees, production fees, and a built-in profit mark- up, there are a few special fees that don't fall into any particular category because they neither represent a direct cost nor have they a direct correlation to the production of an assignment. Nonetheless, they are legitimate fees that you can and should bill at every opportunity.
Bid Submission Fees
Some advertising agencies have a policy that requires at least three separate photographers to bid on any job that comes up. But it sometimes happens that an art director already has a strong opinion about which photographer to choose. His reasons are based on creativity. Nevertheless, he has an obligation to submit all three bids to his boss, because his boss, a bean counter, cares about how much money will be spent.
This situation has led, unfortunately, to the unethical practice of asking an informal pool of photographers for bids on every job that comes up. Some of the solicited photographers are expected to bid too high and have already been surreptitiously excluded from consideration. The practice is even more egregious when an art director informs his already-chosen favorite photographer who the other competitors are, so he has an advantage in bidding.
One way to counter this kind of dishonest and unfair behavior is for every photographer who is asked for a bid to demand a fee for the time it takes to prepare one. By the way, that preparation time can be considerable when you have to make telephone calls to suppliers, location and production managers, assistants, and stylists to determine their availability. In fact, it sometimes comes to light that a particular art director and his photo buddy have conspired on a phony request for bids when a photographer makes inquiries with several different contractors, only to discover that one or more of them as already been booked for the job in question. So, when you are asked to bid on an assignment, not only is it a good idea to ask who you are bidding against, and not only is it a good idea ask the art director or art buyer what his budget is - it might be too low for you to bother with anyway, if you can't earn a profit - it is a good idea to have your own policy of asking for a reasonable bidding fee. That might discourage insincere requests.
I have deliberately left out any discussion of microstock and working with stock photo agencies. These topics can be addressed in another article.
Since stock photography has already been shot, that is to say it is "in stock," there are no shooting or assignment fees involved in its licensing. Neither are there any production expenses directly billable to the buyer for a stock photo license. Usage rights alone will normally apply. And while a photographer's reputation and talent may add a premium to the creative fees for any given assignment, the rarity and quality of a stock image, taken into consideration as well as the photographer's reputation (the demand for a "name brand") may add a premium to the usage fee.
Pricing Stock Shot on Speculation
In addition to those photographers who work on assignment and put commissioned photos into their stock catalogs for subsequent licensing opportunities, some photographers undertake "self-assignments."
Self-assignments are not commissioned by a client; photographers shoot photos on their own initiative and pay for the costs themselves. To minimize the risk of their financial investment in creating the photos, they pick only subject matter that is in demand. They speculate on making a profit on the back end by pro-rating, or spreading out, their total production costs and building them into however many licensing fees they may expect to bill annually. In other words, your production costs will usually have an influence on pricing, even though no production costs will be itemized on your invoices. In the vernacular this is called working "on spec."
For example, if a set of pictures of, say, Formula 1 race cars required you to spend a considerable amount of capital on travel costs to follow the racing circuit from Europe across the Americas, a fraction of the overall cost should be reflected in the price of each stock photo sale you make. Each licensing sale should be priced proportionately higher than if you had shot only one race in your home town. Eventually, after the pictures have been licensed and published many times, you will recover the cost of producing them and earn a profit too. Such costs will not be billed as distinct line items, but the costs are divided and absorbed, hidden if you will, within the bottom line of each sale.
After such time as a stock photographer has recovered his production costs through sales, or in the case of an assignment photographer who puts his images into a stock catalog, production costs need not be factored in at all, since the initial shoot was already "in the can." It was already complete. The production costs were already paid, and the rest is gravy. At that point you can bill more aggressively competitive prices (i.e., lower prices) without sacrificing your profit.
1) This method is more sophisticated that the one cited earlier.
2) This information is available in PhotoByte. After you have billed a few assignments, you can click the Billed Expenses button on the Sales Reports screen.
3) This applies to magazine assignments only. In other cases there are the Five Factors discussed earlier that determine your creative fee.
4) Except in the states that do not collect sales tax and use taxes.
A note from the Shakodo Team: This is the sixth and last installment of six guest posts by Tom Zimberoff, the fifth guest blogger in our series of industry experts sharing valuable advice with the photographers community.
Bio: BIO: Tom Zimberoff, is a classically-trained clarinetist (USC School of Performing Arts) who nevertheless began a career as a photojournalist covering the Rock music scene in the 70s. Subsequently, he turned his attention to other topics and, for twenty-six years, traveled throughout the world on assignment for many popular magazines as a member of the Sygma photo agency and, later, Gamma-Liaison. His images of celebrities, scholars, artists, scientists, business leaders, and politicians, including two sitting American Presidents, were published regularly worldwide, including covers for Time, Fortune, Money, People, and other periodicals. Later, as an accomplished commercial photographer, his work was featured in the annual reports and advertising campaigns of many Fortune 500 companies.
Zimberoff is known for his portraiture, with examples collected by the National Portrait Gallery in London, the Los Angeles County Museum of Art, the San Francisco Performing Arts Library & Museum, the Eretz Israel Museum in Tel-Aviv, and the Corcoran Gallery of Art in Washington, DC, among other institutions. His first two subjects were Marx and Lennon - Groucho and John, that is.
Zimberoff is an authority on the topic of applied business administration in commercial photography. He is the author of "Photography: Focus on Profit" (Allworth Press), the first college textbook about the business side of photography. He has also contributed articles to the leading photo-industry trade journals. Zimberoff also created PhotoByte®, the leading business-management software application for commercial photographers.
Zimberoff was born in Los Angeles in 1951. He was raised there and in Las Vegas, Nevada. "Portrait photography," he says, "is a predatory sport. I stalk my prey like a big-game hunter, look for a good clean shot, and try to avoid unnecessary wounds. I hang their heads on a wall to admire like trophies."
After a ten-year-long hiatus from shooting pictures to pursue other business interests, Zimberoff picked up his cameras once again to illustrate his best-selling two-volume work entitled "Art of the Chopper" (Bulfinch Press) as a tribute to his decades-long affinity for custom motorcycles. He has most recently curated several exhibitions of the motorcycles featured in his books along with his portraits and documentary photographs of the artists who created them. Installations include the William J. Clinton Presidential Library, the Appleton Museum of Art, and the Kansas City Museum at Union Station.
Zimberoff lives in San Francisco, California.
Tom Zimberoff's Web Site: