Digital Photography for Graphic Communications
Chapter 7 • Pricing Digital Photography
Digital photography can result in lower downstream costs if processed correctly for file format and color-management of images. It can let you take advantage of automated print technologies. Progressive printing companies realize this competitive advantage in controlling the photography. Digital processes make this all possible.
Professional photography can take many forms. A photographer may capture images on speculation, offer these images as stock images and license them on a per use (royalty) basis. A photographer may work for a publisher and be compensated for capturing the image and still retain copyright and continue to license the image for use to others who would find value in using the images. Or a photographer may work for a media company such as a printer as a regular salaried employee. In the latter two forms the employer may require the photographer to relinquish copyright, ownership and any future compensation for the images captured. If the images are for marketing purposes that clearly contain images of the client’s products and services this may best represent the interests of the client. These images that are only of value to the client allows the client to reuse the images many times without further cost.
Although this chapter concentrates on work-for-hire assignment photography, photographers specializing in stock, freelance or other forms of photography may be able to utilize applicable concepts from this chapter for their own use.
Copyright, Ownership and License Fees
Pricing of professional photography, should take into account copyright ownership and licensing considerations. The Copyright Act generally gives ownership and copyright of the photographic work to the creator who is then free to determine the current price and any future royalties. This is often the case for freelance or stock photography work.
Photographers who have copyright ownership may determine license and royalty fees depending on a wide variety of factors. These include the type of product or media it is to be reproduced in, the quantity of the circulation or print run, the page or image reproduction size, the time frame for which it is to be used, and other factors. Single use, multiple reuses, exclusive use, unlimited use and outright buyout are part of the compensation equation. This chapter does not cover license fees in detail as this form of photography is not its focus. The American Society of Media Photographers (www.asmp.org) provides more information about copyright and license fees. The U.S. Copyright Office (www.copyright.gov) provides information about your rights.
Photographers may work on a salary basis and receive health benefits from their permanent place of employment. In this case the employer may claim the right to ownership and copyright of the photographic images created by the employee. When photography is commissioned by and paid for by the client, as a “work-for-hire’ photography assignment, the client may retain ownership and copyright of the photographic images. Often these images clearly show the client’s products or services and may have little commercial value except to the client for whom it was originally commissioned by, to be reproduced in print or other media.
Print media companies that offer digital photography as an ancillary service usually offer the service as a “work-to-hire” assignment with the copyright ownership being transferred to the client. The printing company is sufficiently compensated through the markup on both the photographic and printing services and the photographer as a full-time permanent employee receives a fair salary plus benefits and permanent employment. This is in contrast to a freelance photographer who is self-employed and may work a limited number of days in a year, and have a career that spans less than that of a salaried employee. They must do their own sales, marketing and bookkeeping and self-employed photographers are also responsible for their own health benefits and retirement savings.
Steps to Accurately Price Photographic Work
The steps below are those used in the printing industry that lead to accurate pricing of printing. This chapter will lead you through a similar process in determining the costs and pricing for digital photography.
| Table 7-1. Steps Leading to Estimating Prices for an Assignment | ||
| Annually |
|
|
| Per estimate |
|
The first step is to calculate what it costs you for an hour of your time. This rate will become your Budgeted Hourly Rate (BHR) or charge out rate. You may decide on different rates for different operations or cost centers.
The second step is to determine the standard time (based on standard operating procedures) it takes to perform a particular function.
Once you have these two you can calculate the cost of a particular operation.
Cost versus Price
Estimating costs and adding a profit markup to determine the selling price are distinct and separate steps in a customized process such as photography assignments or commercial printing. The standard cost estimating formula is:
| Cost estimate = (Production standard x charge-out rate) + cost of materials + outsource purchase costs |
Once you have established your costs you can add a profit markup to determine your selling price. The standard selling price formula is:
| Selling price = Estimated cost + Markup |
Capital Investment and Setup Costs
The following charts illustrate the potential starting costs between the different commitment levels in offering digital photography services. Costs stated are used to make a point and your exact costs will vary depending on your own investments.
If you are to produce high quality images suitable for sheetfed offset printed reproduction on coated paper printing at 150 LPI at 300 DPI (2 × LPI) you will need a camera that produces enough optical pixels. It may be that you are assigned to shoot a double page spread of an 8 ½” × 11” saddle stitched magazine with bleeds in which case your image will need to be at least 11 ¼” × 17 ¼”. Or you may be assigned to shoot a 19” × 25” or 25” × 38” poster.
| Low-End Investment | |
| Point & shoot 6MP | $250 |
| Computer – existing | $0 |
| Software (Adobe CS suite, etc.) | $2,000 |
| Total | $2,250 |
| Prosumer Investment | |
| Nikon 12MP | $6,000 |
| Computer (Mac) | $3,500 |
| Software (Adobe CS suite, etc.) | $2,000 |
| Total | $11,500 |
| Professional With Small Studio | |
| Hasselblad 39MP (body, lenses, backs) | $30,000 |
| Lights, power supply, umbrellas | $1,500 |
| Backdrop, props | $1,500 |
| Studio construction | $10,000 |
| Computer (Mac Pro), high-end monitor, and proofing device | $18,500 |
| Software (Adobe CS suite, etc.) | $2,000 |
| Business management software | $1,500 |
| Total | $65,000 |
The above charts illustrate the typical costs for an entry-level digital photographic setup. Annually you will need to replace, upgrade or add cameras, lenses, backs, lighting, studio props, computers, software and upgrade or reconfigure facilities. By calculating your hourly and daily charge out rates based on adding an annual budget of approximately 50% of your startup costs will ensure that your equipment will stay current over time. A magnitude increase in capacity will require a significant ramp up in investments and a recalculation of your charge out rates.
If you specialize in shooting food product shots in your studio you will need to install a refrigerator and stove, plus account for food costs and maybe even a chef. Don’t forget to account for storage space and hauling of waste. Approved lighting may also be necessary for viewing proofs.
The photographer must invest in robust computer hardware and software solutions, and training. A color managed MAC is used for creative, editing, manipulation, marketing collateral design, web site design and maintenance, viewing images, asset management. These costs of are not trivial. Image editing requires a fast computer with relatively expensive software. Computer hardware (RAM, hard drive, backup systems) and software will need to be upgraded on average every one to two years.
Determining Your Hourly Charge Out Rate
The process of determining your hourly charge out rates is a detailed process that is in itself very enlightening. You can use this time of self-examination to review all of your business processes, procedures, policies and costs in detail to determine if a general fine-tuning of your business or a more systematic process such as reengineering of your business operations is appropriate.
You may need to employ an accountant to assist in accurately deriving the values of fixed and variable overhead expenses of your operation. Once these values are compiled they can be entered into a Budgeted Hourly Rate (BHR) spreadsheet such as the one on the next page.
Running a lean operation and controlling expenses and maximizing are ways to reduce your charge out rate and assist in growing your business and increasing profits. Optimizing levels of efficiency, productive (chargeable) hours, waste and spoilage, real estate costs, salary and employee benefit costs, sales and marketing costs, bad debts are necessary to control your hourly charge out rates.
| Facilities | ||
| gardening, snow removal | $2,500 | |
| garbage removal | 750 | |
| janitor | 1,250 | |
| insurance | 2,500 | key man, property, E&OE |
| lease or rent | 12,000 | |
| utilities | 1,250 | light, heat, water |
| repairs & maintenance | 500 | |
| security | 1,800 | |
| licenses, permits, taxes | 500 | |
| external storage | 1,500 | |
| $24,550 | ||
| Studio | ||
| cameras, lighting, props | $10,000 | 50% reinvestment annually |
| computer | 1,250 | hardware & software |
| depreciation | 2,250 | |
| salaries & burden | 95,000 | photographer + assistant |
| $108,500 | ||
| Admin—Office | ||
| computer | $750 | |
| furnishing | 500 | |
| depreciation | 375 | |
| telecommunications | 2,500 | land/fax lines, cel, internet |
| web site | 750 | design, maintenance, hosting |
| office supplies & postage | 1,000 | |
| legal & bookkeeping | 1,725 | |
| shipping & couriers | 500 | |
| education | 1,000 | 2 continuing education courses |
| $9,100 | ||
| Marketing | ||
| printing | $3,500 | business cards, brochures |
| trade shows | 2,000 | 1 local, 1 at a distance |
| supplies | 1,250 | paper, toner |
| advertising | 3,000 | targeted trade magazines |
| associations | 2,000 | photo & print association fees |
| travel | 2,500 | attend 1 trade show |
| entertainment | 1,800 | entertain clients |
| donations | 500 | local midget baseball team |
| automobile | 4,000 | lease, insurance, gas, maintenance |
| $20,550 | ||
| Subtotal | $162,700 | |
| markup @10% | $16,270 | |
| TOTAL | $178,970 | |
| 40 hours/week x 48 weeks/year | 1,920 | |
| BHR at productivity of 65% | $125.84 | 1,248 hours chargeable annually |
| BHR at productivity of 70% | $121.18 | 1,344 hours chargeable annually |
| BHR at productivity of 75% | $116.52 | 1,440 hours chargeable annually |
| BHR at productivity of 80% | $111.86 | 1,536 hours chargeable annually |
Calculate your total annual expenses. Divide by the number of sellable (productive) hours. Use the spreadsheet for “what-if” scenarios. i.e. What if we are able to bring enough business in to run on a two shift basis and spread overhead costs over more hours? You can use your hourly rate to determine a daily or half day rate.
The values in the above sample spreadsheet are based on a two-person one-shift operation, with the owner/manager being the photographer and one multi-tasking assistant. Some shops use separate columns for different equipment or operations to determine more detailed charge out rates. Note how the charge out rate changes based on the number of chargeable hours increases. Multi-shift operations with enough volume are able to reduce hourly charge out rates.
Estimating Fees
Photographic fees can be categorized as assignment specific creative fees, non-creative fees, expenses and miscellaneous costs, as shown in the charts below. Creative and non-creative fees are generally performed by in-house professionals and time estimated is based on production standards and costs estimated based on established charge-out rates. Expenses are generally assignment specific costs paid to outside individuals or companies. Miscellaneous charges cover lost production time caused by mother-nature or the client.
| Creative Fees |
| Color correction
Digital capture File conversion Image manipulation Proofing / web gallery maintenance Reshoot |
| Non-creative Charges |
| Casting
Consulting Coordination Preproduction Postproduction Research & Testing Travel time |
| Expenses |
| Crew / driver / grip / janitor
Couriers / messengers / shipping Insurance License & use fees Location costs Props Rentals: sets, studio Rentals: lighting, camera equipment, computer, monitor Security / police Talent Transportation (taxicab, car rentals) Travel (air, hotel, airport transfers, taxicabs, meals, per diems) Wardrobe |
| Miscellaneous |
| Cancellation
Postponement Weather delays Value factors – special markups |
Proofs
Many digital photographers choose to provide proofs via a web gallery or as soft proofs. Photographers normally shoot many more photographs than viewed by the client. Clients may request all images rather than only the “Photographer Selects”.
Web gallery images may be removed after a few weeks. Some photographers may charge separately for this while others roll up the cost in the creative prices. There is a cost to purchase or develop and implement this service/software. Training, upgrades, service and maintenance are costs a photographer will also incur.
Photographers have begun to include soft proofs in the cost of the image capture. Soft proofing is becoming more popular with big publishing clients and is starting to trickle down to other operations. The quality of approved LCD panels has increased, prices have come down, size has increased and there are more people that understand colour management. The cost of soft proofing may be negligible even when multiple proofs are required simultaneously in different locations. Some photographers will set up the client to view color managed soft proof as part of a quality and customer management and customer training programs.
Many clients still like to see hard copy reference prints which are printed using inkjet technology and some require images delivered on CD-ROM or on DVD disks.
Assignment Costs
Thoughtful planning can assist in reducing costs long term and will reduce unexpected surprises. You still need to plan for some contingencies because uncontrollable variables may put the shoot off schedule and increase costs. People show up late, equipment malfunctions and things break. On location other contingencies may be anticipated, the weather doesn’t cooperate, traffic problems makes participants late. Experience is learning from past occurrences. Keep a log and share learning amongst staff.
A job may include pre-work such as research and testing in addition to consultation.
Short shoots may not be cost effective. Take advantage of common setups to get more photographs done in the same shooting day/week so you can share the cost of setups, models, hair stylists, assistants, travel costs and time and rental equipment.
The digital photographer is now responsible for more creative control that was once part of the scanning and prepress processes. Color correction, retouching and tone-range compression is now performed up-stream by the digital photographer. The digital photographer may embed an ICC profile thereby tagging the color preferences information that has been established.
Digital capture charge could include standard image capture, some editing, proofs, transfer, batch convert, evaluate, saving and archiving digital files and delivery of images. Meta-tagging by adding keyword captions so images can be found later is important and time-consuming. You may choose to roll up some or all of these costs into your prices or charge separately depending on the circumstance.
If you do location shooting you may be need to be concerned about weather days which may result in a postponement of full cancellation of the shoot. Determine in advance who will absorb the costs should this occur. You need to build in a number of unproductive days into your costing.
Your Profit Markup and Selling Price
Your profit strategy will likely be multi-faceted but should result in a year-end profit target somewhere around the printing industry profit leaders of 10% to be sustainable in the long term. Once you have estimated your costs you should use market based pricing. It is in both your interest and your customer’s interest that you make a healthy profit. This does not mean gouging your client but rather making such a profit that allows you to stay ahead in terms of upgrades and offering innovative services and products. Pricing based on perceived value or what the market will bear makes sense as long as you are not price-gouging. If you price too low and go out of business it is neither in your best interest or the best interest of the customer. If you price too high because your costs are too high you will not attract enough work to cover overhead expenses and will not stay in business in the long term. Profit is needed to support growth. Growth allows a company to reach a size where economies of scale can be realized.
Profits are needed so the company can continue to invest in expensive digital hardware, equipment, software that becomes outdated in one to two years. Profit is also needed for updating premises and for expansion. Employing top staff and providing extensive training costs money as does R&D. And profit is needed to compensate owners and investors for their use of capital.
| Typical Printing Industry Markups | |
| Labor | 10% to 30% |
| Materials | 20% to 50% |
| Buyouts | 50% to 100% |
Some customers may need to be educated about what they receive for your price. Other customers buy from you because you are consistent and predictable in delivery of your promises. From you they receive an optimum level of quality control, customer service, communication, turnaround, and most of all peace of mind. Customers appreciate your show of competence, empathy, and how you calm customer’s job related anxieties. All of these factors have costs implications. This equates to the customer using a cost-benefit ratio and paying an insurance premium to ensure peace of mind and reduced stress.
Many suppliers have a goal of being a supplier of premium priced products and services. Market skimming is an approach where a company begins with low pricing and determines which customers have the best long term profit value, skimming off these customers and favoring these customers for preferential treatment and eventually dropping off less desirable customers. This approach allows a company to position themselves in upper-end price-inelastic highly profitable spectrum of the market. You must work to continue to be top-of-mind with the selected customers by maintaining the desired image. It is hard work to create and maintain a favored-supplier position (“halo effect”), but worth the effort. Your goal may continue to be low cost while providing either moderate or high priced products and services thereby maximizing profit.
| Work for Which Special Pricing Might be Warranted | |
| Charity work | Discounted |
| Employee work | Discounted |
| First time customer with long-term potential | Discounted |
| Volume work | Discounted |
| Filler work | Discounted |
| Rush work | Premium |
| Slow paying and delinquent customers | Premium |
| Work during slow periods | Discounted |
| Work with significant marketing and/or PR value | Discounted |
| Environmental levy etc. | Premium |
| Difficult assignment – time and skill involved | Premium |
| Pain in the neck factor | Premium |
| Style value – can’t get the photographer’s style elsewhere | Premium |
| Competitive edge – a gut feel of client dynamics | Premium |
On certain jobs a company may choose simply to break even (cover costs) or even to price below cost as a loss leader. This may take place if pricing to buy exposure, to get a foot in the door or to give a client a trial of the company’s service or product. Too much pricing below cost may lead to disastrous long-term financial results and is not sustainable long term. The law may prohibit pricing below cost. Pricing must be diligently managed or you will not achieve your yearly profit target.
Handling the Quotation Request
Getting accurate specifications is the first step to accurately estimating assignment photography costs. Tighter specifications should result in a tighter price as the estimator is able to use his or her estimating judgment to find creative solutions to reducing cost without jeopardizing quality.
When determining your price don’t be afraid to ask what your client’s budget is. If you are the preferred supplier your client may give you this information and maybe even what the competition’s price is as well.
Make your quotation subject to review of final specifications at the time the job is received. Errors and omissions insurance (E&OE) should be purchased to protect against large mistakes made during cost estimating.
Provide a written quotation letter with acceptance signature by the client will ensure legal enforcement. It protects both sides. Make the quotation subject to Trade Customs, Terms and Conditions.
Determine if a deposit of up to 50% in advance is justified with 50% COD. Perform a credit check regularly throughout your relationship and ask the customer to provide financial statements if you feel necessary. This will show if the customer is not paying others or if there are lawsuits or judgments. Wise companies regularly monitor business newspapers and journals for lawsuits and bankruptcies. Not only could you head off potential problems with customers but you can see what is happening with your competitors as well.
Once the job is in production be sure to track customer changes and get a sign-off on additional costs before proceeding with the alterations. This is a source a lost profit margin for many vendors.
Establishing Pricelists
Once you know how long it takes to perform a particular operation (standard) and your hourly charge out rates you can create price lists where you roll up material costs such as for proofs. The following price lists are taken from a survey of photography suppliers. Although these may get you started you should take the time to determine your own costs, standards and price lists.
| Digital Photography Services | ||
| Price range | Minimum | |
| Image capture – regular | $1 to $2 per image | $50 to $150 |
| Master file preparation – regular | $50 to $55 per image | |
| Master file preparation – hi-rez | $100 per image | |
| Retouching | $125 – $150 per hour | |
| Color correction | $125 – $150 per hour |
| Proofs (color correction not guaranteed) | ||
| Price range | Minimum | |
| Web gallery | $50 for first 100
$20 for additional 50 |
$50 |
| 4” x 6” inkjet guide prints | $1 | $50 |
| Inkjet contact sheets 8 ½” x 11” | $15 each | |
| Inkjet contact sheets 11” x 14” | $25 each | |
| Large inkjet proofs | $5 to $8 per square foot | |
| CD-ROM delivery (jpeg or tiff) | $2 to $4 per image | $25 to $50 |
| Courier or mailing charges are additional |
| Standard CMYK conversion | $65 |
| Greyscale conversion | $55 |
| Greyscale & CMYK conversion | $75 |
| Web only (small file) | $25 |
| Web & CMYK | $70 |
Price charts in this chapter are for illustrative purposes as you should determine your shop’s costs and profit targets.