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Pricing Guide Chapter 1: Industry At A Glance
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The stock photo industry is going through a period of transition and turmoil. Never in the
more than thirty-eight years that Jim has been involved in stock photography has there been so
much uncertainty among photographers about their future.
Before we get to the pricing strategies which are the heart of this book we will take an
overall look at the industry -- where we've been, where we are now in 2001 and the
opportunities for the future. We will examine the various issues facing photographers --
royalty free, agency consolidation, over supply, marketing methods, agencies wholly owning
high demand subject matter, volume production -- and how these issues impact on one another.
We will look at the opportunities that the Internet affords and suggest strategies for using
it effectively, as well as those you should avoid.
Shifts and changes are occurring at dizzying speeds. Photographer/agency relationships that
have taken years to build are shattered in an instant. Information needed to make educated
shooting decisions is scarce. Predicting future customer needs and finding ways to show
customers what you have to offer has become much more difficult for most stock photographers
than it was just a few years ago.
In most other lines of business the potential market is evaluated and supply lines developed
before production begins. In the stock photo business, in order to get representation, it is
usually necessary to produce large quantities of images on speculation. Getting an agency
contract is no assurance that the next images you produce will be promoted by the agency. The
industry leaders -- Getty Images and Corbis -- have a powerful control, for the moment, over
which images will get seen by potential customers. We believe that is about to change.
Technology, properly used, will offer the small operator and the specialist an opportunity to
more effectively compete with the industry leaders. We will explain how.
Photographers Are Still Making Money
The good news is that some photographers are earning significant incomes from stock. Based on
a survey we did in 2001, for sales in the year 2000, the average photographer had total
photographic income of $149,040 and stock photo income of $91,518. This was almost exactly the
same as 1999.
While the numbers in the higher income categories declined somewhat from the year before,
still 43% of those who responded were earning in excess of $70,000 annually from stock. This
was down from 45% in 1999. To see the complete survey results go on-line to
www.pickphoto.com/sso and click on 2001 Survey Results.
In our survey, 54% of the photographers reported their yearly income from stock was
increasing, 21% said income was about the same in 2000 as it had been in 1999 and the rest
said it was decreasing.
The number of stock images used by buyers may be leveling off.
Getty provided statistics in 2000 that indicated the average price-per-unit-sold was rising
substantially. A few other agencies have reported the same type of growth. However, there was
almost no growth in overall revenue indicating that the number of units licensed may be on the
decline. This is particularly true with Rights Protected images.
Unfortunately, the statistics we have are sketchy and not as complete or detailed as one would
like. Therefore, we can't say for sure there is such a trend. About all we can say is that
there doesn't seem to be any evidence that there is a significant growth in the number of
licensed uses despite all the rumors you may have heard that the Internet is "going to create
a huge growth in new uses."
Royalty Free's Role
The most significant change in the stock photo business in the 1990's was the introduction of
Royalty Free (RF) photography. It should be recognized that these images are not "free,"
although the prices charged for their use are much lower than those charged for one-time use
of a Rights Protected (RP) image. When the buyer purchases an RF image he or she normally gets
unlimited rights to use that image forever. This can result in costs per-image-used of $100 or
less for an RF image and many thousands of dollars for the same usage of an RP image. The
difference between RF and RP average usage fees is about $80 compared to $400, respectively.
Royalty Free is here to stay -- like it or not. In order to participate in this market as
either an RP or RF shooter, it is important to realistically assess RF's present and future
impact on the market.
We estimate that the gross sale of stock photography, worldwide in 2000, was about $1.35
billion U.S. The overall growth of the market in dollar volume in the last few years has
been, at best, less than 5% annually. We estimate RF sales worldwide in 2000 at about $220
million, or roughly 16% of total industry revenue.
Because the average fee paid for a Royalty Free image is so much lower than the average fee
paid for a Rights Protected image the percentage of total usages represented by this 16% of
dollars generated could be almost 50% of total usages.
How do we get this number? Assume that the average fee paid for each RF image used is $80.
This would mean that if someone pays $250 for an RF disc they use, on average, only three
pictures from that disc, not all the images on it. In fact the $80 may be high. Over a period
of time more than three images might be used. Or there may be a higher percentage of the
lowest end sales than the limited statistics we have available would indicate. But, for the
purpose of this analysis we will use that number.
This would mean that from $220 million gross sales there were 2,750,000 uses. On the Rights
Protected side there were almost $1.130 billion in revenue. If we assume the average RP sale
was $400 this gross revenue would have represented 2,825,000 uses.
The 2,750,000 is about 49% of the total 5,575,000 uses. If the average price per usage is
lower than $80 the percentage of total uses could actually be higher than 50%. (We have no way
of determining how many times a given RF image is used or how many images from a single disc
are used.)
At this point in time there is much more RF use in the U.S. than in other parts of the world,
although use in Europe is growing at a significant pace. I estimate that close to 60% of all
uses in the U.S. are of RF images.
Volume Sales
The argument for the RF pricing strategy has always been that they would make up for low
prices with an increased volume of sales. During the "early adopter" phase of the RF business,
the number of users rapidly increased as more and more business users found ways to use cheap
RF images as a replacement for more expensive Rights Protected images.
Now, virtually all traditional photo users are aware of the advantages and disadvantages of RF
and the rate of increased use appears to be leveling off.
It has generally been assumed that most customers who bought discs purchased them in order to
use a single image. It was hard to determine exactly how many of the 100 or so images on a
given disc were ever used. Survey's indicated that it was 2 or 3, but nobody was sure. Now
that customers are buying individual images on-line, rather than whole discs of images, it is
much easier for the RF companies at least to track which specific images are being used. It is
believed that in the range of 70% of the RF revenue in the U.S. comes from the sale of
individual images rather than discs and that the majority of those sales are for the 10MB file
size, or smaller.
Within the last eighteen months RF sellers have finally started raising prices after almost a
decade of keeping their prices extremely low. PhotoDisc, the 800 pound gorilla, whose gross
sales probably represent well over 50% of total RF sales worldwide, has instituted the
following price increases:
|
Nov 1999 |
Feb 2000 |
Sept 2000 |
Increase |
600K |
19.95 |
24.95 |
29.95 |
50% |
10MB |
69.95 |
79.95 |
99.95 |
42.8% |
28MB |
129.95 |
149.95 |
179.95 |
38.5% |
Disc prices are also up slightly over what they were a few years ago. Prices for PhotoDisc's
major line are $329 per disc. They also offer their Signature Series and Designer Tools at
$279 and the Object Series and Backgrounds at $179.
It seems likely that disc sales are on the way out. In the future, all buyers will purchase
the image they need, as they need it, be it RF or RP, and get delivery on-line. It also seems
likely that prices for single image RF will continue to rise as a way of making up for the
loss of revenue from disc sales.
On the other hand, both Getty Images and Corbis have recently instituted new services aimed at
Internet and PowerPoint users.
Getty is charging only $4.95 for some of their RF images licensed for these uses. This is
one-sixth of what they were charging previously. Customers can also get an annual subscription
for $99.95 that entitles them to unlimited use of any of about 50,000 images. Corbis is
charging $7.95 for PowerPoint use and $14.95 for web use.
There has been a lot of discussion as to how RF has cannibalized the Rights Protected market.
Now the Royalty Free market leaders have instituted a new service that could easily
cannibalize their own market.
The Good News
We feel that the use of RF will top out at 50% to 60% of all stock usages, and represent maybe
25% of gross stock photo billings.
The new lower prices are a desperate attempt to try to grow the number of uses by finding new
low end users.
We believe there will always be a demand for images that can not be produced economically at
RF prices. The Rights Protected producers will always offer a much broader choice of imagery.
The savings users realize by using some RF makes it possible for them to pay more for RP.
Users will want:
- an image that is immediately available (faster than assignment)
- an image that has a different look from the RF options available
- an image that will not be used as widely as many RF images are likely to be used.
- a creative idea that has already been executed, but not something that will be used to
death, as is likely to be the case with RF.
- a price cheaper than an assignment produced image, but not necessarily as low as RF.
- in some cases, specific rights control, although not many buyers actually ask for that
at present.
The big question is whether there will be enough demand at the higher prices to justify
continued production by stock photographers.
Supply vs. Demand
Most businesses try to keep the SUPPLY in balance with the DEMAND, or at least the perceived
demand. This is a basic law of economics which, for the most part, the stock photo industry
totally ignores.
There has been very little control over what, or how much, will be produced in a given subject
area. Some stock agencies encourage photographers to shoot, shoot, shoot so the agency will
always have new, updated images and can get a broad cross section of material to market. Since
they do not participate in the costs, they are unconcerned about the photographer's outlay,
and often there is no limit to their irresponsibility.
As one photographer puts it, "It's like General Motors going to their manufacturers of
steering wheels and saying we're going to sell a lot of cars next year and every one of them
will need a steering wheel. We don't know how many we'll sell so just produce a lot. Give us a
lot of variety in color and design. Some buyers may want square wheels, some may want stripes
and some may want polka dots. Be creative. Invent something new. Oh, and by the way, a bunch
of other suppliers will also be producing steering wheels so we can't guarantee you how many
of yours we'll sell. We'll only pay you for the ones that are eventually purchased and your
cost of production has no relevance to what the buyers are willing to pay."
Steering wheel manufacturers are smart enough not to produce under these conditions.
Photographers have bought into the line of reasoning that they must continually be creating
something new. As a result, they have created a tremendous oversupply of images in the past
few years. Meanwhile, overall demand, particularly for RP images, has been relatively flat
compared to the heyday of stock in the 1980's and early 1990's.
In the 80's and early 90's there were relatively few images to choose from in any subject
area. Thus, those images that were available tended to get used frequently. If there were 25
images available on a particular narrow subject in the 80's there are hundreds available now
-- many of them in print catalogs. When the buyers have more to choose from, the odds are
less that any particular image will be chosen frequently.
The system of producing on speculation can work -- and did -- so long as the demand is greater
than the supply. But, as demand levels out and supply continues to increase each supplier
simply gets a smaller and smaller share of total sales.
Getting Images Seen
The big agencies, in particular, and many other agencies to a lesser degree, are trying to
control the supply in areas where it affects their costs. This is particularly true when they
consider their costs of scanning and keywording images compared to slipping them in a plastic
sheet and dropping it in a file drawer. They are accepting fewer images into their files in
order to limit their costs. Getty Images has said that in the next three to five years they
will only put about 15,000 new images, per-brand, per-year, into the files for each of their
major commercial brands.
If their thousands of photographers deliver 150,000 new images for consideration each year,
they will only put 15,000 into the files. If the photographers deliver a million good images
per year they will still only put 15,000 into the file drawers. To supply some perspective,
FPG International (half of one of Getty's brands) was accepting over 250,000 new images into
files per year in the early 90's.
Getty has too many photographers. Published reports in the investment community say they have
about 4,000, but my estimate is that they are marketing the work of well over 5,000
individuals. In the future, not more than a few hundred will get a significant number of
images added to the gettyone.com database in any given year. Despite this, Getty would like to
have the pick of the best work and the creative vision of the entire photographic community.
Thus, they will probably continue to accept images from a large number of photographers, even
though from most it may only be a handful of images each year.
Andrew Saunders, director of photography at Stone in London, made it clear in a story
published in the British Journal of Photography that Stone intends to work with a small group
of photographers who will be heavily art directed. The philosophy at Stone reflects Getty
Images' approach to "rights protected" imagery and that philosophy seems to be carrying
through to TIB, FPG and VCG photographers as well.
Editing at Corbis is just as tight. The Corbis photographers who are happiest are those who
got in early and had a lot of images accepted into the files. Many are receiving significant
royalties. However, now Corbis is accepting a much smaller number of new images from these
photographers. This is not because these photographers have become less skilled as shooters,
but because of a change in Corbis editing strategy to cut costs.
It is also worth noting that many of these same photographers acknowledge that the overall
quality level of the Corbis file is weaker than Getty's because too many "average" images were
selected in the early years. On the other hand, it is often these average images that are
selling because they happen to fit the needs of the buyer better than others that are more
artistic and creative. These photographers are making more money because they have a higher
volume of images in play.
Photographers who want to earn a profit from their production need to shoot more selectively.
But at the same time, expend more effort getting the images they have produced out where they
can be seen by customers.
Small Agencies
Small agencies are also being much more selective in what they accept. They recognize that in
the future they will need to place many of their images in digital databases, and their
general files will be used less frequently. They are concerned that as the volume of file
requests drops, they may not be able to justify the continued costs of building and
maintaining the general files.
While they believe there will be a continuing need for analog backup to digital databases, it
is hard to find anyone who is confident that they have figured out the proper mix between
digital catalog images and analog file images that can be managed economically in the future.
Buyers are always looking for something different, but there are two questions the
photographer needs to carefully consider before stepping out to produce those "different"
images.
- First, how many "different" looking images will have to be produced, and at what cost,
in order to make a single sale?
- Second, will the images the buyers want sell frequently enough or at high enough fees to
justify the expense and time of producing, not just those that sell, but all the other
non-sellers?
No photographer will know the answers to these questions when they start out. But, assuming
that the purpose of taking pictures is to earn a profit, it is important to track this
information so as time passes, and/or sales begin to develop, the photographer can recognize
the subjects that are likely to be most productive.
In the new digital environment, agencies and Technology Service Providers will be able to
assist photographers in planning new shoots by providing statistical information on what is
being requested and what's selling. To date, this information, when shared at all, has been
very closely held so the agency, rather than the photographer tends to benefit from the
knowledge. The Royalty Free producers have probably used such information more effectively
than most Rights Protected agencies.
WHO ARE THE CUSTOMERS?
The major users of stock photography are business-to-business (B2B) users in the advertising,
editorial and book publishing fields. There are no indications that other types of customers
will make up a substantial portion of the market in the foreseeable future.
Consumer Market Demand
There has been speculation that there is a huge untapped consumer market for images. Getty's
consumer division, made up mostly of fine art prints, none of which were produced by their
traditional photographers, represented about 4% of the company's gross sales in 2000. However,
this division lost about $13 million on $20 million in sales and Getty sold the division in
May of 2001.
After years of telling everyone that consumer sales would eventually outstrip B2B sales, and
trying a number of different strategies to sell professional photography to consumers, Corbis
began cutting staff in early 2001 and retrenching once again.
Then we have Index Stock and their "Homework Helper" product. Typically photographers get long
lists of sales for royalties of $.06, $.09 and $.12. It is hard to find any photographer who
feels the income from this source is worth the trouble.
It seems clear that selling images to consumers is not likely to be a significant income
source for any photographer, anytime soon.
Internet Usage
There have also been predictions that the growth of the Internet would increase the demand for
images. Certainly, many images are being used on-line and this use did not exist five years
ago. However, there does not seem to be a corresponding growth in revenue from the sale of
stock photography. In this area we think several things are happening:
- Many businesses are using images they purchased for other purposes. Often they pay
little or nothing for this additional use. Many sellers are not aggressively pushing for
reasonable additional fees for these additional uses, and when they do it is an up hill
battle.
- Small business and consumers are stealing images from the Internet. A huge portion of
the public has little or no understanding of copyright and why it is important to continued
production of new material. The user's motto is: "I want all I can get now, for nothing. Let
someone else worry about the future."
- Many of the images used on the Internet are self-produced.
- When users pay for on-line uses it is often at RF rates. This adds little to the net
gross sales of images. Now that the major RF sellers have set up channels aimed at Internet
users and are offering images at even lower prices (www.gettyworks.com and
www.bizpresenter.com) it seems to be an acknowledgment that even RF has not been making
significant sales for Internet use at the normal RF prices. It is hard to see how this new
effort will produce enough sales to generate significant revenue.
- As we look to future growth of image use on the Internet, it is likely to be for digital
video, not still images. When the Internet matures as a medium for supplying information and
communication, still images will appear about as frequently as they appear on TV today.
It should also be noted that the recent moves by Getty (www.gettyworks.com) and Corbis
(bizpresenter.com) to try to reach this market with very low priced images, may be an act of
desperation. It seems more likely that with this effort they will steal higher paying
customers from themselves.
Converting The RF User
Some Rights Protected sellers think they can convert RF users back to using RP images if they
price competitively. We don't think this will happen. There are good business reasons for
using cheap RF in some cases and the higher priced RP in others. Most buyers have worked out
the proper balance for their particular needs.
We believe the price cutting route will lead to disaster for any RP seller who attempts it.
They are unlikely to generate enough additional sales to offset the significantly lower prices
that would be necessary to convince buyers to use RP instead of RF.
Sales Growth
The annual growth in sales the industry was experiencing five to ten years ago has slowed to a
trickle. The growth larger agencies are experiencing seems to result from taking market share
from smaller competitors. Getty's major brands now seem to be stealing market share from their
own brands, and the overall growth of the company is very modest. Those who were well
positioned to use the Internet for marketing do much better than those not so positioned
because more and more buyers are using Internet search engines to find images.
In the late 90's the increasing use of images that occurred was offset by lower average
prices. This primarily resulted from a steadily growing percentage of RF uses that were sold
at a lower average price than the RP images. In 2000 prices in the U.S. started to inch back
up for both RP and RF uses. However, revenue growth did not seem to match the price increases
indicating that the number of units purchased may have been slipping. Results from company to
company vary widely, and there are no good hard industry numbers to prove or disprove this
point.
With RF images representing close to 60% of U.S. image uses, those who only produce and sell
RP images are limiting themselves to about 40% of the market in terms of total uses. Yet that
40% is generating over 80% of the industry's gross revenue. Even for a company like Getty
Images who has a huge position (PhotoDisc) in the RF market, over 70% of their revenue comes
from the RP side of their business.
For the photographers who produce the images, the economic advantage of RP is even more
impressive because photographers receive a significantly higher percentage of the gross
revenue collected from RP sales than they do from RF sales. If we are right in our analysis,
and RF does plateau at about 60% of all uses, then focusing on the smaller segment of the
market that produces most of the revenue may not be a bad business strategy.
AGENCY CONSOLIDATION
Through acquisition the bigger stock agencies have brought more and more photographers under
one roof. This consolidation has brought with it major problems in integrating the various
brands and business philosophies.
The consolidation that has taken place at Getty Images, Corbis and Index Stock also has had a
tendency to bring all of their photographers under a single editing and marketing philosophy
and reduce the number of images and photographers each agency needs.
While good for some photographers because it limits the competition, it may not be good for
everyone. In the past some photographers found that being with many agencies added to their
success because each agency had a different approach to editing and marketing. Now, as a
result of acquisition and consolidation many of these options are being eliminated. The
photographers are now dealing with a single editor instead of three or four as used to be the
case. In the past, the variety in editorial points of view helped them get more of their
production where buyers could see it.
When there were lots of agencies each one needed their own set of images on every subject. The
image that eventually sold depended more on the source the client used to find pictures, not
necessarily on which image was the most outstanding. Now there are fewer sources, but each
represents a much broader cross section of images than was the case with any single agency in
the past.
Getty and Corbis are in the process of centralizing all of their images in their own single
databases -- gettyone.com or corbisview.com. Each will show images from all the brands they
represent. Now the individual brand identity has less importance, and the search engine brand
becomes more important.
Smaller agencies are also using centralized search engines such as workbookstock.com and
PictureQuest.com as a way to more cost effectively deal with the new technology. Both
PictureQuest and Workbook have work from 40 or more agencies on their sites and Workbook also
accepts individual photographers.
Buyers can go to a single site and, using keyword search, review what all the agencies have on
a particular subject. The downside is that this tends to reduce the importance of the agency
brand, and puts them on a more level playing field with every other company that has similar
material.
Beyond this, super consolidators are developing. Random Eye's Image Grabber technology allows
buyers, with one command, to simultaneously search Getty, Corbis, Workbook and many other
sites. We predict that such super sites will be widely used in the near future.
Niche Players
There are still plenty of opportunities for smaller niche agencies. They can serve the needs
of photographers and buyers by gathering images from photographers, editing based on their
understanding of customers' needs, providing custom research and handling negotiation and
collection for uses. In order to market the images they will often use the services of
Technology Service Providers (TSPs) like PictureQuest and Workbook that consolidate imagery
from a number of sources.
The giant agencies have determined that they do not want to handle much of the specialized
imagery because it will not sell in high enough volumes. This opens the door for smaller,
specialized suppliers. In the name of efficiency, the large agencies have gotten rid of many
of the people who had specialized knowledge and expertise and were formerly employed by the
properties they acquired. This leaves many photographers with no alternative but to seek out
smaller niche suppliers.
The trick for many of these niche suppliers will be to have a specialty that is unique enough
that they don't have too much competition -- but not so unique that there is very little
demand.
Many photographers who specialize get immersed in trying to completely document their area of
expertise, and fail to take into account the potential demand for their subject. Thus, even if
100% of the eventual uses of the subject go to the photographer, the photographer still loses
money because he spent more on in-depth coverage than he earned in usage fees.
Photographers with specialties must keep in mind that some agencies will encourage them in
such production because the agency does not normally share in the production costs and makes
money no matter what the level of sales.
Some of the smaller agencies will attempt to set up their own sites and market as they have in
the past. We believe most will find it more cost effective to use the services of a TSP.
One of the downsides of PictureQuest and Workbook is that they function more as agencies, than
just providers of technology services. They handle much of the negotiating, collection and
other customer support needs. In Workbook's case they also handle sales for individual
photographers and have all the administrative overhead of dealing with these individuals, each
of whom supply small numbers of images.
We believe that eventually there will be TSPs that stick to just providing technology services
for agencies or individual photographers and leave the details of choosing the images to be
shown, the keywording, the pricing and collection of any uses not paid by credit card to the
image supplier. The image supplier may also handle much of the marketing and share costs by
engaging in joint campaigns with other suppliers.
These services might be supplied for a fixed monthly fee, but there are also indications that
some suppliers may be willing to accept a percent of sales instead. Depending on how these TSP
services develop they may open up a lot of opportunities for new agencies and new types of
relationships in the marketing of still images.
Agency Production
A critical issue for agencies is how to obtain a steady flow of new images. Agencies are
always looking for new photographers with a different visual approach to high demand subject
matter. Styles and trends change frequently and art directors want to find new ways to
illustrate often used classical concepts.
In addition to looking for new ideas from photographers, Getty Images goes to great extent to
analyze sales and to direct some of their photographers as to what to shoot and how to shoot
it. They seek photographers who are willing to work with their in-house art directors; who
will present shoot ideas and refine them with the art director before beginning production;
and who will re-shoot the subject many times, if necessary, until they get exactly what the
art director feels will work.
Once the shoot is completed to the art director's satisfaction the selected images must then
go through a higher level of editing before anything is chosen for an on-line database, or a
print catalog. It is not uncommon for photographers to spend a great deal of time and money
executing a photograph exactly to the art director's specifications only to have that
photograph eventually rejected by the review committee and returned. Potential buyers never
get a chance to see such images unless the photographer can find another agency who will
accept and promote them.
The odds are that accepted images will eventually sell well given Getty's extensive research
and reach in the market. They have over one million registered users on their various sites.
However, even with accepted images there is one other factor to consider.
Stone (Getty's leading brand) tries to stay on the cutting edge of what they believe will be
in demand. Often they seem to put images in their print catalogs that are designed to "wow"
art directors rather than be something that the AD would actually be likely to use in a
campaign.
Anecdotal information from photographers indicates that many of these images are not selling
well, and that the images which seem to generate more revenue are the more generic images that
are not what one would refer to as "edgy." This is important for the photographer because the
only time he or she gets paid is after a customer has decided to use an image. Just because
the art director buying images is pushing his client to be more "edgy" and take more risks
doesn't necessarily mean the client who pays the bills will choose that course for the
project.
Because Stone and other Getty brands select images so tightly, most photographers -- even many
of their top income producers -- get very few new images into the files. As a result, many of
these photographers have seen their income fall recently -- some as much as 30% in three
years. Consequently, some are cutting back on production as well as looking around for other
outlets for their work.
As it has become harder and harder to get photographers to produce the kind of new work they
want, Stone has moved to funding production shoots with a few photographers. In addition to
getting what they want in a timely manner, the agency gets to keep a larger share of the gross
fee collected from the sale of the images. The arrangements vary on such shoots, but one
photographer was offered a shoot for $800 a day plus all expenses paid up front and a 10%
royalty on any sales made from the images in the first ten years.
Getty Images and many other agencies are looking to "cherry pick" what they believe will be
the best selling images from any photographer's production. They reject the rest and it is up
to the photographer to find some other way to market the rejected images. Very few
photographers produce enough great images to sustain their business by selling only the few
"great" images. Most need to earn something from their more common images as they strive to
produce the "great" images. Moreover, there is significant demand for these more common
images. That demand may have been lessened somewhat by the availability of RF, but many
photographers still earn a significant amount of income from classic, more traditionally
styled and lit images.
Photographers who are encouraged to produce the very "edgy" images on speculation, to the
exclusion of all else, need to carefully consider the amount of time, effort and expense they
are being asked to commit with no guarantee of income. We recommend that you move cautiously
in this area until you see some sales results.
Getty is only concerned with getting their hands on as many "great" images as possible. They
have given little evidence of being concerned with the individual photographer's problems in
trying to generate enough revenue from his or her total production to sustain a business.
Volume Production
In the 80's and early 90's the demand for good stock images was greater than the supply. The
key to success for most photographers was volume production. In 2001, that frequently doesn't
work. Agencies often have so much in their files on any given subject that they choose not to
add new material. Photographers find that even when the new images significantly update
existing images in the file -- like city skylines -- the editors often won't select the new
images.
Agencies have become very cost conscious. There is a much greater cost in putting new images
into a digital file and in maintaining those files than there was with the old
plastic-sheet-and-file-drawer system. The percentage of images purchased that are not in a
print or digital catalog is rapidly decreasing. Consequently, agencies are editing tighter and
cutting back on the amount of material they accept.
The director of photography for The Image Bank has told photographers that researchers seldom
go to the file drawers to look for images that have not been selected for the digital
database. Over 90% of TIB's revenue comes from images in the digital database.
One TIB photographer who has been represented by TIB for over 20 years has approximately
70,000 images in the files and less than 100 in the database. Many of his past best sellers
are not digitized. The vast majority of his images are not being considered to fill client
requests. At this point, the file images of all TIB photographers that are not digitized are
being boxed for return to the photographers.
This does not mean that the rejected images will not sell. The challenge for the photographer
is to find some way to get those images where customers can see them. If your agency will not
store in-depth coverage of a subject there is very little point in shooting volume until you
find other outlets for the work.
Getting Accepted By An Agency
Given the oversupply of stock images on most subjects, top agencies have more photographers
than they need. Many photographers are finding it difficult to get accepted by an agency.
Photographers with years of major agency experience are being dumped. In some cases, the
photographers are asked to totally change their shooting style to accommodate the perceived
needs of the agency. Often, it is not the case that the images the photographer produces will
no longer sell. The agency has simply decided that they want to offer the buyers something
different.
The fact that some agencies are editing in this way is not all bad, provided the photographer
has the option to market the rejected images through another venue.
In choosing an agency it is important to determine the percentage of sales that come from
print catalog images, the percentage from on-line and the percentage from the general file. If
only a small percentage are being sold from the general file then make sure to offer those
file images to another agency. Don't let them die in the file of an agency that refuses to
market them. Just being accepted by an agency is not enough.
Agency Editing
A major problem with the new strategy of tighter editing is that no editor, no matter how much
experience he or she has, has a perfect understanding of what will be in demand in the future.
The tighter they edit, the more likely good saleable pictures will be left on the table. The
more they look for "edgy" images, the more likely they will ignore highly saleable, generic
images that have long range potential.
Editors choose images for different reasons. Most of those reasons are valid for the
particular market where the editor has experience. But it is almost impossible for a single
editor to have in-depth knowledge and understanding of all the various businesses, industries,
people groups, arts, etc. that make up our world today. Often, such knowledge is critical to
choosing the right images.
The photographer may understand, and that is why the images were shot. But, too often, editing
prevents it from ever being seen. The editor has determined that there will not be enough
demand to justify the cost of showing it.
One lesson many older photographers learned was that they could take a set of images and send
them to the editor at Agency "A" to make a selection. Those rejected by Agency "A" would go to
Agency "B," and those rejected by Agency "B" would go to Agency "C". Each editor would pick
different images from the same take. Agency "A's" sales never fell off because "B" or "C"
were offering different solutions from the same set of images. "B" and "C" were "add on"
income and often, on images from a particular shoot, the income from "B" or "C" would be
higher than "A". It so happened that the client who needed this subject matter went to "C"
rather than "A". The lesson is to let as many good editors as possible look at the images
produced, and go with the instincts of each.
As Getty limits selection to reduce costs and markets only the 'edgy' images for which they
believe there will be high demand we often hear the following complaint from art buyers. "They
want to sell the "edgy" stuff they have produced, not what I need." This opens opportunities
for everyone else. The important thing is to find a way to give the buyer a good selection of
what he or she wants to look at, not try to convince the buyer that the agency editor has the
only right solution for him.
"Holes" that develop in the big agency files may not be in the highest demand subject areas,
but they will often be in subjects that can generate a significant income if the images are
where they can be seen by potential customers.
Smaller agencies have an opportunity to review the imagery being rejected by the leaders and
get some of these great images in play. The smaller agencies can also win by supplying file
research and personal service. These agencies will need on-line catalogs, the capability to
accept and market digitally produced images, and the capability to scan on-demand and deliver
the file digitally.
Exclusive Agency Relationships
It used to be thought that an Agent -- particularly an editorial agent -- would take on a
photographer and try to guide that photographer's career so both the photographer and the
agent would prosper proportionally. The agent insisted on being the exclusive representative
of the photographer. Such agents would limit the number of photographers they worked with and
actively promote them as individuals. This type of agent/photographer relationship is very
rare today.
When this type of relationship exists, there may be justifications for an exclusive
relationship. But, in today's environment, most exclusive agency relationships make little
sense. Whenever possible, photographers need to market their best work through multiple sales
outlets using multiple marketing strategies.
The one big argument for exclusive relationships was that they enabled the agent to license
exclusive rights to any of the photographer's images because they had total knowledge of what
rights had been licensed in the past and could easily put a hold on future sales.
The digital environment will make it easy for multiple agents to be licensing rights to a
specific image and for any one of them to license exclusive rights as needed. All that is
needed is a central database, available to all authorized sellers, where all sales data for
restricted rights is maintained. Masterfile already has such an arrangement with their sub
agents, and there is no reason why the Technology Service Providers offering services to many
agencies can't set up the same type of system.
Photographers need to fight for non-exclusive or image-exclusive contracts. They should reject
being exclusive to an agency unless the agency is willing to put a significant portion of the
photographer's work into promotional vehicles (print catalogs or on-line). If the deal is
image-exclusive the definition of "similars" should be narrow, not very broad as is the trend
among many agencies. (See chapter 20 for more info on similars.)
Setting Up Your Own Site
Faced with the difficulty of getting a major agency to represent their work, and declining
royalty shares, many photographers have decided that the solution to the marketing problem is
to set up their own on-line sites. They point out that the technology needed to manage a small
site is relatively simple and that they can show several hundred images for relatively little
expense.
For photographers with a real niche, and an easily defined list of potential customers maybe
this will work. But, for those trying to sell people, lifestyle, business, travel, nature or
scenic images it is unlikely they will get many serious buyers to look at their sites.
The problem has to do with how the site will be promoted and the relatively limited selection
of images. Potential buyers must be reminded constantly that a given site exists. This can be
very costly for the seller. In addition, when buyers go to the site they must find something
usable almost every time, or they are unlikely to return. It is almost impossible for an
individual photographer to offer a broad enough selection to fulfill this requirement.
Randomeye.com has developed a software that will search across many sites for keywords entered
as search parameters. They take a percentage of sales for providing this service. However, it
seems unlikely that Random Eye will make this service available to individual photographers
because they need a certain level of volume to justify adding a site to the list of those they
search.
What is needed is a critical mass of images in a single database, so that by going to one site
the buyer has a good chance of finding something that will work for any project. We believe
photographers need to band together in ways that provide a critical mass of imagery, and then
promote the group. Getty says they have over 1 million registered users. PictureQuest has
upwards of 75,000. It is not enough just to build an on-line site, the site must be promoted.
Outsourcing Some Of Your Work
One of the biggest advantages to selling yourself is that you get to keep 100% of the fee.
But, there is a huge amount of work and cost involved in effectively managing a file and
marketing directly.
One photographer reports that he used to do nothing but take pictures and ship them off to his
agency. Little office work was required. Now, in order to sell pictures he has to learn much
more about technology. He has to scan images and e-mail them to clients. He has to consider
setting up his own site and keywording images. If he does that he will have to make sure the
site stays up and working. He will have to market the site. He has to pay a lot of attention
to carefully defining the rights licensed, and deal with collections when clients don't pay on
time. Outsourcing some of these tasks can be a good idea.
The best strategy is to sell what you can yourself, AND use other resources and multiple sales
channels as much as possible. This is the way to maximize the sales potential of your work.
Giving up 30%, 40%, 50%, and maybe even more on some of your sales, may be well worth it if
sales are generated that you would not have received otherwise.
For photographers earning most of their income from assignments or other activities, the
downside of selling stock yourself is that requests invariably come when the photographer's
staff is heavily involved in an assignment project and has little time to break away to deal
with the stock request. In addition, there is much more involved in selling than just pricing
the usage and delivering the image. (See Chapter 7 for a more in-depth explanation.)
Individual photographers often let a lot of these other activities slip through the cracks.
The agent whose full-time job is being available to handle such requests, is more likely to be
able to deal with client needs in a timely manner.
How Agencies Help
An agency can help get images scanned and keyworded. They can provide valuable editing
insights to help you decide which images are the most important to promote initially. One
photographer spent a huge amount of time scanning 30,000 of his images, only to realize that
he was going to have to spend even more time keywording them before the images could be
effectively marketed on-line.
An agent with statistical experience on various sites can help you determine the most
effective on-line venues to use to market your particular subject matter. Agents also get
better deals from TSPs because they provide a volume of images and reduce the work load
involved in getting new material on-line.
If you hope to sell outside the U.S. it is almost mandatory to have foreign agents in each
country where you want to do business. They can handle requests in the local language, provide
technical support and promote the site in the local area. In some countries buyers will look
to English speaking researchers to find images for them rather than doing the research
themselves. Such researchers usually work for agencies.
The foreign agent understands the local pricing structures and can handle negotiations, as
well as monitor usage and take care of collections. In many cases, foreign buyers will not be
able to pay by credit card, and many individual photographers will find it difficult to accept
credit card payments anyway.
MARKETING
Not only is it necessary to have good images and put them where they can be seen, but it is
also necessary to get the customers to come and take a look.
Twenty years ago customers would call a photographer or an agent and ask them to search their
files for particular subjects. Then the industry moved to print catalogs, and after that to
CD-ROM and on-line catalogs. As more and more customers started finding what they needed in
catalogs, requests for file searches diminished.
There are still file requests, particularly coming from the book publishing market, and for
unique and difficult to find subject matter. For the most part these requests come from the
poorer paying side of the market. There is a huge amount of work in storing and maintaining
such a file. Many sellers have determined that the potential return from responding to such
requests is not great enough to justify the work involved. They are getting out of this aspect
of the business, and focusing entirely on catalog (print or on-line) selling.
Marketing, in the old way, meant controlling as many images as possible and convincing the
buyer to call you first. Hopefully, after receiving such a call, you could produce an image
that fit the customer's needs.
In the catalog environment, marketing involves getting the customer to look at your catalog.
With print catalogs it was a matter of first getting your image into a print catalog, and then
being sure that the catalog made it onto every potential buyers desk. The greater the
circulation of the catalog, the greater the potential sales.
The problem with this strategy is that as more and more people put out catalogs the buyers
began to get overwhelmed. There were too many images to look through. They didn't have room to
store all the catalogs. They began throwing many catalogs in the trash the minute they came in
the door.
Sellers have tried to come up with new print catalog themes and formats to get the buyer's
attention, and hopefully encourage them to keep and use the catalogs.
In the past couple of years, as the on-line catalogs improved and it became easier for buyers
to search for the image they needed on-line, fewer and fewer customers find the images they
purchase by flipping through print catalogs.
Recently, the cataolg strategy of many sellers seems to be aimed at getting buyers to remember
the company name and go to the company web site when they need a specific image. The catalog
is designed to convince the buyer that the company is on the creative edge, and has a
significant collection of images from which to choose.
Print catalogs still generate more dollars in sales than any other marketing vehicle, but
their use is definitely on the decline. We believe that decline is going to rapidly accelerate
as web searching improves in the next couple of years.
For photographers, the costs of participating in most print catalogs has been rising
dramatically. Getty is charging photographers well over $1,000 per image placed in a Stone
catalog. Many photographers are skeptical that sales of many of the images currently appearing
in these catalogs will be enough to offset their costs.
The major issue is whether customers still use these books to find images, or whether all the
books accomplish is to build brand identity and drive customers to the web site where they
eventually choose other images.
If the catalogs are brand builders rather than vehicles to sell specific images, it may not be
fair for the photographers who pay a large share of advertising costs through catalog
assessments, when it is the images of other photographers that end up being licensed.
OnLine Marketing
The number of buyers using on-line databases to search for images is increasing at a rapid
pace. I estimate that at the beginning of 2001 close to 25% of the worldwide stock revenue
resulted from the buyer finding the image they used on-line. Getty Images says that 34% of
their 2000 revenue resulted from customers finding the images on-line. If they exclude their
VCG brand, which was not fully web enabled in 2000, web sales represented 43% of revenue. In
many cases the image was delivered as film or on a CD-ROM, not on-line. Only a very small
percentage of these transactions were fully automatic with the customer actually paying for
the usage on-line.
In February 2001, 58% of Masterfile's North American revenue came from customers finding the
image on Masterfile's web site. Use of the web site has gone from zero to 58% in less than two
years. The percentage is rising every month. Masterfile earns approximately $10 million
annually from sales in North America.
In the not too distant future the vast majority of images that get used will be found by
searching through on-line databases. This means the first job of the photographers is to get
their images into these databases. The images must be keyworded so buyers can find them
easily. It must be easy to segment the database into custom edits that can be promoted to
smaller user groups.
It should be easy for the buyer to search for images that only fall into one of the following
large categories: Commercial, Editorial, Personality, and Historical. If a buyer is looking
for contemporary images to be used in brochures or advertising they might not want to waste
time looking through editorial and historical images and they need the option to focus the
search on only those images that are in the Commercial category. Likewise, if they are looking
for Personality pictures, they may not want to waste time wading through a lot of Editorial
images that might have similar keywords, but not be pictures of known personalities.
One problem that must be overcome is that many of the databases are set up in a way that makes
it very costly to upload and store images on a per-image basis. We include in these costs all
the scanning, cleanup, captioning and keywording costs that are necessary whether they are
done by the photographer or the site operator. Systems need to be developed to cut these costs
in order to make it easier and more cost effective for a broader cross section of imagery to
be shown to the buyer.
One aspect of marketing in the on-line environment will be finding ways to make the search
process as user friendly as possible. Another will be providing various types of user services
that simplify the process of purchasing pictures. Not all of these will be technological. In
many cases the answer will be in providing a human contact who can help the buyer work through
any problems.
Cooperative sites, not owned or controlled by a single agency, will benefit the buyer because
they offer a broad cross section of subject matter. With a single search the buyer can see the
work of many photographers on a particular subject. In addition, such sites spread the costs
of promotion among many photographers, greatly reducing the promotional costs for any
individual.
Promotion on search engines is useful, but most serious buyers are not likely to use search
engines as their primary resource for finding stock photos. The search engines that list
various sources offer too many options with widely varied levels of quality. The serious buyer
is going to learn about the good sites through other forms of promotion -- mostly direct mail
and traditional print -- and will go directly to the sites rather than use one of the major
search engines like Yahoo or Altavista.
Some new sites aimed in this direction are: SolusImages.com, StockMedia.net, and Alamy.com. We
are not prepared to specifically recommend any of these at this point, but they are worth
watching and exploring. Photographers have a better chance of earning income using sources
like these with heavy promotional budgets, than in trying to sell directly.
Initially, there will be many options, each with different strategies as to how to reach the
customer. It will be difficult to tell which ones will work best until they have had some time
to prove themselves. The best strategy for most photographers will be to simultaneously test
as many of these options as they can.
There are likely to be two limiting factors. The first is that many sites will try to get
exclusive rights to market the images they handle so they can easily license "exclusive" or
"restricted" usages, if needed. In our opinion this should not be a requirement. In the
digital environment it should be relatively easy for every online provider to set up a
database that supplies information about such restrictions on an image-by-image basis. This
information could be updated as sales are made and easily provided to other databases handling
the images.
The whole concept of having exclusive rights to a photographer's production, comes out of an
old way of working that is no longer appropriate. There is no justification to place
restrictions on the sale of all images when only a very small minority are ever licensed for
"exclusive" or "restricted" use.
The limiting factor in putting the same image in many databases is the costs, in both time and
money. Each database will have different requirements. There is no easy answer as to how many
sites the photographer should test. The best ones will be pure TSPs that focus on offering a
very open system that can be used in many different ways by various marketers. This is
explained in more detail in chapter 11.
As the industry moves ahead in the next couple of years the winners are likely to be those who
move away from the old print catalog marketing strategies quickly and find new and more cost
effective ways to tell customers about the availability of their images.
RF Teaches Some Lessons
The Royalty Free producers have taught the industry some marketing lessons that many on the
Rights Protected side of the business have been slow to adopt.
- They recognize that much of what they mail is going to be thrown away.
- They focus on frequent mailings with fewer blockbuster pieces.
- They use a magazine format catalog of 48 to 64 pages which is much cheaper to produce
and mail.
- They use small pictures so they can show more of them. The RP people are learning here,
but they still have a way to go.
- They use attractive, contemporary design but not as far off the edge as much of what
Stone is doing.
- They market through multiple sources. Many of the RF producers will market competitors
products through their sites and their own products through competitor's sites. They recognize
that various buyers may use different channels to find imagery. The producers want the buyers
to be able to find their product regardless of the channel the buyers chooses to use.
- They put effort into building their brand because they give up a lesser percentage of
the sale if the buyer uses their brand to find the product. The key is moving product. If they
can move more product by giving someone else a percentage of the sale they seem more than
willing to do that.
Pricing Rights Protected Uses
Given the general over supply in the industry and the likelihood that the ratio of number of
units licensed relative to the number of units produced or shown will decrease, it is
critically important to not only maintain prices, but raise rates in the coming years.
In 2000 we began to see price increases. In the Rights Protected area Stone reported that
their average price-per-unit-sold in the U.S. increased about 23%. At Stock Connection our
average price increased about 48% -- on a much smaller volume of sales than Stone's. Other
companies in the U.S. also report that they were able to push up prices through tough
negotiating.
Royalty Free prices also went up (we reported the PhotoDisc prices on page 4), and many RF
companies are beginning to offer more variations in the price, based on certain types of
usage. However, these variations are still very minimal.
It is worrisome, that while pushing up prices for print uses, RF producers have felt they
needed to introduce a new lower set of prices for many electronic uses. These lower prices may
not have a major impact on the market since the bulk of stock photo revenue continues to come
from B2B print uses.
A couple of years ago many Rights Protected agencies were trying to compete with Royalty Free
by lowering their prices. They soon discovered that they were unable to generate enough new
business to offset the lower prices and now the overall trend seems to be toward higher
prices.
For photographers, pricing must have some relationship to their cost of doing business and
their estimated annual volume of sales. If the number of sales (or uses) goes down and the
costs of production, marketing and administration either stays the same or goes up, prices
must go up to cover costs and profit. Otherwise, the photographer needs to get into another
line of work.
Holding the line on pricing can result in tougher and more stressful negotiations. The seller
must determine, "Does the customer really need this particular image?" or "At what point am I
willing to lose the sale." Our experience at Stock Connection is that more often than not we
get our price and it is usually well above what the buyer tells us they paid for similar
pictures at some of the big agencies.
Editorial Pricing
Editorial usage rates have been way below what they should have been for years. The rates set
by the publications for the most part have absolutely nothing to do with the publication's, or
the photographer's, cost of doing business. Publications establish their rates based on the
minimum they can get away with paying while still getting "something" in the way of
illustrations to fill their holes.
For years photographers have allowed editorial buyers to get away with this payment policy
because (1) they loved to do editorial work, (2) they expected to make multiple resales of the
images, and (3) they could also do some commercial work and make up for their editorial loses
through commercial sales.
Now these dynamics are changing. The number of commercial sales for most editorial
photographers is declining due to increased competition. Multiple resales and reuses are also
decreasing, as publications push for more rights for a single initial fee.
Photographers must fight for more money for the initial use as well as additional payment for
every re-use.
An online group called Editorial Photographers (EP) is working to get magazines to raise their
rates and to inform photographers about what various magazines are paying. You can join this
on-line forum by sending an email to editorialphoto-subscribe@yahoogroups.com. This site is
password protected and all applicants must be professional photographers and approved by the
list managers.
The numbers in this book will help you establish fair and realistic prices for Rights
Protected uses based on the realities of today's market. Often these numbers will be higher
than your customers have paid in the past. Nevertheless, these fees are reasonable.
Photographer's production costs have increased, marketing costs have increased and due to the
wide use of Royalty Free the number of units licensed has declined. Prices must go up if
photographers and the agents marketing their images are to earn a reasonable income for the
time and money invested.
Some customers will say, "Why don't you just sell everything Royalty Free?" The answer is that
you would earn less than by licensing rights, and you couldn't afford to continue to produce
new images.
Some customers will say, "I can't afford that much." Suggest that they go buy Royalty Free
which is cheaper. (Most buyers who are seeking a Rights Protected image have already looked at
RF and couldn't find what they wanted.)
Other customers will say, "I found this image on the Internet and things are supposed to be
cheaper on the Internet." The answer is that right now it is more expensive to market images
using the Internet, than using traditional filing systems, but since they want to look for
images on the Internet you needed to go to the expense of putting them there. If sometime in
the future it becomes less costly to use the Internet for marketing then you will lower your
prices, but based on current trends they should not expect to see that happen in the near
future.
SUMMARY THOUGHTS
Focus on getting the images you have already produced where they can be seen.
Seek TSPs that can help you get your images on-line quickly.
Understand keywording. Images without good keywording will not be found on-line.
Diversify your marketing. Test various marketing strategies in this time of transition.
Don't cave in on prices. Survival will depend on holding the line on prices. Monitor
your agency's pricing and seek other representation if they consistently price too low.
Attempt to get many editors looking at your images and selecting for different
databases. Each editor has his or her own distinctive bias.
Control production costs. Be careful what you spend producing images on speculation
until you have a reliable distribution outlet and records that document sales of your work.
Re-sell work you have already been paid to produce.
Control marketing costs. There is pressure to offer the customer a higher quality
product than can be justified for the price the customer is willing to pay. Seek less
expensive ways to get your images on-line.
Recognize that if images are not on-line they are unlikely to sell.
Specialize. Develop a specialty. Find out what has been done in your specialty by
searching on-line photo sites. If you find nothing, make sure there is a demand for this type
of imagery before you launch into producing it.
Get non-selling file images on-line. Fight to get images your agency refuses to place
on-line returned so you can place them somewhere else.
Get on-line. Use e-mail. Monitor the photographer forums to keep up with trends. The
Internet gives every sole proprietor the opportunity to learn from others in their profession
and not to be alone.
Fight for non-exclusive or image-exclusive deals. Reject being exclusive to an agency
unless the agency is willing to put a significant portion of your work into promotional
vehicles (print catalogs or on-line). If the deal is image-exclusive the definition of
similars should be narrow, not very broad as is the trend with many agencies.
Don't think that e-commerce is the only alternative. Being prepared to deliver files
digitally doesn't mean that you have to be prepared to offer a total e-commerce solution. It
may not be necessary to have every image in your file scanned and stored at high resolution.
Recognize that there are alternatives.
The changes have just begun. There are opportunities. But many of the old rules and old ideas
about how the business should operate will no longer apply. Sorting out which new proposals
are "pie-in-the-sky" dreams and which will be the next "killer-app" will be difficult. Image
producers must give more attention to how their work is marketed and test every assumption. No
one, least of all these writers, can claim they have all the answers. The best we can do is
examine the options.
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