As a freelance artist, sooner or later you will come to the point where you have to do something - in my opinion, something strange - like pricing licenses. In doing so, German copyright law (§31 UrhG) distinguishes between "simple or exclusive right". But what does that mean and how can you even calculate something like this?
Why price usage rights at all?
In the early days of my artistic self-employment, this was a topic that consistently interested me. After all, it was also about being able to write serious offers for clients that would include impressive numbers and formulations such as "usage rights". However, looking professional was not my only motivation. Of course, there was also the financial aspect. The aspect which, by the way, is a topic in and of itself: because if an offer was too cheap, people didn't take me seriously, and if it was too expensive, they would walk away. Maybe I will write a separate post about this.
What else justifies the calculation of usage rights? I came across a blog post that talks about a "second service" that should be compensated for (see sevdesk.de). Personally, I find this view extremely illogical and opaque. As an artist, I certainly have a workload that should be compensated for - no questioning. However, simply issuing usage rights ultimately does not involve any additional work in terms of working hours. Therefore, I don't see any "second service" here. Moreover, it is absolutely unclear to the customer what exactly is behind the price for the usage right. This may not become much more transparent even if one works with a more informed calculation (more on that later) - communication with the customer would be crucial.
I believe that legitimization of usage rights primarily lies in the economic value added for the respective using entity. As an artist, I can sell a piece of music, for example, on production music websites and monetize a piece already produced for reuse by other creative professionals. On the other hand, a buyer (either directly commissioned with me or through such a website) can use my music to e.g. advertise a product with their own commercial, striving for economic gain. In my opinion, both economic values ultimately lie in the payment of the usage license.
And how to calculate usage rights?
How such a number comes about, was - and still is - almost impossible to understand logically and in a transparent way - in the past and even today. The only thing I found back then and still find today is the calculation through factors (again, see sevdesk.de for comparison). However, this is based entirely on art in the field of graphics and design. There is a table that one works through to put together a factor that depends on usage type, duration, type, etc. This factor is then used as a multiplier for the project's working hours and compensated accordingly as a price for the usage rights based on one's hourly rate.
My tough opinion on this: totally opaque and fictitious nonsense. I admit that I haven't done even much more research on this. Perhaps there really is something like a mathematical basis for such a calculation. And perhaps it is based on real numbers and experiences, etc. - but I don't believe that. I believe much more that some people have come up with some numbers here that work in such a way that the price for usage rights could somehow appear "solid" - whatever that might mean.
I'm trying to approach things differently here: Since I've been selling my music through licensing archives for many years and keeping precise records of all earnings and works, I have concrete numbers. Numbers that show me which tracks with what duration have brought in how much in licensing revenue in which period of time. This allows for very specific calculations. (Additional note: Of course, the prices of the respective licensing platforms are also opaque and therefore not the best fair and logically comprehensible basis!) For example, I can take my bestsellers, divide the licensing revenue they've brought in over the years they've been earning money, and get something like an annual flat fee. I can calculate this per second or even per track. Exclusive insight into my current status: I consider tracks up to about 20 seconds in length as logos/sounds, and calculate based on the length of time in seconds. For longer tracks, I calculate a flat rate per year. Why? Because then the prices don't vary so extremely - otherwise you would have to pay disproportionately more for a music track.
How was it again with non-exclusive and exclusive? I use the example mentioned above for the cost of exclusive rights. And here's why: If I sell exclusive usage rights, I cannot generate any additional value for myself with the work during that time. Therefore, I try to determine this potentially possible additional value with the calculation outlined above and invoice these potential costs as the price for exclusive usage rights. Personally, this seems somehow fair and well-founded to me.
However, if it is a non-exclusive right of use, the situation is somewhat different. With customers, I generally grant such a right in accordance with the order, usually inclusive (i.e., without these fictitious additional costs for the customer). In my music archive, I must admit, I roughly oriented myself towards other music licensing archives and lowered the prices even more. I don't (yet) have a really fairer and more well-founded pricing concept here. After all, we're talking about numbers that are so incredibly far from me. Theoretically, I would have to predict what added value customers have with their projects that use my music and what share my music plays in this. But even that could be taken so far that one ends up with perceptual psychology or something similar. In addition, these pieces of music already exist and no longer cost me any working time (at most bureaucratic effort). The legitimization for me lies here in a kind of investment. I invest my own time at my own risk in works that could only possibly generate income - the principle of passive income.
Overall, I still find this topic a bit difficult, even after more than 16 years of experience in the field. Perhaps it is because I am someone who always stands for fairness and transparency, and such a calculation of prices for something that ultimately does not require more work from me seems somehow surreal to me. Ultimately, I think it is very important to always be in good communication with the interested parties who want or need to acquire usage rights, and to be open and honest about things.