Adapt Or Die

Posted on 10/14/2003 by Jim Pickerell | Printable Version | Comments (0)

588

ADAPT OR DIE



October 14, 2003

By: Stephen Mayes


    STEPHEN MAYES is Director of Art + Commerce Anthology and previously Creative Director
    of Image Source , CEO amana america and Senior Vice President of Getty Images . He
    provides the following insights on the continuing Royalty Free vs. Rights Managed
    debate.

The debate about Rights Managed and Royalty Free seems to be more informed by fear of
what might be lost rather than enthusiasm for what is to be gained. With the market
facing renewed revenue growth, it is clear that whatever is lost will be regained, plus
some by the savvy operator. There are several roads forward each of which has problems
but it is already clear that the worst possible response is to do nothing, and this is
true not only for photographers but also publishers and distributors. History reminds us
of the futility of protectionist responses to changing markets and even if the roads
look rough, we must all step forward.


It really is not a matter of either Rights Managed or Royalty Free. When
looked at from the customers' perspective (which is the crucial perspective on a
commercial product), stock is all one with only minor differentiations between products
and brands. RM and RF are simply different distribution channels for equivalent
material. For the moment RM has stronger content with a greater number of images and a
wider range of subjects, and RF has the more appealing licence. It is clear that RF is
fast developing content to catch up but meanwhile RM is doing little to reform itself
and the question is coming, "What happens when customers get the same material in RF as
in RM?" The answer is clear: RM will become a niche supply channel for the relatively
small number of customers with a real need for controlled rights, and ironically RM will
also service the low value markets (such as editorial) for whom RF is already too
expensive. RF will hold the lion's share of the market by volume and by value and those
photographers who have already committed to the new model will make the greatest gains.


Having recently worked for Image Source (a rapidly developing RF publisher) and
previously for leading RM companies, I can confirm the rough calculations offered by the
publisher of this newsletter in Story
580 , summarised as follows.
Even on 20% royalties
(more on that later) a photographer can earn the same average income from a day's work
for RF as from a day's work for RM. The scale of the return depends on a number of
factors including the choice of subject matter, the variety of images produced and the
market-reach of the publisher. Production costs also need to be managed, but it is an
absolute fact that the returns on a shoot do not correlate to the funds put into its
creation; one good idea can be worth many thousands of dollars in production costs.
This is as true for RF as for RM production, and in both sectors I have seen shots
costing cents outselling shots costing tens of thousands. (Over-production is a blight
on our industry that all too often substitutes for genuinely creative thinking, but that
is another story.)


Meanwhile, RF and RM publishers and distributors need to think seriously about how to
handle the market that they are following. All of them, from the smallest to the
biggest, are vulnerable; we are about to see a period of industry change when inactivity
and misjudgement can level the greatest and conversely elevate the meekest.


Royalty Free Price Conundrum


Two great blunders have hampered the development of the Royalty Free business model to
date. The industry's first big mistake was made by PhotoDisc when they launched their
dazzling new RF product in 1992, which was brilliant in every aspect but one: they
miscalculated the price point. The PhotoDisc founders quickly recognised that they had
under-priced their product but they were immediately hamstrung by the industry's second
big mistake, which was the mindless proliferation of me-too RF publishers who copied
PhotoDisc's every last detail, including the too-low price. Immediately the industry
was locked into a competitive low-price structure and to this day none of the attempts
to break the cycle have succeeded, including pricing-per-pixel (with low/medium/high
resolution prices), nor pricing by arbitrary creative standards (such as Getty's
Red/Green/Blue channels). The irony is that while the industry agonizes about losing
competitive price advantage, all research demonstrates that this is still the lowest
concern to the customers, many of whom would pay more for the right RF picture.


The struggle with low unit price defines every part of the RF business, including the
royalty percentage paid to photographers. The StockArtistsAlliance (Story
587 ) rightly
points out that RF publishers carry the same costs as RM publishers but they should also
note that the average unit sale is around 40% of the value of the average Rights Managed
sale. It hardly requires a degree in economics to realize that no business could
survive if paying the same acquisition cost for a lower priced product and there have
been two solutions: some RF publishers front all costs to produce wholly-owned material
with no commission payable, and others choose to sell images under licence from the
photographer while paying a more equitable 20% of the net returns (after distributors
have taken their cut). Given that photographers can earn as much on this basis as from
RM's 40% or 50% (on a product that is higher value but lower volume), the test of
whether this is an equitable relationship lies in the actual profit achieved by the
publisher. How do you tell if you are being ripped off? It is a delicate question to
ask anyone to reveal their margin (even Getty disguises the detail in their general
reports to the market), but I have yet to see a RF publisher that pays 20% commission
and profiteers at the expense of the photographer.


The key question now facing every alert stakeholder (photographer, publisher and
distributor) is not how to manoeuvre within the existing inadequate arrangement where
every snatched percentage point further weakens the structure, but rather how to build a
better business in preparation for the imminent shakedown. The cornerstone is price,
and the key to changing price is changing perceptions of value. Doing the same-old
same-old will not succeed in the tomorrow's market; nobody will survive by stamping
their feet and demanding new money for old products. It is up to all of us to identify
what is really valuable to clients and then to supply it better and faster than our
competitors. Nothing is lost by joining the chase, but everything could be lost to
those who stand on the sidelines waiting to spot the winner; the chances are that all
the spectators will get is a mouthful of dust from the competitors' heels as they
disappear over the horizon. However in this rough and tumble game it absolutely right
that people joining the fray should bring new rules, and all the players need to
continually re-evaluate their expectations. Think smart about spreading risks (and
doing nothing is a risk), use contracts intelligently and shoot with a plan.


Success will not come to anyone that limits their vision to the dual tramlines of RM and
RF, but to those that can use them to get into new territories. It is not useful to put
authors and publishers into adversarial positions and the SAA is again correct to point
out that we work in symbiosis. This is not a battle of ideologies but it is a movement
from old to new. Although it is essential to hold each party accountable we must not
undermine the mutual opportunities to develop new value for our skills. If we get it
right everyone wins: photographers, publishers and distributors. And customers.



Feedback:


From: StockArtistsAlliance

We were impressed by Stephen Maye's article --"Adapt or Die", especially in his re-framing of
this issue as not about "RF vs. RM" but rather looking ahead for a better way to sell stock that
benefits all involved. It would help everyone involved to step back (or forward) from the
messiness of the present and openly consider how to do this.


So leaving RM and RF terminology aside;


The reality of the present is that a system of "fixed price for unlimited usage" is getting more
and more entrenched among agents and distributors as a streamlined, hassle free, profitable (for
some more than others) way to sell images and clients are lining up. At the same time the
"traditional" system of "price per use" which makes so much sense when images are used in a
commercial context now looks in contrast like an expensive and more complicated system to agents
& distributors, and more and more so to clients.


Agents and distributors don't seem to be concentrating on evolving or finding a "fix" to the
system -- especially any ideas that would provide photographers with a more equitable share of
revenues. Raising prices is a good start for fixed price stock usage but while that does
provide everyone with relatively higher income it does not address the inequality in % split
which exists between agents/distributors and creators.


As you suggest, there is a most certainly new and better ideas out there if we all look forward
as "partners" in this industry, but are our agents willing to do this? Partnering means caring
about the business of the partner, and understanding that their health is important to your own
health as we work in symbiosis.


The reality of the present is that this kind of partnering is scarce in the stock photography
business. The SAA issues this challenge to agents and distributors to sit down with their
contributing photographers and develop new ways to license images in a manner that keeps clients
happy and that is fair and equitable to all parties involved. The SAA believes the pay per use
system of stock photography licensing can be evolved in a way that provides clients with nearly
the convenience of what RF is now and still allows for a fair and equitable partnership between
photographers and those who represent and distribute photographers work. The SAA is willing and
eager to work closely with those interested in a spirit of true partnering to improve this
industry for all parties involved.


Copyright © 2003 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 301-251-0720, 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.  

Comments

Be the first to comment below.

Post Comment

You must log in to post comments.

Stay Connected

Sign up to receive our FREE weekly email listing new stories posted.

Follow Us

Free Stuff

Recent Stories – Summer 2016
If you’ve been shooting all summer and haven’t had time to keep up with your reading here are links to a few stories you might want to check out as we move into the fall. To begin, be sure to complet...
Read More
Corbis Acquisition by VCG/Getty Images
This story provides links to several stories that relate to the Visual China Group (VCG) acquisition of Corbis and the role Getty Images has been assigned in the transfer of Corbis assets to the Gett...
Read More
Finding The Right Image
Many think search will be solved with better Metadata. While metadata is important, there are limits to how far it can take the customer toward finding the right piece of content. This story provides...
Read More
Where Is The Stock Photo Industry Headed?
For new readers, or those who may have missed some of what I have written over the last few months, the following are a list of stories worth looking at to get a sense of where the industry is headed.
Read More
Photography As A Career
It’s that time of year when high school seniors are waiting for college acceptance letters and thinking about future careers. If you know someone who is thinking about photography as a career you mig...
Read More
2014 Stories You May Have Missed
For many the end of the year is a time to review past experiences and consider whether it makes sense to chart a new course in the year ahead. Stock photography has changed dramatically for professio...
Read More
More Stories In 2014 You May Have Missed
Every so often I put together a list of the most important stories we’ve published in the recent past. If you are engaged in the business of stock photography the links below are to stories that we’v...
Read More
Getty: A Three Month Review
In all the excitement about 35 million FREE images it is worth looking back at some of things that have been happening at Getty Images in the last three months. After watching revenue decline for the...
Read More
State Of Stock Photo Industry: 2013
If you’re looking for an overview of the state of the stock photo industry as of October 2013 the stories listed below are a good place to start. Regular readers of Selling-Stock will have seen all t...
Read More
Education Market Shifts To Digital
If supplying pictures for educational use is a significant part of your business plan you need to be aware of how the market is trending toward digital delivery and how that is likely to affect the p...
Read More

More from Free Stuff