6 Reasons For No Revenue Growth

Posted on 11/20/2014 by Jim Pickerell | Printable Version | Comments (2)

I am constantly challenged on why I think there is likely to be little or no revenue growth in the stock photo business. Many point out that clearly there is a huge explosion in the use of imagery online. Therefore, why won’t that be reflected in the growth of stock photo revenue? They also point to Shutterstock’s consistent 40% growth per year over for the last three years.

Here are 6 reasons why industry revenue growth is and will continue to be in the very low single digits, until it finally turns negative.

Reason 1 – Overall, prices are falling much faster than paid downloads grow. The number of paid downloads is certainly increasing annually. This is particularly true of microstock and subscription sales. On the other hand the number images licensed at anything approaching traditional prices seems to be falling. Overall the annual revenue generated by the industry remains about the same.

Reason 2 – Much of the revenue before 2006 came from licensing for print uses, but print is disappearing rapidly and digital is taking over. Prices charged for digital use are only a small fraction of what is paid for print uses.

Reason 3 – There are lots of ways for image users, to get the images they need, without paying for them.
    a - Among these are free images online. There are over 300 million images on Flickr that offer Creative Commons licenses. These licenses allow free use in exchange for a photo credit. Obviously, most of these images are supplied by amateurs.

    b - Users can simply grab and download anything they want without paying anything for the use. In virtually all cases the cost of trying to enforce copyright is much greater than any likely recovery. In the case of Getty Images, when they discover an unauthorized use on a commercial site Getty sends out demand letter - about 50,000 a year, but these are a drop in the bucket to the real unauthorized uses industry wide. There is a huge cost in administering this process and such letters have often created bad publicity for Getty which probably results in turning away customers.

    In October Getty general counsel John Lapham told Gigaom that, “Our enforcement polices are being ramped down. We’ve changed the program quite a bit to remove penalty and fees.” Getty now does more to distinguish between blatant pirates and “customer who make a mistake.”

    In March of this year Getty also started offering images to customers for free if they would allow Getty to embed the image on their site and track viewers rather than just licensing use of the images. In the first six months images were embedded on about 60,000 website and these images received almost one billion page views. (See this story)

    c – With improved camera equipment and software like Photoshop it has become much easier for former stock photo customers to produce much of what they need in the way of imagery themselves rather than being forced to buy imagery.

    d - And then it is increasing easy to find a photographer to shoot what you need, rather than buying stock. There are thousands of struggling photographers who will work for peanuts. Often customers can find someone who will shoot exactly what they want for very little.
Reason 4 – When customers need an image to communicate and idea there is an increasing use of illustration and proportionally less of photography. If a company wants to create a marketing piece the first stop isn’t a photographer or stock photo agency, they turn to their in house graphic designer, or to an independent graphic design firm. The graphic designer creates the concept for the ad, brochure or web site. At that point he may check the web to see if he can find the illustrations he needs.

These graphic designers have the skills necessary to create many of the illustrations they need without purchasing anything. Increasingly that’s what they are doing. They may choose a stock image for a background, or something that is a small element of the final illustration.

Many of these image buyers also take photographs. Over one-third of Shutterstock’s downloads are for illustrations, not photographs. About half of iStock’s best selling contributors are either illustrators or people who both take pictures and create graphic illustrations. (See here). There is a declining need for realistic photos when it is possible to easily create an illustration that exactly fits the client’s vision.

When designers need to buy images for their projects they are looking for cheap because they are usually working on a “project budget.” If they can save on the photography they buy, it goes to their bottom line.

Reason 5 – The growth in downloads is deceptive. I believe there were about 185 million paid downloads worldwide in 2013. That number will probably jump to 210 to 220 million in 2014. But over 70% are subscription downloads at an average price of $1.25 or less. A huge percentage of subscription downloads are used for reference and planning purposes rather than as part of an end product. Thus, these download numbers are not reflective of the actual growth of images used in print and online products.

Reason 6 – While there is an increasing use of video, most videos are shot start to finish by the producers. Rarely do they need stock video clips. If you consider the kind of stock clips Getty and Shutterstock are selling, the growth in revenue for the entire 14 years since 2000 has been something in the range of 100-150%. Compared to the growth in the use of video online during the same period, this is insignificant. There is no reason to think that the growth rate for stock clips will be any faster in the next decade than it has been in the past.

Finally, there is one other issue to be aware of. It doesn’t directly affect revenue growth, but it is a basic economic issue that points to a fundamental problem for this industry. The price paid for stock photography has no relation whatsoever to the cost of production. Currently, it costs more to produce most stock imagery than that imagery will ever earn. Thus, eventually, producers looking for profit must stop producing. Many professional photographers, particularly in the Western world, have already given up and moved on to other things. More and more of the best selling imagery is being produced in third world countries where the cost of living is much lower.

Today, amateurs are the principal producers of stock imagery. For these people profit is not an issue. They are just having fun and any revenue is a supplement. But, eventually, even for the amateur, the time and energy necessary to produce and sell stock imagery may become more trouble than it is worth.

Copyright © 2014 Jim Pickerell. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-461-7627, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of www.selling-stock.com, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  


  • Tom Zimberoff Posted Nov 22, 2014
    With all due respect, Jim, that’s a nonsensical business analysis.

    Why should prices for digital use remain only a small fraction of what's paid for print uses? Really, WHY? They may be so, right now; but the practice is qualitatively unsustainable FOR BUYERS precisely because it’s economically unsustainable for photographers. Do you really believe amateurs have killed professional photography?

    Because commercial buyers demand reliability and a known quotient for talent—yes, they really do—they still spend $6.5 billion each year hiring professionals to shoot pictures. That’s more than the entire stock photo segment (i.e., $4.5B).

    Think about what kinds of users typically can (or would) "grab and download anything they want without paying." They are RETAIL CONSUMERS, for the most part, looking for cheap pictures to fill up their Web sites. They are bloggers, freelancers, shopkeepers, and Web designers who work for them. They are not commercial buyers. They do not populate a business-to-business marketplace. They represent, instead, a consumer-to-consumer marketplace. That's a new marketplace altogether, a phenomenon. Nothing wrong with it. It can coexist with the the B2B marketplace, as long as they're not both crammed into one sales channel like they are today. The market for commercial buyers, today, is like trying to shop for haute couture at Walmart.

    You wrote, "When customers need an image to communicate an idea, there is an increasing use of illustration and proportionally less of photography.” Well, it's always been an empirical assertion that illustrators compete with photographers. Nothing new there. But, you have no data to back up your own categorical conclusion.

    “Finally,” you wrote, “. . . the price paid for stock photography has no relation whatsoever to the cost of production." Yes, that's been true. But technology exists today, Jim, that can capture dataflow between sellers and buyers; and it uses that kind of market intelligence to balance the economic playing field with economic sustainability for photographers and qualitative sustainability for publishers. It can amortize the production costs of stock photography utilizing an algorithm to reflect true market pricing based on—of all things!—usage—even if that usage is minimal and demands a cheap price. But let's not even get into the issue of exclusivity and how much that matters to buyers.

    Ideas like Uber, Airbnb, Priceline, eBay, Groupon, and even Apple’s iTunes all have one thing in common: PRICING INNOVATION. They were game changers because they changed the way markets source, price, distribute, and pay for goods and services. That’s what some company is going to come along and do for B2B photography. (Hint, hint.) There hasn’t been pricing innovation in photography since royalty-free met subscriptions many years ago. But that kind of "innovation" helps neither side of the creative marketplace stand out from the crowd(sourced). It only helps the distributors, not their customers.

    The reason for zero revenue growth is that Shutterstock is eating Getty’s market share. The two of them are cannibalizing stock photo sales, and racing each other to the bottom to do it. They swap revenue back and forth with each other like squeezing air in a balloon. They can’t raise prices because content quality is so poor; they can’t increase quality because their prices are too low to attract better content contributors. After all, even good amateur work gets lost in a sea of crowdsourced content. There are too many choices for buyers, and too few good ones. Technology will fix that.

    The tide will turn. It always does.

  • Todd Klassy Posted Nov 25, 2014
    Well said, Tom. And I sincerely believe the biggest reason there's no revenue growth is because photographers are relying on old business models and frankly they are not shaking the trees enough. My stock photography revenue is up year after year. Revenue per photo may be down, but revenue as a whole for me is up.

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