I noticed a question on one of the photo forums, which I will answer shortly, but I thought I’d share it with you here. The person was asking if it was standard practice to base a cancellation fee on “some percentage of your dayrate” depending on how far in advance the cancellation occurs.
The answer to this is both yes and EEK! I’m sure you can guess the “EEK” part–the use of the term “dayrate.” Sigh. When are we going to get past this notion?
Now, having said that, the “yes” part is that you should indeed have a schedule for cancellation fees and they should be based on your Creative/Shoot Fee for the time canceled–but not your Usage Licensing Fee–and, of course, any Production Charges incurred to that point.
It’s the part about not using your Usage Licensing Fee as a part of the Cancellation Fee that is going to honk off some people. The argument will be something like “I had made time in my schedule now I’m not going to be making the money I was expecting/promised and I can’t book something else then.” Well, yes, that is true, but it was a mistake to count those chickens too soon.
Yes, you have lost that time for a billable client (probably), so you should be recompensed for that time lost, but as there was no usage, it is unfair to include the Usage Licensing Fee in your Cancellation Fee. There was no license generated, so it is unreasonable and unfair to your client to bill for one.
Even if you believe and agree with the argument that you should be compensated for the lost usage to some extent, the good relationship you will build with this client by NOT billing for a non-existent usage license will be greater than the money you would have gotten. And, if you do bill for the license, you are likely to generate resentment and distrust–very costly to your future relationship with this client.
So, if your client cancels 3 business days or less before the shoot, figure out your scale (50%, 75%, and 100% is a good one) and bill ’em. But keep it to the Creative/Shoot Fee and your incurred Production Charges only.
btw – where DID that notion of “day rate” come from? Ever since I entered the business back in 1980 there has been talk about day rate and how everyone hated it. Why does it still persist?