Real World Estimates – Bribes And Kickbacks

by Wonderful Machine CEO Bill Cramer

It seems like everywhere I turn lately I’m finding people giving “incentives” for others to do business with them. On more than one occasion, I’ve seen stock agencies offering iPods to art buyers who spend a certain amount of money with them. And recently, I’ve even run across an individual photographer offering an iPad to anyone who hires him for a shoot. One says,

“I am giving away brand new iPad 2’s (WiFi 32Gb your choice white or black) all year to any Creative Director, Art Director, or Art Buyer who hires me to shoot a campaign*. What’s the catch you say??None just my way of saying thanks.”

Sometimes this works in reverse. When I first got out of college, I worked for a photographer who had a client who asked him for a “commission” on the projects he hired him for. The client was an art director for a local television station, and the photographer was shooting publicity photos of the on-air personalities. Another photographer I know used to work for a national tabloid newspaper, and the photo editor there had a high volume of assignments to give out. He decided to create a photo agency as a side business, he hired the photographers through that agency and then took an agent’s commission for getting them the job. Those payments, called kickbacks, are like a bribe in reverse. The practice may or may not be legal, but those folks would certainly be fired on the spot if their employers found out they were taking that money. After all, the employee was obligated to serve the interests of the employer, but instead they were selling those interests to someone else and keeping the money for themselves. Some companies have explicit policies that prohibit their employees from taking even the smallest gift. Bloomberg L.P. for example, sends out a letter every November reminding their vendors not to send any Bloomberg employees any holiday presents because they want to avoid even the perception of conflict of interest.

But what if the person asking for a commission isn’t an employee bound by those restrictions? What if they have their own independent company? Recently, I had a situation involving a small ad agency and a campaign for a local brand. The project was a one-day studio shoot where we’d photograph several models, individually, on a white background, in a variety poses.

In the course of the usual exchange of emails during the estimating process, I received the following information from the account executive:

Good speaking with you today. For estimating purposes, it looks like, in rough terms, we will have:

8 billboards
3 newspaper Ads
1 transit shelter
8 posters

That is subject to change once the final deliverables have been set. But I won’t know that for a while.

As to billing, the client wants to have you invoice them directly because they have tax exempt status. Because we typically mark-up all 3rd party costs such as photography, can you bill the client your fee plus our mark up and then remit the commission to us when you get paid. For example, let’s say your cost is $10K and we add our $1.5K commission on top of that. You bill the client $11.5K and then we invoice you for the $1.5K that you pay us when you get paid. I hope this works for you Bill.

Please get back to me with your input and/or comments. I look forward to working with you!

I had to think about how to reply. I did want the job but I didn’t want to pay them a commission. So I called the account executive and told him that I was uncomfortable with that arrangement. After all, he wasn’t my agent. He wasn’t working for me, I was working for him. If he wanted to mark up my services, that was fine with me, but that was between him and his client. He told me that they always work this way and that all of their other clients and photographers are comfortable with it. I told him I had been working in the same city as him for 20 years and I never had a client ask me for a commission. I asked if his client knew about the commission, and he said, “not exactly.” So we left it at that and he never brought it up again. I’m not saying that there’s anything illegal or unethical or immoral (necessarily) about what he was asking for. It wasn’t exactly a kickback in the traditional sense. But I didn’t like that he wanted to misrepresent the cost of the photography to the client (which is different than a regular mark-up where everyone understands the situation if not the actual costs) and I didn’t want to set a precedent for future projects. Are these situations somehow different from an ordinary bribe or kickback? Am I naive to think there’s something wrong with them?

Back to the estimate. The plan was to photograph three people, resulting in one ad each. The client was a local company that did business mainly in just one section of the city (albeit with a lot of exposure, given the media buy). I first checked Blinkbid and fotoQuote. Blinkbid suggested a fee of 3000.00 – 6750.00 for three images for billboards, newspaper ads and transit poster for a year. fotoQuote came back with 5410.00. They both seemed low to me. If the client was going to lease 8 billboards for a year each, that could be $200k in media right there (small billboards lease for about 1000.00/month and large highway billboards are about 4000.00/month). So I decided on 7500.00. I planned on a day to test the pictures so we could figure out which poses would work best for the concept and layouts. The rest of the production expenses were pretty routine. Here’s the first estimate:

Maybe I came in too cheap, but the client who was previously very budget conscious, decided that they wanted one more ad and they wanted more extensive licensing. Email from account exec:

1) XXXXX would like to have a full buy-out on the rights to use the images for longer than a year and with the possibility of using them on other deliverables such as the website. Can we work this into this agreement upfront?

2) XXXXX would like to know what the certificate of insurance covers?

3) XXXXX would like you to “bury” the cost for catering/craft services somewhere else (e.g., add it into another line item) because she can’t justify this cost to her boss. Long story.

4) XXXXX does not understand the $150 for mileage. Can you please explain that?

5) Last, they are tax exempt. I will fax you their certificate.

That’s all for now. Please get back to me with questions/comments/answers.

1) To me, this meant simply removing the restrictions about where they could use the pictures and for how long.

2) Most locations and rental studios require a certificate of (liability) insurance. They want to know that a photographer is properly covered in the event of property damage or injury during the shoot. Some insurance companies charge for this, some don’t. We routinely charge 100.00 for it because whether we have to pay for it or not, it’s one more task that we have to handle, and to a lesser extent it helps pay for the actual insurance. Like a lot of expenses, there are times when it makes sense to itemize it and other times it makes more sense to bundle it into the fee. Mostly it’s a matter of doing what’s customary.

3) The client’s client’s boss didn’t want to pay for lunch for the cast and crew. Who knows where that came from, but it’s very unusual. If I’m doing a half-day magazine portrait, I won’t charge the client for any meals (though I will buy my assistant lunch regardless). But on most full-day shoots, it’s customary to bill for meals (or for catering on larger productions).

4) This line item was actually for Mileage, parking, tolls, shipping, misc. They may not have realized that we were renting a studio and that we would have to make several trips back and forth.

5) There are two parts to the “tax exempt” question. The rules vary from state to state, but in Pennsylvania, we’re obligated to charge sales tax to any in-state client (that’s not a publication) unless they send us a certificate exempting them from that sales tax. Lots of times when I’m doing an estimate, I’m not sure who’s going to pay the bill and whether they’re going to have to pay sales tax or not. If you add in the tax, it makes your price look bigger than it really is. If you leave it out, you risk getting stuck paying it yourself. So we simply say, “plus applicable sales tax.” That way, we’re covered both ways. Looking back to my client’s email, saying that his client wanted me to bill them directly because of their tax exempt status was a bit of a red herring. In all likelihood, the end client wanted to be billed directly for the photography because they wanted to know what they were paying for and they wanted to keep a lid on the “mark-ups.”

Now to revise the the estimate. Adding one more situation and expanding the time and breadth of the licensing would certainly increase the price, but by how much? Checking back with my pricing programs, Blinkbid offered up a range of 33k – 90k and fotoQuote said 7350.00. I knew that the if the client was concerned about buying lunch, they were not going to pay the photographer $90k. But 7350.00 seemed way too low. A lot of photographers say that their rule of thumb is that a “buyout” is worth triple the price of limited use. (First of all, I don’t use the term “buyout” in any of my contracts because it means something different to everyone.) I don’t think it’s a simple multiple. You have to evaluate each situation individually. There are some pictures that are going to hold up better over than others over time, or be more useful in more ways than others. In this case, the first quote was for a year, with the bulk of the value (and the most likely use – based on the long narrow format of the photos) was in the billboards. They were already planning on 8 billboards, which is a lot for a local company to rent in a relatively small geographic region. Any campaign is going to wear out after a while. I decided that without restrictions, they might reasonably use the pictures two to three times as much or as long as the original plan. That doesn’t mean that the licensing is necessarily worth double or triple though, since a bird in the hand is worth two in the bush. All things considered, I decided on $18k for the fee. We “buried” the catering fee into some additional “retouching.” (I guess I’m corruptible after all.)

They signed the quote. We shot the job. They paid the bill (less the commission).

There Are 22 Comments On This Article.

  1. Wow, $300 for a 1st. photo assistant on an advertising job?
    WhoTF is foolish enough to work for an editorial rate of $300 on an advertising job.
    This is just ridiculous, unless of course the assistant has little experience or skills.

    • Interesting comment, Sean876.
      Editorial rates for photographers haven’t gone up for the most part in decades. In fact in many cases shooting an editorial is a loss when all business costs are factored. In this climate rates in all photography (including advertising photography) have mostly gone down due to many factors – oversupply of images and photographers being one of the most significant.

      A decade ago many good photographers assistants, both advertising and editorial would charge $175. – $225. a day (plus overtime: 1.5 – 2x). (Even 15 years ago) exceptionally experienced 1st Ass. of automobile photographers would regularly charge and get more on elaborate auto shoots ($300. – $350. a day + OT). These auto shoots often had a dozen or more light packs, huge set-ups and sets, long days, mucho OT, hard work, etc. Today’s vernacular style (with some exceptions) photographers tend to use less elaborate sets and lighting set ups, digital proofing, a separate digital tech, less stress, less work in general.

      Have assistants had a significant rise in overhead costs in the last decade? Has their job gotten more difficult in the last decade? Do assistants have more risk today? Given that the entire industry (across all sectors) has declined in rates paid, what is the appropriate rate for a 1st assistant on any photography gig?

      Now I realize the burden of ‘return on investment’ for a photography studio is not the responsibility of the assistant, however in this marketplace what will the market bear with regard to assistants rates? Is there a lack of supply of assistants today? On a 3 day editorial job in which the photographer nets maybe $1500 – $2000. does a $900. fee to an assistant seem appropriate? How much of that $900. does the assistant net after ‘cost of doing business’?

      On the referenced job, $18K seems quite low relative to past rates, which may have gone as much as 2 – 3 times higher (or more) depending on the specific photographer.

      Thank you Bill for sharing.

  2. It’s so good… here when 99% of prospect hear “usage” limit, they will not show up any more (even they don’t get the estimate yet). This is not limited to Chinese people… oversea companies most react the same.

  3. Glad you got the gig. I was only asked for a kickback once. On my first paying job in 1977, which was to photograph all the speakers at a nuclear energy conference in DC. 3 days at $225 each and I had to kick back $150. It was explained to me that “that is the way it is”. I took the job and (though I didn’t figure it out until years later) the Art Director bought me a hooker for the last night – and thinking back on it; totally worthwhile!

  4. Thanks for sharing Bill. I’m curious about the usage. When you reworded the contract did you actually give them a “buyout” or did you provide them with an unlimited, exclusive license where your photographer still retained the copyrights?

    • The client just got the limited usage stated in the final estimate. I don’t use the term “buyout” because it means something different to everyone. If you intend to transfer the copyright, it’s better to simply say that you’re transferring the copyright.

  5. “He told me that they always work this way and that all of their other clients and photographers are comfortable with it.”

    Whatever! IMO, the agency should bury any vendor markup in their production line item when estimating to the client. Having you do this just doesn’t feel right.

    Bill, I saw that there were no mention an advance. Thanks for sharing!

    @Sean-what isn’t a “foolish” rate for a 1st assistant on an ad job?

    • Ryan Ketterman

      Thanks for sharing, Bill.

      I’m also curious about whether or not there was an advance on this and what your M.O. is for requesting it.

  6. Welcome to the inner workings of the advertising agency world. Some agencies pay for their clients’ kids college tuitions, cars, etc.

  7. I wonder how many days it will be before the client gets wind of this. After all, if the story is real, then it’s a named photographer, on a fairly specific project, being posted on a well known ‘inside’ industry blog. Can’t be that difficult to connect the dots and point right back to the ‘executive’ in question.

    @ F – Welcome to the business world. It’s everywhere, in every industry.

  8. This article was awesome and spot on and helped me see a number of things more clearly…good curation Rob….keep it coming not he topic of real world pricing and problems solved where expectations and estimation mixes with deliverables.

    Bravo

    Darrin

  9. I am glad to see a professional act as a professional, no doublt you always have been Bill ( By the way I don’t think it is wrong to bury the catering). Thanks for sharing a topic that can be difficult to deal with, especially with the state of the economy.

  10. scott Rex Ely

    Quote: “But what if the person asking for a commission isn’t an employee bound by those restrictions? What if they have their own independent company? “.
    Is this an accurate interpretation of the law?

  11. Kickbacks? Incentives? Shocking!? I ‘ve never done this in my 25 years as a Photo Agent. I was however in the Record Business before that where kickbacks never happen either.