Recently, several stock agencies have found it necessary to discontinue operations. When that happens, photographer royalties often go unpaid. A reader asks: “What do you think went wrong in the industry for these firms and their photographers?”
Several factors are involved. These include the growth of mega-agencies via consolidation, the ability to research and deliver images using the Internet and the cost of developing effective platforms for this purpose, oversupply and the decline in demand for traditional imagery, partly due to the availability of microstock.
Large agency growth
The image choice and marketing muscle offered by the mega-agencies have made it increasingly difficult for smaller players to get their product seen and thus compete. Some have been able to work out deals to have some of their images represented on the major portal platforms. Others have sold their businesses to larger competitors. Many of the agencies that are unable to pursue one of these two options have seen a steady decline in revenue.
E-commerce
In order to license rights to an image, it has become absolutely necessary that the image be available online for both research and final delivery as a high-resolution digital file. This has severely affected photographers with film-image libraries, because it is not cost-effective to digitize most of those images. Agencies dependent on film files have seen a rapid decline in revenues.
Even the early adopters of image scanning and Web-site development have often found it difficult to compete due to the costs involved in building such sites and the difficulty in attracting traffic. The broad offering and heavy marketing of the major sites made it almost impossible for small sites to draw buyers. Small sites often made large investments to complete and grow revenue, but instead saw a continued decline in revenue and a proportionate decline in the monies allocated to paying off debt.
Oversupply
There is a huge oversupply of images. With digital capture, photographers are creating a lot more images, faster. However, for several years there has been no increase in the number of traditional buyers or the number of images they need—in fact, there has been a decline in the number of still images needed.
As such, the industry is facing the classic supply-and-demand problem. Customers have more choices, so an increasingly smaller percentage of all available images sell. Thus, there is no growth in overall image sales—and what sales there are go to the biggest and strongest suppliers. This leaves the little guy in an impossible situation.
Decline in traditional demand
In 2008, Getty Images made about 500,000 rights-managed image sales and 1,000,000 royalty-free sales at traditional prices. iStockphoto made about 25 million sales of images in their collection at an average price of about $6.50 per image. There is no question that microstock has opened up a great new market and found a lot of new customers who simply could not afford to pay anything approaching traditional prices for the images they wanted to use.
However, microstock companies are also selling images to commercial customers for the same low prices they charge everyone else. Commercial customers used to pay an average of $250 for a royalty-free image and $500 for a rights-managed image. Now, the same customers can often get the images they need for an average price of $6.50. As a consequence, traditional sales are disappearing at a fairly rapid pace.
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These four factors have put extreme pressure on many small agencies. Those that have not sold their assets to one of the industry leaders have tried to hang on as long as possible, hoping for a turn-around that would allow growth—or at least stabilization—of revenue.
Continued operations require staff and other overhead costs. If revenue continues to decline, there comes a point where monthly operating costs are greater than a given agency’s percentage of gross image sales. When that happens, there is great temptation to use some of the photographers’ share of revenue to cover basic expenses, in the hope that the company is only a couple months away from a revenue turnaround that would allow paying photographer royalties. But when things eventually get so bad that the agency must close its doors, there is nothing left to pay the photographers.
In some cases, the troubled company takes out loans from banks or other investors instead of using its photographers’ share of sales. Still, when the company finally gets to the point of bankruptcy, these investors become priority creditors, and any money left from the sale of assets goes to these priority creditors, not the photographers.
For the 45 years I have been in this business, poorly capitalized firms have been going out of business, and photographers have ended up the losers. The current economic conditions are bound to make this situation worse. The only way photographers can avoid this problem is not to attempt to sell their images through stock agencies and portals.