Copyright is an important asset belonging to the artist, and royalties are the payments they receive when their artwork is used on products and merchandise. These royalties are not optional, they are a necessary cost of production, just like manufacturing and packaging expenses, and must be included in your budget from the start.

When you are working out a fair royalty amount you should be guided by the Indigenous Art Code, which promotes fairness and transparency.

This means:

• Artists must be paid fairly for the use of their copyright.
• They have the right to understand the royalty terms, including when and how they will be paid, before production begins.
• The royalty agreement should be in writing, allowing artists time to review and seek advice before agreeing.

While there is no standard licensing fee, factors like the artist’s situation, the type of product, and the licensee’s engagement with the art centre and community must be considered.

Benchmarks

A useful benchmark for royalties is provided by the Copyright Agency, which suggests most merchandise is licensed at 25-30% of the wholesale price or 15-20% of the retail price. If a product meets industry standards and includes a fair royalty for the artist in this range, it is unlikely to be considered unfair.

Some artists and art centres use the Copyright Agency to manage the licensing process. This simplifies negotiations and payment collection for them. If the Copyright Agency isn’t involved, artists and art centres will establish their own formal agreements with manufacturers and retailers. Arts Law has templates which you can use to ensure fairness.

Since royalty structures vary, what is considered ‘fair’ depends on different factors. Here are some examples:

• Manufacturer offering 20% of the wholesale price – This might be considered fair because the artist is paid for every item produced, not just those that sell. While this could result in a lower percentage of total revenue, the artist receives payment earlier and doesn’t have to wait for sales.
• Retail chain offering a $20,000 upfront payment + 10% of retail sales – This arrangement ensures the artist gets guaranteed money upfront, even if the product never sells. Although the percentage per sale is lower, the upfront payment provides financial security, which can be beneficial for artists.
• A major public gallery offering 12% of sales revenue for products featuring an artwork on show as part of a group exhibition – While the royalty rate is lower, the exhibition increases the artist’s visibility and may boost the value of their artwork. The art centre also benefits by buying merchandise at a discounted rate, allowing further promotion.
• Fashion brand offering 15% of wholesale price + a community-focused promotional campaign – The artist is fairly compensated, and the brand invests in the artist’s community, featuring local models and widely promoting the campaign. All models are paid fairly and receive products, making this a broader cultural collaboration.
• Local ranger program offering a $500 flat fee for 150 shirts – Although the fee is lower, the community benefits because the shirts help fund the ranger program. The number of shirts being produced is small, and the agreement helps support a local cause.

It’s up to each artist and art centre to consider the licensing agreement to ensure fair and ethical compensation while taking into account broader benefits like timing of payments, cultural visibility and community engagement.

Who is the licensee?

The identity of the licensee (the person or business who licenses an artwork) plays a key role in determining royalty rates. In some cases, the Copyright Agency offers discounted rates for galleries, academics, and educational institutions.

Several years ago, Arts Law worked with a remote art centre to create a royalty scale based on its licensing experiences. The scale applied different discount levels, depending on who was licensing the artwork:

• Commercial third parties paid full price with no discount.
• Government agencies and funding bodies received a 20% discount.
• Local Indigenous community organisations received a 40% discount.
• Public collecting institutions and non-profit arts organisations qualified for additional discounts.
• The art centre itself received the largest discount—50%—because it is a non-profit dedicated to supporting artists. This means artists benefit both from royalty payments and the success of the art centre. While the art centre still pays royalties for the use of the artist’s copyright, the discounted rate helps sustain the centre’s work, allowing artists to contribute to their own community’s future.