Price, Value and Cost in the Creative Industry

13/05/2016

 

Price, Value and Cost in the Creative Industry

13/05/2016

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This talk was originally delivered at the 2016 Creative Bedfordshire Conference. In it I examine the relationship between price, value and cost.

Given that the Creative Industries are worth £84 Billion to the UK economy, and that all the big Think tanks and agencies like Nesta are predicting that as work becomes more automated  creativity is set to become even more highly valued in the workplace, why aren’t we all making more money?

After 30 years I don’t have all the answers. The relationship between costs, price and value is a complicated one. But I do know that as creative people we need to understand our costs, how to price our work for the market we are working in and understand value as something separate to price. I also want to promote the use of the professional bodies that are out there to support the creative sectors – whether that’s Equity, The Artists Union or the Design business Association.

Most of my professional experience has been in the fine art world, but no matter what you do, artist, designer or maker – the thing that unites us all is – If you don’t know who your customer is – how are you going to get paid? If you are selling your work or your services for less than they cost you – you might as well be giving money away.

As a strong advocate for paying artists I want to look at the complicated territory of how much. By way of telling the story of my cup…

White Porcelain Cup by Rachel Dormer

White Porcelain Cup by Rachel Dormer

12 years ago I bought 6 cups by the potter Rachel Dormer Ceramics, I paid £90 for 6 cups, which worked out at £15 per hand thrown cup. When I got them home my lovely northern husband was aghast, how much?! Was his immediate question. Then as now I felt that the value of these cups was much more than the cost of a cup from Tesco.

The starting point for any business is what does it cost to do what you do and how much do you need to live? When budgeting in basic business you need to plan your fixed costs and your variable costs.

Fixed costs are the things you have to pay for like workspaces, business rates, utilities, materials, equipment, banking, accountancy and insurance. Variable costs could include marketing materials and staff.

To look at it simply, If you take those costs over one year and then divide by twelve you will see how much you need to earn a month just to cover your costs. That doesn’t pay you to do anything frivolous like eat – or pay rent and of course doesn’t include your time.

You need to work out how much money you need to live. It’s the addition of both of these that is the starting point for your costs and therefore your price.
Why would you work for less than your costs?

When we look at Rachel Dormer’s work, what do we think it costs to run her studio? And how much of her time do we think went into making these cups? Each cup is hand thrown, dried, glazed and fired, that feels like a lot of work to me and £15 feels quite cheap. If you looked at your process does your cost reflect the time and work that went in to it?

Rachel Dormer now sells her cups at £25.00 each, if her overhead costs were low, say £350 a month, she would have to sell 14 £25 cups a month to cover her costs, but what about food, bills or treating herself to a hair cut, how many cups does she need to sell then? – 50? 100?

The new national living wage is £7.20 per hour. That’s about £1,150 per month. To earn the living wage and pay her overheads Rachel Dormer would have to sell 60 £25 cups per month.

So the obvious thing for the artist that made my cup is to put her prices up. And this is where value and market come along and make things complicated. Life would be simpler if price was just about cost, but we know this isn’t true.

The market value of your work is zero if no one wants to buy it. Finding and understanding the market for your work is a hard job.

Edmund De Waal is an artist that makes ceramics in porcelain (he is described as one of the worlds leading ceramic artists) He doesn’t sell his pots singularly, but his prices go up to half a million. Christies sold a set of 10 vessels for £19,000 in November 2015

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Edmund de Waal’s costs will be higher, he has staff and a large studio to maintain but his prices are not just to do with his costs.

Rachel Dormer & Edmund de Waal are not making work for the same market. They have materials & process in common. But what they also have in common is they know their markets – they know who their customer is – and they have worked out how to get their work to their customers.

It is the same across the creative world – value is established by others – it is part of understanding your market – the more your work is valued the higher the prices.

There are other rewards associated with value…and other ways we get paid.

In the fine arts an artist can work all their lives and rarely sell a piece. But their work will have a value that brings them a status that enables them to teach at a university and be commissioned and exhibited in public galleries and eventually collected by those major institutions. (An example being my painting tutor who currently has a retrospective at Spike Island in Bristol).

So the perceived value of their work does lead to being paid. Albeit for teaching other people.

It’s important to understand your costs – but cost doesn’t determine price. Your market determines price. Look at what other people are selling in a particular market;

How are they pricing their work?
Who are their customers?
Who is determining the value?
What have they done to get there?

When Grayson Perry first started he set his prices on the current value of a dole cheque – as that was what he was living on. His work now sells for a lot of money.

grayson

There is no parity in the creative world. Rachel Dormer’s work might look like Edmund De Waal’s, but it does not have the same value. Both are making work for very different markets. Value is hard won and based on status and reputation and can be very reliant on the opinions of others.

In your chosen market; who are the opinion makers? Is it specialist press? High profile customers? Collectors? Galleries? Your peers? Other businesses like you?

Untitled

In some fields pay is set by a union. This is the case for actors. As an actor, Equity is there to make sure you are paid properly, to guarantee minimum wages and fight for your rights. Actor’s agents are taking their percentage of all those fees. In the performing arts agents take between 10-15% of everything you earn.

Compared to the visual arts (my sector) that looks great, commercial galleries regularly take 50% of your sale price.

Commercial galleries have a very different financial model to other forms of retail.
London gallery representation guarantees you sales – and just by association adds value – and so ups your price. Grayson Perry is now represented by Victoria Miro – a Cork St Gallery.

Most commercial galleries will expect you to foot the cost of making the work. Where they do give you money towards making your work that will be against sales. So it comes out of what is made in sales. Like owning a racehorse, they put their own money on the line in the expectation that the artist will win the race – resulting in increased sales and prices.

If like Edmund de Waal you are making work for high-end art collectors – It is hard to get to collectors without a gallery.

The good thing about being commissioned (artist, designer, maker) – you are often paid in part up front. You do not have to front the costs of making the work, before it is sold. In this case you do know who your customer is and how you are going to get paid.

Shockingly AN’s recent campaign and research on paying artists showed that many publically funded galleries don’t pay exhibition fees.

There is a legal framework, we have a minimum wage, now the living wage, but a lot of fees advertised for artists are below that – and potentially not even legal.

I make it a rule to not share unpaid opportunities on social media, but its easy to be caught out. A recent opportunity with the Baltic in Newcastle turned out to be offering below the minimum wage.

This is where professional bodies like Equity come in. Use the support that is out there and make sure you know your rights. Join equity, join the artists union. Join. The Design Business Association, join BECTA, join the Association of illustrators. Don’t wait till you have a problem, it’s too late then.

So in conclusion…

Within the complex world of cost, price and value, cost is the only certainty.
Price and value are dependent on the market you are working in. So establish your costs, identify your market. Then you can work on growing your value.

Don’t work for free. Have a plan and stick to it. Take advantage of the support that’s out there. There is a legal framework – use it!

Here ends the story of my cup. I still think it was good value. Because I was willing to pay £15 that is what it is worth. Next time you buy a beautiful hand-made item for a fiver, think that the person that made it might need to sell 300 or more of those a month to make the living wage. Value both your creative work and the work of others.

 

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