The big gamble

Form 1/2011


It’s been 60 years since the royalty system become the standard in the design world. But is it a sustainable form of compensation? And how does it affect the next generation of designers and what they produce?


There’s a blizzard outside of Stockholm’s Hotel Skeppsholmen, where the staff have started to light candles in the lounge. A French carpet producer has flown to Stockholm for the sole purpose of meeting the American designer who sits in front of him. He wants to collaborate and has a suitcase filled with samples.


“But before I decide, I want to know how many of your bestselling carpets sold last year,” explains the designer, who prefers to remain anonymous. “If I’m going to spend time visiting the manufacturers in Nepal and creating a great product, I need to know the carpets will be profitable.”


The carpet producer also requested his name not be mentioned. But what was revealed over the course of the evening at Skeppsholmen in February 2010 is not unusual: the year before, the company sold only four of the most profitable carpets in its catalogue. That’s in a collection of fifteen rugs – several of which didn’t sell at all. In this particular agreement, the designer only received a 3 percent commission for every carpet sold. That’s it.


“For me, this type of collaboration means that I have to work with several producers,” explains the designer. “Which in the end means that I have to do more designs in a shorter period of time And to be blunt, the result is an excess of things that constantly demand our attention and affect our environment.”


According to the designer, the royalty system also negatively affects the artistic merit of the final product: “That goal often goes by the wayside since I have to focus on sales. Which makes the industry less artistically rich and prevents diversity.”


Not everything about the royalty system is negative, however. Having become the standard in Italy at the beginning of the 50s – in order to help a staggering industry regain its footing after WWII – the royalty system has both its upsides and downsides. In principle, it means that a designer works without payment to create a product for a company in order to later receive percentage-based compensation for each unit sold.

The size of the royalty is dependent upon the company and type of commission, but the standard is about 3 percent of the wholesale price, which in turn is about half of what the item sells for in stores. A lamp with a retail price of SEK 1,500 ($220) gives the designer around SEK 24 ($3,50) – before taxes.


The larger and more established the company is, the smaller the royalty, since more of the products are expected to sell. However, in really fortunate circumstances, a bestseller can support a designer for several years. A good example is Dutch designer Bertjan Pot’s incredibly successful Random Light lamp, a project he did early in his career and one that currently provides enough income to live on.


But if the product doesn’t generate any interest at all, it means several months of work were all in vain. In some cases, a product might not even be put into production despite the fact that the designer was asked to submit proposals. How are designers supposed to live on small and uncertain incomes – without having some other job? And how are the thousands of designers graduating each year able to work under such conditions?


“A designer should be able to make five, six good products per year,” explains Italian designer Luca Nichetto, who has designed the acclaimed and technically advanced chair Robo Chair for Swedish manufacturer Offecct. “One of them should sell well and make a lot of money. Another product should generate a lot of media attention and create a lot of PR. I see these as pure advertisement. The rest might lead to other collaborations, or exhibitions and associated activities. I try to think like a strategist.”


All of the hard work – and strategic thinking – has paid off for Nichetto. He currently has 69 products on the market. Many of them, like the Face chair for Kristalia, bring in a lot of money each year.


“It takes awhile to get into the system. And once you have, you need to learn how to differentiate between the different projects – those that generate PR and those that generate income. In general, I think that we designers should dare to talk more about money, join together and make more demands,” Nichetto says.


What types of demands do you have in mind?

“If an exclusive bathroom producer asks me to do a collection that only a few people will be able to afford, I want a design fee of half a million Swedish krona ($75,000) that will not come out of my royalties later on. We must become better at negotiating such things and we should talk to each other more,” Nichetto explains.


Many critics claim that the long-term effects of the system harm the final product, since a lack of funding at the beginning stages can determine how much time a designer can afford to spend on creating something really good. Another factor is that it can take a designer up to three years to receives royalties from a product – about as long as it takes to go from the first sketches to the final sales.


If you compare the design world with the publishing or music industries, they’re more flexible when it comes to an advance on royalties. Advances would provide designers with several advantages – for instance, payment up front allows you to spend more time on your work. It also reassures designers that the manufacturer intends to produce and market the product.


Johan Lindau of Blå Station still doesn’t think that companies should offer advances. “I don’t think that advances add value, but are rather disadvantageous. It’s like a lot of other things in life; if you taste the cake before it’s yours, it won’t taste as good or be as exciting once it actually belongs to you,” he explains.


Lindau sees only one drawback to the royalty system: “The only negative I see with the system is that the large companies quickly copy the products that sell well and their cheap knockoffs obviously impact how much designers earns, since fewer of their products sell. That wouldn’t be the case if designers were paid by the hour,” he explains.


He beliees companies still make a large investment. “Designers invest their time, but the company pays all of the costs associated with the development process and the marketing. It’s a mutual risk.”


Åke Jansson, managing director at Lammhults, agrees. This year, the company is launching several new products and has focused efforts on raising the brand's design profile. The company’s new products include German designer Andreas Störiko’s Volo, a technically advanced product that costs upwards of SEK 3 million ($440,000) to create the machines to manufacture it.


“It’s a major investment for us, and we don’t even know if a product is going to sell well. Last year we introduced 10 new pieces of furniture, and half of them didn’t even sell. We give every product three years to see if sales take off, and if it doesn't we take it out of production. We focus on high quality and an attention to detail. The latter makes our products more difficult to copy, which gives the designers some security, since they know that their products don’t have to compete with cheap knockoffs. It secures their wages.”


Since the royalty system was introduced, society has changed – to the advantage of the system. Few young designers can expect a future tied to a single company, even if there are still long-term collaborations, such as that between Lammhults and Gunilla Allard, Vitra and the Bouroullec brothers, and Moroso and Patricia Urquiola, which is preferable. But for freelance designers, it’s not just about getting something into production, but also ensuring that a company has a fantastic distribution network. If they don’t manage to get the product into stores, it’s not going to sell.


Moreover, the system is built so that companies are transparent in reporting sales to designers. This might seen obvious, but it isn’t always. Another negative aspect that is often mentioned in this type of discussion is the gap between how success is portrayed in the media, and the economic reality. Sometimes it can be almost comical. Private drivers and champagne one week – and calls from the collection agency the next. An example is the Swedish-German designer Katrin Greiling’s daybed Bidoun, which has received regular media coverage and last year was named Furniture of the Year by Swedish interior design magazine Sköna Hem. The only example of the sofa that exists in Sweden is at Asplunds showroom, where it remains unsold.


As Kristian Byrge, one of the founders of Danish manufacturer Muuto puts it: “It’s easier to create a product that receives a lot of media coverage but doesn't sell than one that both sells and generates press.”


He views the royalty system as something incredibly positive. In his opinion, it makes the designer and producer understand each other, since it comes down to one thing: money talks. Suddenly, they both have a vested interest in a product selling well.


“Both parties want as much as possible out of every product, which means that the designer is more open to suggestions that can improve a product's sales. You become a team, during the product development and afterwards.”


Nevertheless, many designers have started to explore other avenues. Creating unique objects and exhibiting them in galleries has been a natural move for some when it becomes difficult to find a producer. Others, like British designer Tom Dixon, have spent their careers seeking out new production methods.


In addition to launching new furniture at last year’s Milan Furniture Fair, Dixon published a new book, New Industry. In short, it discusses bypassing the traditional producers and stepping into the role of manufacturer in a manner similar to the music industry’s revolt against the record companies. And he’s not alone – colleagues who have chosen the same path include Piet Hein Eek, Stephen Burks, Marcel Wanders and Jurgen Bey, as well as a number of younger designers. Maybe it’s the way forward – the saviour of pluralism?


Muuto’s Byrge thinks the idea is absurd: “Why don’t producers design products themselves since they know exactly what is going to sell well? The answer is simple. They do what they do best. There is a reason why one chooses to be a designer rather than the head of a company. As I see it, we need each other to achieve the best possible outcome.”


Swedish designer Fredrik Mattson agrees. “It’s easy to forget that design requires interaction between the designer and the producer. The producer often has a lot of expertise in the areas where the designer needs help, and vice versa,” he says.


Mattson believes the system has positively impacted his work: “I think you can work more passionately when you are not counting hours. The way I work today, I might throw away an entire month if the result isn’t up to par. That would be hard if I were keeping track of the time.”


Did the American designer and the exclusive French carpet manufacturer ever work together? The Nepalese carpets never saw the light of day. The anonymous designer decided to place his bets on other projects. Several of them relatively lucrative – others pure speculation.


Liked what you just read? Subscribe here!

TEXT Hanna Nova Beatrice
ILLUSTRATION Martin Nicolausson