A friend and I are starting a business making and selling pinback buttons. There are going to be two halves to the business - a printing service, and an online store (which might also sell at conventions). The two aren’t connected, so an artist who only uses the printing service wouldn’t be mentioned in the store. The store is the part we need advice about. We want to carry a large variety of button designs, and to do that, we need to know a fair way to buy or pay royalties for the art.
The rights we’d need are to print and sell buttons, and use photos of the finished buttons in our online store and marketing. The artists would keep the rights to do anything they want with the pictures themselves, including selling their own buttons.
Paying royalties looks like the best option, so far. That way, the artists would get some passive income from their art without having to do any selling/marketing themselves, and our incentives would be more in-line with the artists’. It would also avoid situations where we end up selling more than we and the artist expected when the deal was agreed on, or sell less than expected and lose money.
How large a royalty would be fair for something like this? Buttons usually sell for about $1 - $1.50. My gut feeling is somewhere around 20% of the sale price, but I’m not sure if that’s right. (We’ll be making the buttons ourselves, and we expect to spend a lot of time packing and shipping, since each individual order doesn’t cost a lot.) If we want something made custom, rather than just paying for the right to use the artist’s existing work, I assume we’d also pay their regular commission price up front.
Paying royalties also introduces some other complications. PayPal charges a flat fee for sending payments; would it be okay to pay monthly and/or wait until we owe the artist at least $5 or so before paying, so that we don’t have to pay the fee as often? (DeviantArt does something like this when paying artists for prints, and I’ve seen people criticize it.) If we stopped carrying designs that didn’t sell very well (and paid the royalties on the few copies that did sell), would that be unfair to the artists?
The other option would be to buy commissions that include the rights to print and sell the work - so we’d be paying up-front only. Is this considered fair? How much extra should we expect to pay for the usage rights, if anything? Would there be other complications with this approach, like having to do limited print runs?