If you receive a demand letter from a copyright owner, your best course of action if is to refer the problem to an experienced Intellectual Property Attorney. He/she will know the bounds of your legal rights under copyright law. Your copyright attorney can then try to negotiate a lower payment amount. The attorney should also obtain the proper releases from the copyright owner once agreement is reached.
You can try to negotiate with your opponent yourself. But that typically doesn’t work well unless you are a skilled negotiator, and know the limits of the copyright rights under the law.
What you don’t want to do is to ignore the demand. That will get you sued, which is the most costly option you have.
The good news is that most of these copyright owners do not want to go to court, as that can be costly, and there are risks on both sides. A negotiated settlement is in the best interest of both parties, and the intellectual property attorneys for most copyright clients know that. So there typically is room to negotiate the settlement amount down.