Pricing

Jani Paavola

Some time ago someone (could have been Kris Sowersby) was pondering about new ways of pricing the font licensing, especially licensee organization size and location and it's economic status. 

My current price variation idea for desktop fonts could be like:
Organization size:
Freelancer: 100%

Micro (<10 people): 120%

Small (10-49 people): 150%

Midweight (50-249 people): 300%

Large (>250 people): 500%

AND

Roughly based on IMF country classification:

North America/Europe/Japan/Australia/New Zealand 100%

South America/Asia: 50%

Africa/Oceania 25%

Or could be location based on UNICEF Human Development Index (HDI): Very high, High, Medium, Low

Or World Bank income classification: Low, Lower middle, Upper middle, High
 
What do you think?

Nadine Chahine

I think it's great to take into account IMF country classification. This adapts the price to local purchasing power and makes total sense.

When it comes to pricing by company size, I have major gripes against the model in general. We need to have answers to these questions:

1- What happens when the company grows and how will you know? Example: Instagram was only 7 employees in the beginning.

2- What is the difference in price between a branding typeface and one that is only used for a Christmas card by an in-house design team?

3- And how do you count company size? Does that include part-timers, those on zero-hour contracts, and external contractors like Uber drivers. 

If you would still like to go with that model, you might need to raise your brackets for companies that are actually quite large. So maybe more than 5000, and more than 50,000. You never know if you get a large bank or insurance company as a client.

Jani Paavola

Thanks Nadine!
Company/organization revenue could also be taken in consideration instead of staff size, as in almost every part of the world there are huge corporations.

But my views to your doubts:
1. I wouldn't mind this, the company size at the time of licensing would be enough. Using the traditional font users (or CPUs) model you wouldn't know anyway how many users (or CPUs) have actually installed your font.

2. EULA could prevent branding use, or have different more pricey licence for branding use. But personally I don't care about the use.

3. True this, maybe revenue would be better measure for organization size

Nadine Chahine

Hi Jani, happy to help! You have to keep in mind what is public information or can be audited. Private companies are not obliged to reveal the revenue to anyone but tax authorities and this info is not always readily available to find. If you do want to take financials into account, you would need an average over the past few years but this again is not future-proof and is not something your contact partner for licensing would be necessarily able to disclose.

A general comment to all: A very large portion of income in the type world comes from branding work and we need to keep that in mind when discussing new licensing models. The model needs to be fair, and the only fair way I see is based on usage of fonts rather than if the client is big or small. It feels like the big ones are being punished for being big, when the font usage might not necessarily be a big one. Like for limited time campaigns and similar.

The way that the font industry can protect itself from being labelled anti-business and so as not to push companies towards free fonts, is to have fair practices. And pricing per font use seems the fairest way, even though it is not without its pitfalls.

Patrick Griffin

Nadine Chahine said: ... fair practices. 

Fairness is a constantly moving target, not to mention objectively unquantifiable really. Fair/unfair to whom exactly? The font developer? The publisher? The reseller? The user? Everyone involved?

In the 60s and 70s, typesetting outfits charged their customers by the word, and the typeface designers barely made 1% of what was charged, and that was considered fair. In the 90s foundries charged Eastern European people more money for their font license because their languages had more accented characters than Western European ones, and that was considered fair. Also in the 90s, font publishers paid the font makers 20% royalty, and that was considered fair. Some foundries charged different license prices for different formats of the same typeface, and that was considered fair.

The vast majority of the current licensing/pricing models you see out there were invented and glossed up by higher valuation seekers at Monotype before HGGC acquired them. HGGC did some more glossing up, then fired all the people who were handling the varnish. Those people went to different outfits and took the Monotype playbook with them. If you look closely at the different EULAs of foundries large or small out there now, you will see more than a little Monotype in all of them. I suppose that's fair too. In a market where supply outruns demand by thousands of clicks, anything can be fair. In a market where you've got to compete with free without having the "you get what you pay for" excuse to bandy around anymore, anything can be fair.

I think somewhere along the line we just may have lost sight of why we make fonts in the first place. Though I'm definitely glad we stopped punishing Polish and Czech people for their choice of language.

Miles Newlyn

hi Yani,

There are a few foundries including mine that use company size as the single cost parameter.

I'm very happy with the model after a year of use.

André Simard

Miles Newlyn said:

hi Yani,

There are a few foundries including mine that use company size as the single cost parameter.

I'm very happy with the model after a year of use.

At first glance, your approach seems quite easy to use for both users and typefaces designers. How do you make buyers’s follow up? Do you have statistics about the percentage of Annual or Perpetual users? Thanks, you answers would be really appreciate. 

Miles Newlyn

Hi André,

What do you mean by "How do you make buyers’s follow up?"?

Annual 55%
Perpetual 45%

Enrico Sogari

Hi @Miles Newlyn, yeah personally I find "company size" the best compromise. Off topic: I browsed through your IG and I was amazed to see how similar your wip and mine are [work in progress]. I'm a Microgramma fan and I'm making my interpretation of that concept without taking a look at it but jeez... I felt good and bad at the same time ahahah.

Miles Newlyn

@Enrico Sogari nice work, you should complete that.

Enrico Sogari

@Miles Newlyn thank you, yours too. As per your price based on company size, I double checked it and it’s great, you guys have really done a masterful job, everything looks just right.

JoyceKetterer

My professional opinion is that company size licensing is a good option but a bad default.  I don't want to hijack the thread so will explain why if asked.

Enrico Sogari

@JoyceKetterer please go ahead.

JoyceKetterer

@Enrico Sogari   The idea is that the value of the font to the brand is based on the over all contribution rather than the traceable use metrics (CPU installs, web and app traffic, ect).  It therefore assumes (perhaps unintentionally) that all font use is branding use.

That just isn't true.  All the foundries I know that use company size admit that and say they negotiate with companies who come to them with that concern.  Why add such friction?

Probably because it freaks you out when you see a small order from a big company.  But I can tell you that I track every single such order, watching carefully for large use, and less than 10% of the ones we get turn into a big use.  

Miles Newlyn

I agree @JoyceKetterer, the point you make is clear and true.

We are sticking with company size because we are brand focused, and because of the simplicity it lends to many aspects of running a foundry.

JoyceKetterer

@Miles Newlyn to be clear, Darden Studio is also brand focused.  All our big sales are branding, never editorial or other.  Even so, I think that if we had company size as the default we'd loose 20-30% of our income.  Alternately, we'd make that percentage of income (which is by volume like 70-90% of sales) much higher friction and much more work for us.  I really think it's a misunderstanding of risk.

Miles Newlyn

@JoyceKetterer   How do you approach risk? Do you seek to minimize it?

Thomas Phinney

@JoyceKetterer
I think I can infer what the “risks” are for the different licensing models, but I think it would be good and useful to say explicitly what you think they are—and what you think other people are worried about.

JoyceKetterer

@Miles Newlyn Of course I do.  I just outlined why I think the company size strategey has more risk to it than use based pricing.

JoyceKetterer

@Thomas Phinney basically, I think that company size as the default is attempting to solve the problem of small orders for big companies, which I don't think is nearly as big a risk as some people imagine.  Yes, when it happens it can be a lot of money, but these cases loom large beyond their numbers by volume.  Forcing everyone into that model adds friction I think will lose other sales.  

Stuart Sandler

I agree 100% with @JoyceKetterer and in fact to put a fine point on it, I received a licensing request recently where the buyer is only interested in licensing for the integration of the use of the font (a generic server license) rather than the use of the font to create an unlimited number of personalized items at retail online.

It's not a deceptive practice on the part of the company requesting the license because they only need it for how they plan to integrate the font to make these items but by withholding the actual end use of the integrated font to make the items, the licensing won't actually cover the use and it skirts the fair market licensing fee for the value the font brings to the offering.

This alone could have a significant multiplier on the cost of the license that if not for the digging would never have been known so the Use must be licensed. The company who is the beneficiary should always be paying fairly for each use case but 99% of the time, the total number of End Users in an organization is not equal or the same as the Use of the font itself.

JoyceKetterer

@Stuart Sandler. I think everyone agrees those cases exist.  Several of the foundries that do company sized licensing tell me they accommodate those customers in negotiation.  I think the question is about what to prioritise not for the sake of fairness but for the sake of optimising sales.  My argument is that if I adopted the company size model I think I'd make more work for myself, not less, in the best case scenario where we lost no sales.  

I also just have a fundamental philosophical disagreement.  Yes, fonts are a design product.  Yes, fonts contribute to the over all value of a brand.  But at the end of the chain I believe that we are licensing software, not design.  For the same reason I include logo, broadcast and social media at the basic level I don't want to be talking about the over all brand value when I price something.  

That reason, to state it plainly, is to avoid customer confusion.

Ray Larabie

I've observed that sometimes, an excessive focus on minimizing risks can inadvertently diminish customer goodwill. As a passionate video game enjoyer, I often come across my fonts being employed in various titles. What stands out to me is the possibility that the hassle-free licensing options might play a role in retaining these gaming companies as repeat customers.

Take the Borderlands series as an example. While there might have been an opportunity to maximize revenue from the fonts used in the initial game, it could have compromised potential sales from subsequent sequels and DLC packs. It's heartening to think that they might have a particular affinity for my fonts. However, I can't help but wonder if the smooth and uncomplicated purchase journey contributed to their loyalty.

While it's essential to be vigilant about optimizing business potential, there's a fine balance to be struck. Tipping the scale too far might inadvertently alienate customers in the long run.

JoyceKetterer

@Ray Larabie, exactly.  Also this is a knife that cuts both ways.  Sometimes someone will ask for a discount, say on an app license because they are "only using it for titles" and I can say that isn't relevant to the license.  This isn't exactly true, if you only get one style (which we allow) odds are you're only using it for titles, so there is a way that's priced in.  But if I did the company wide licensing thing I'd have to field all these questions.  JUST SAY NO TO MORE WORK!

James Hultquist-Todd

We offer both: licensing based on company size (determined by annual revenue) and traditional licensing (desktop/web/social, app, broadcast). The company size license, which we call the “Simple License”, is sort of an enterprise-light license.

Since we launched the Simple License, our sales have be roughly 50/50 between simple and traditional licenses and we’ve sold licenses in every tier of our revenue options.

John Hudson

@JoyceKetterer:

Yes, fonts are a design product.  Yes, fonts contribute to the over all value of a brand.  But at the end of the chain I believe that we are licensing software, not design.

Yes, but I think we collectively forget sometimes that the use rights licensing model of software is itself directly taken from the use right licensing model previously employed, for decades, by photographers, illustrators, and other creatives. I think that model evolved as it did precisely because it provides the fairest balance between the interests of the people making things and the people using those things. The value of a useful thing is in the particular use of it, not in the size of the entity using it. That is why photographers and illustrators license images for particular kinds and quantities of use, and why we continue to license fonts similarly, using usage types and tiers.

Miles Newlyn

Minimising risk has never been an agenda for me. Personally I seek it in various ways.
Of course if you avoid risk, you'll stick to a traditional model.

I spent many years licensing by use, and in the end it became a headache to account for emerging media, and the measurement of use - asking licensees to guess page views, installations, downloads, etc,.. I just don't want to be involved in that complexity.

It didn't make sense to manage, via legal agreement, the ever increasing use cases of fonts. It became far clearer to both me and the licensee, to describe a few things there are not permitted than the plethora of things that may be permitted, and the limits applied to them.

Having spent a large part of my career designing logos at the highest level, my objective has been to understand the value typography has to an organisation. Now that I'm licensing by organisation size I feel that I'm using that knowledge, whereas previously I felt I was treating my work as a commodity.

Lastly, the licensing by use was not sustainable for me. Revenue was not facilitating the lifestyle I sought. Changing the license model has worked for me.

John Hudson

I’ve never thought of this in terms of risk management.

I’m glad your model is working for you, Miles, and I am not someone who ever thought there should be only one model at use in the type market, because I never thought there was only one market. Unfortunately, a lot of people do seem to think there should only be one model—I’ve lost track of how many times I have heard calls for a unified EULA—, so there may be some pressure on people to adopt a particular model that might not be suitable to them or to their fonts, especially if that model ostensibly makes things easier and less complicated for the customer, whether that is customer-size pricing or libre licensing.

Igor Petrovic

While I generally comprehended the logic of opinions on this interesting topic, I need some clarification.

JoyceKetterer said:

All our big sales are branding, never editorial or other.

1. What would be examples that outline all of these categories? And what are the main use cases from the "other" category? For example, if the company uses a font for the website headlines and body text is it branding, editorial, or other?

Stuart Sandler said:

 I received a licensing request recently where the buyer is only interested in licensing for the integration of the use of the font (a generic server license) rather than the use of the font to create an unlimited number of personalized items at retail online.

2. I am not sure I understand what the client needed in this case. They just wanted to use it as a placeholder while building the online platform, or (I guess) something else?

3. All these years, I have a feeling that font licensing is far more detailed and complex than the ability of independent foundries to track and get real numbers, and then to pursue possible breaches. Taking piracy into account, and in the case of smaller businesses, they could in theory say they ordered a design on the crowdsourcing platform (a hard-to-track designer) and get the outlined text (never used a font file). That's why I relied on the good intentions of the customers like I wouldn't steal in the supermarket even if I knew I wouldn't be caught.

However given discussions in the last few years, I see indicators that I must be making a few wrong assumptions.

So, how do you track if the chain of barbecue restaurants printed flyers to celebrate 10 years of just one local store? Maybe on the web, looking at their site and social networks? I guess often that kind of printed material never finds its way to the web.

What methods of tracking do you usually use? Is it tracking worth of effort, giving the licensees sold as a result of spotted breaches? How do you know that numbers about annual income are true?

Miles Newlyn

@Igor Petrovic 
1. examples of other large licenses that we've had are:
• the embedding of our fonts in digital hardware, e.g. printers and vehicles
• license for use across a city transport network: bus, train, airports, etc.
• licenses for use by departments of government 

3. We use FontRadar to track online use and recommend it. Axel and his team are very helpful, and the service to foundries has developed very well since we started with them.

Stuart Sandler

@Igor Petrovic - The font buyer is a developer only working on behalf of their client but only desiring to acquire the license for their development work to complete and launch their task but ignoring the actual licensing needed for their client. This is a typical scenario when a freelancer is working on behalf of a larger organization.