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 When
consultant Sandra Kinsler told ASMP meetings five years ago
that stock would one day sell for three or four dollars per
picture, she was nearly run out of town. Photographers
reacted angrily to the messenger while players like Getty
and Gates studied the message.
Today,
stock photos are readily available on the web for $20 per
use, a radical change that's going to wipe out many
photographers and mom-and-pop stock shops while the big-boys
compete for market share. This article examines the little
secrets that are propelling these new trends and predicts
some strategies for survival and profit in this brave new
world.
The First Secret - Every photo placed in a stock
agency's catalog adds at least $1,500 to that agency's value
if the photo supplier is under long-term, exclusive
contract.
Early
purchases of entire stock agencies placed a de facto
standard for an agency's value at $1,500 for every catalog
image in distribution. Since catalog images (and their
digital equivalents) represent 80% to 90% of agency sales,
it's realistic to connect the sales price of an agency with
the images in its catalogue. And, the price is going up.
Getty's recent purchase of PhotoDisc for about $150 million
works out to be around $3,000 for each image in their online
database. The photographers, of course, receive no share of
this wealth. And agency acquisitions are escalating.
The Percentage Secret - Agencies are working to lower
photographer percentages to 15% to 20% of gross.
An
excellent article in the January '98 Photo District News
uses these quotes to illustrate the point: "I have no
trouble going to photographers who are marginal and offering
them 40 percent, take it or leave it," says Steve Pigeon of
Masterfile in Toronto. Adds Craig Aurness of Westlight,
"Still photographers have an abnormally high royalty. It's
time to ask why that is ... The dynamics of the industry are
leading us to 20 percent". Mr. Aurness says he won't be the
first to drop percentages. Already, Image Bank shooters are
accepting 30% on most sales minus duping and marketing fees.
Despite
this trend, percentages in traditional stock sales are still
much higher than in Royalty Free (RF) where photographers at
PhotoDisc receive just 8.3% on average according to Getty
documents filed with the SEC.
Discussing
Getty via PR Newswire, stock analyst Keith Benjamin says,
"[Profit] Margins can jump as the company begins to
shift research, and eventually, image delivery over the
Internet. Part of the cost savings can come from
significantly lower handling costs and lower royalties to
photographers."
The Cost Secret - Marketing and delivery costs are
ready to plummet.
For
sure, costs are temporarily up as agencies frantically
increase catalog distribution and duplicate their efforts
with hi-tech CD's and web sites that advertise the exact
same images. But, with one print catalog a week arriving
with a heavy thud on art directors' desks, this
Tyrannosaurus Rex of marketing is nearing extinction.
Million-dollar catalogs will one day collapse from their own
weight, trying to keep up with the rapid growth and low-cost
marketing and delivery of the lean, mean Internet. Agencies
with viable web sites will see an increase of profit when
this happens. (Note: Some trend setters like Photonica
already separate catalog and CD marketing, putting different
images in each.)
Traditionally,
you could estimate an agency's gross sales by multiplying
the number of its employees by $80,000 each. Agencies that
rely heavily on catalogs bring in about $110,000 per
employee. But, highly digitized archives, such as PhotoDisc,
fetch about $190,000 per employee. This reflects the
direction of profitability for hi-tech, low-labor companies.
The Bulk Secret - Pictures are selling for $5 - $10
per image in bulk deals.
Such
figures are strictly hush-hush and, therefore, not
verifiable. But stock giants are selling bulk access to
universities (and other places where volume users of
pictures can download images) at rock bottom prices. Because
agencies have no production cost (they pay a percentage to
photographers instead of a fixed price that is based on
shooting expense plus profit), the price floor for stock
(the lowest price that can be charged without the agency
loosing money) is determined mostly by the agency's
transaction and delivery cost. Since digital marketing,
storage and delivery is a fraction of the cost of print
catalogs, dupes, human research and Fed-Ex, the big agencies
with computerized databases will soon be profitable selling
bulk access at $5 an image. And, changes in credit card
procedures in '98 may make even this low price level
profitable for individual sales, as long as the orders are
filled, delivered and paid for without human interaction.
The Price Secret - Prices are increasing in Royalty
Free sales.
RF
is really just low-cost stock. Clients love the no hassle,
no haggle convenience ... and are willing to pay for it.
Realizing this, PhotoDisc actually raised it's prices
recently. Look for many traditional stock agencies to post
their price lists online as they realize that
ease-of-purchase is at least as important as competitive
pricing. Online price lists will show what the user would
pay to license the most common usage rights requested, given
specific file sizes of the images to be downloaded.
The Cash Cow Secret - Catalogs cost an agency very
little compared to the effortless revenue they bring in.
Theoretically,
an agency charges the photographer 50% of catalog costs. (At
Tony Stone, that's now $800 per image.) The average agency
then sells half its catalogs to foreign agencies to recoup
even more of the production cost and pockets half of the
revenue generated from the efforts of these sub-agents.
Agencies,
wanting to clone this cash cow onto the Internet, are trying
new formulas in which their web site is paid for by
photographers or sub-agents or both. Stock Imagery has
proposed that its foreign agents pay $200 to $275 per month
for online links and referrals. They do not currently charge
photographers to put images on the site. (Editor's Note:
After this article was written, Index Stock purchased Stock
Imagery.)
The Size Secret - Image size and film attributes no
longer matter.
Old
logic says that Fuji outsells Kodak at stock agencies 20 to
1 and that 70mm dupes outsell 35mm. But the days of
comparison shopping on a light table are ending. In the
modern marketplace, the client has usually already made the
decision to buy based on a CD, Internet or print catalog,
before having seen the physical image. And, technology is
allowing a picture to be printed much larger than ever
before, even though the original image size continues to get
smaller. Stochastic printing, 72 d.p.i. web use and
photography that uses fractals instead of bitmaps will soon
make traditional measures of image quality irrelevant to all
but the high-end ad agencies.
The Royalty Free Secret - Stock agencies helped create
the RF market and are now openly embracing it.
Arrogant,
old stock agencies channeled most of the early images to the
Royalty Free market by refusing to accept the work of
marginal photographers. And, unlike big ad agencies, small
clients (the biggest growth area) have long perceived stock
as "excessively expensive". By simultaneously shutting out
photographers and failing to educate graphic artists and
small shops about the high cost of producing stock images,
stock agencies inadvertently encouraged both the supply and
the demand for Royalty Free. Now that the flood gates are
open, agencies will, of course, embrace their successful
offspring. (Note: PhotoDisc sales are increasing 20% per
month.)
Survivors
Within
10 years, this writer believes that print catalogs will be
few, digital marketing and delivery will account for almost
all sales, photographer royalties will be 15%-20% of gross,
$10 sales in bulk will be significant in numbers, and the
total gross sales of the stock photo industry will be much,
much higher than today.
Survivors
of these shocking changes will have many strategies: 1)
Prolific shooters who have already stuffed agency files will
do well as their images enter online databases. After all,
1,000 sales at $5 each will be similar to dozens of sales
for hundreds each. 2) Another option is to get on staff at a
stock agency either as a photographer, editor, shoot
director or photographer liaison. 3) Many photographers find
selling stock directly to clients to be highly profitable if
the images warrant the extra search-effort by buyers who
normally tend to buy from centralized sources. 4) Some
photographers will up the ante and bet they can make the
transition to cinematography. 6) And, you can always buy
shares in agencies. Photographers investing money (very long
term) into Corbis, Getty, FPG/VSG and Index Stock will hedge
their bets. (Note: Only Getty shares can be bought
currently.)
But
in the end, creativity and vision will rise to the surface
and become the odds-on favorite for winning in this new era.
Outside of the machinery of the hi-tech sales process, the
true value of an agency is increasingly found in the
creativity of its photographers and researchers. Niche
marketers of top quality, visually exciting, unique images,
such as Sharpshooters Premium Stock Agency, for example,
will shine in the shadow of multi-national conglomerates.
Great photographers will create the images that complete the
puzzle of an art director's imagination. And great
researchers will conceptualize with overwhelmed clients and
guide them to photographic solutions that they don't yet
realize they want.
Anybody
can shoot a descent picture,
And,
tools of technology are easy to learn,
But,
creativity and vision are a rare gift with great value.
Copyright 1998 Randy G. Taylor
Local chapters of the ASMP are authorized to link to
this article, including via "frames" technology, and to
publish this article in chapter newsletters in its entirety
without editing. All other rights reserved.
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