Question Re: Pricing Structure for Exclusive Licensing on a Custom Typeface Design?

Anthony Elder

Hello folks!

This is my first post here, so hopefully I'm in the correct sub. If not, mods, please let me know and I'll move it along. After doing a few searches I wasn't able to find quite what it is I'm trying to figure out, so here goes:

I'm trying to price out my first custom display face for a potential client. I've figured out what I believe to be a fair baseline price for time/labor, and now I would like to include a pricing structure for varying levels of exclusivity of use. Would it be wise to do so by percentages of the final fee? For example:

Non-exclusive license: 100%
1 Year Exclusive license: 125%
3 Year Exclusive license: 150%
5 Year Exclusive license: 175%
License in Perpetuity: 200%
Full Rights Buyout: 300%

Does something like this make sense? I'm rather new to the concept of licensing—especially with type—and would love to keep it fair for both parties. Any advice would be massively appreciated!

—AE

SiDaniels

As a customer for custom type I might prefer to see the "full rights" price (your 300%) up front, with the other options positioned as discounts for less rights.

James Puckett

It’s important to consider the retail value of a typeface when pricing the rights. If someone wants to you crank out one more knockoff of Gotham or Frutiger, or to revive a set of quirky historical letters, it’s best to just get paid up front and not plan on making much money from retail sales.

Anthony Elder

James Puckett said:

It’s important to consider the retail value of a typeface when pricing the rights. If someone wants to you crank out one more knockoff of Gotham or Frutiger, or to revive a set of quirky historical letters, it’s best to just get paid up front and not plan on making much money from retail sales.

Fair point, James; thanks for the insight. I'm pricing out 3 separate projects, all based on the original painted wayfinding throughout an historic stadium, so you're spot-on.  I'll let you know how it goes. Hope you're well!

Anthony Elder

SiDaniels said:

As a customer for custom type I might prefer to see the "full rights" price (your 300%) up front, with the other options positioned as discounts for less rights.

This makes more sense . . . good call, and thank you for the reply!

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JoyceKetterer

Anthony -  

I like your idea about using the percentage of project fee to determine the cost of the exclusivity - it has a symmetry to it. That said, it can get messy depending on how you calculate the price.  

Your post seems to imply that there are only two items here (labor and exclusivity).  If I have that right then I think you're missing something:  use licensing.  We, for instance, charge one price for the labor and a separate price for licensing using our standard retail tables - I know not everyone does that.  We are able to do this because we've been around longer and are boutique so we have solid established tables.  When I first started with the studio we couldn't do it that way and it might be the case that you need to work up to it.   If you can I think it is much more fair because that way you still get a fair price for your labor and also more fair to varying sizes of clients by not charging the same cost for "custom".

If you need to work up to it then I suggest aspirational invoicing.  Simply invoice them as if you were charging what you want to work up to in the manner you want (in this case including use licensing) then void it out as a discount.  This way the client understands that they got a discount and but you're establishing that these are your prices for when they come back.  In order to do this you will likely have to collect information about number of users, whether they are giving the fonts to outside users (if you want to charge for that separately) embedding use (if your license is allowing it but you think that should be an add-on for retail) and so on.  

 Just a few thoughts on exclusivity and buy out options:  

1. I don't believe in "full buyout" as most people define it (assignment of rights).  Even if it takes 50 years, the odds are that your client will eventually grow tired of the typeface and stop using it.  At that point, if it's good, it will still have value to you or your heirs.  What we do is offer, at most, permanent exclusivity (we retain ownership always) with a caveat: if the client ceases using the fonts publicly for 5 consecutive years the exclusivity lapses (they keep the non-exclusive license).  

2. Your client may come back and buy more exclusivity later.  What then?  I think it is fair for them to get more of a discount if they buy it in one shot and less of one if they buy slowly over time.  What I do is charge the amount (in your case a percentage of the original development cost) less 50% of the amount already paid.  

Thierry Blancpain

Thanks @JoyceKetterer, interesting ideas to think about! And welcome to TypeDrawers!

Our custom pricing also consists of type design + licensing + exclusivity, with exclusivity cost as a multiple of the design work. We’re not the youngest foundry but definitely not the most established. We started out with slightly lower hourlies, which lead to lower type design + exclusivity cost, but licensing was always the same (as our retail licensing).

I think we benefited from the fact that we’re in Switzerland, so our labor cost will never be lower than someone from Berlin, Portugal, or Argentina, anyway. The only thing we can do is offer good quality for the price we ask for

JoyceKetterer

@Thierry Blancpain   Thanks!  I've stayed away for a while because I worried it would be a time sink but I'm giving it a try.  Don't be too interesting or I'll leave.

Ray Larabie

I tell clients I don't do exclusive and the conversation comes around to "I guess we don't need exclusivity anyway". I've turned down some clients who's only interest was having an exclusive font. When the intended purpose of the font is to be exclusive, I'm out.

Max Phillips

What's your objection to doing exclusive typefaces, Ray?

Anthony Elder

Thanks so much for the insightful replies @JoyceKetterer and @Thierry Blancpain

Ray Larabie

@Max Phillips 
You never really know what the next hit will be and the majority of my best sellers were non exclusive commission jobs. I can look at the long term sales on some of those fonts and some of them are 20 times the commission price. It's a gamble; some of them flop but I never know which ones. It's usually the opposite of the ones I think will succeed.

For branding, I've explained to clients how exclusivity has in the past, encouraged freeware knockoffs. I don't know if that's still a thing these days. Let's say a custom typeface is commissioned for a video game franchise. The availability of a font on pay sites, discourages the creation of a free knockoff. It won't stop knockoffs of Batman or Harry Potter but something like Mass Effect would probably have a bunch of knockoff free fonts if I hadn't insisted on keeping it non-exclusive. I don't know if that "scene" exists anymore so I stopped bringing that aspect up with clients.

SiDaniels

Also if you produce a design in the future similar to the "exclusive" design the client may come back and give you a hard time, or worse.

Nick Shinn

The last two custom jobs I’ve done were single weight “similar to” designs. The thought of developing them into retail products fills me with horror so, those were only ever going to be perpetually exclusive for the clients, and that’s how I quoted.

JoyceKetterer

@Nick Shinn We've had jobs like that too.  Politically, we just stick to the same rules even so because it's easier to tell everyone that we simply have standard we always stick to and that's that.