"Artist Choice" at Eyewire

Posted on 6/16/1999 by Jim Pickerell | Printable Version | Comments (0)

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"ARTIST CHOICE" AT EYEWIRE


June 16, 1999

EyeWire, probably the third largest seller of "Royalty Free" photos in North

America, is offering "Rights Protected" contracts to photographers in a move to

develop a separate division of their business. With this move EyeWire expects to

be able to supply a full range of photo services to their customers on their

on-line portal site. Photographers who participate

in the RP division will also have the option to supply images for RF, but it will

not be a requirement and images will not be licensed as RF without specific

permission from the photographer.

In March, EyeWire hired Charles Mauzy, formerly of Corbis, to head their new product

and business development office in Seattle with an initial focus on developing the rights

protected division. The company is following in the footsteps of other major photo suppliers

who offer both Royalty Free and Rights Protected images to their customers.

They expect a soft launch of the "Rights Protected" section of their site in late

fall. Drina Lazar, VP of Content Development at EyeWire said, "Our assumption is

that we can go on-line with a tiny, tiny little file. There is no barrier to us

putting images on-line since we are already putting all our RF material on-line.

All we need is some type of pricing mechanism (for Rights Protected)."

Artist Choice

Probably the most unique feature of this contract is the "Artist Choice" concept.

A photographer can designate, at the time of submission, up to ten images per year

as "Artist Choice" and will receive royalties of 70% on the licensing of these

images. The photographer receives 50% on the licensing of all other images.

Mauzy pointed out that initially, in addition to making the images available

on-line, they will probably promote many of the

"Artist Choice" images in their print catalog (64 page brochure) that is mailed

monthly to approximately 750,000 buyers.

Some photographers who have viewed the contract feel this concept is not just a

new idea, but a clear attempt to snatch the best selling images from the Corbis

file. One photographer called it a very "Machiavellian" strategy.

    There is a loophole in many (possibly most) of the original Corbis contracts that

    Mauzy negotiated. Hundreds of photographers with non-exclusive agreements are

    allowed to remove ten (10) images per year from the Corbis archive so they can sell

    them "exclusively." Consequently, Corbis photographers could identify their best

    selling images, take them to EyeWire, and, in theory, get

    70% of future sales instead of 45%.

    When the Corbis contract was originally developed many photographers were reluctant

    to put their best images into an online database for fear that one day someone

    might want to use one of the these images for a major ad campaign and the

    photographer would be unable to license exclusive use because Corbis would be

    making small on-line sales.

    To meet this objection Corbis agreed to let any contributor withdraw up to ten

    images per year for the purpose of exclusive licensing. Photographers believe

    there were discussions within Corbis at the time suggesting that the photographer

    should be required to demonstrate that an exclusive sale was imminent before an

    image could be removed. However, the final language made

    no requirement and the photographers are now free to choose any ten images per year

    that they want to remove with no explanation as to why.

When this photographer thinking was explained to Mauzy he said, "In all honesty that

had not occurred to me." Ms. Lazar said of

the concept, "It was something we thought would be appealing to photographers in

general, not specifically Corbis photographers."

Mauzy said his goal is to identify the best shooters and eventually work with about

100 to 150. "Many shooters have their best work under exclusive contract with some

agency. We are looking for people who can produce new work for us, not try to go

after older work in the files," he explained.

At first glance the chance to get 70% would seem to be an irresistible draw.

However, based on my thirty five years of selling stock images I have found that

where the image is has a lot more to do with the volume of sales it generates than

whether it is a "great image." I have always had dupes of most of my images with

many agencies. My experience has shown that best sellers at

one agency do not necessarily sell well at a different agency.

Buyers tend to develop preferred resources for locating pictures and this varies

from buyer to buyer. They usually choose the best image they can "easily" find,

not necessarily the best image that can be found anywhere. If an image is no

longer at Corbis that doesn't mean the buyer won't pick something else in the

Corbis file rather than going to EyeWire, or some other place, to find the one

perfect image. The "Artist Choice" strategy may get EyeWire a few big "names"

and bring some images to the file, but it may not produce the returns

photographers are realizing with other agencies.

The problem with putting newly created, untested images into "Artist Choice" is

that it is usually a crap shoot trying to pick the images that will turn out to be

best sellers. Photographers tend to think their most recent production will be a

winner. Some may feel strongly about images produced in January and put them in

"Artists Choice" only to discover that they produce even more marketable images

before the end of the year. In all likelihood many of the images picked from

future productions for "Artist Choice" will turn out to be poor sellers.

On the other hand the print catalog promotion of these images might drive the

volume of sales and turn many into best sellers.

One thing that does not seem to be an option with "Artists Choice" is to convert an

image from "EyeWire Selects" to "Artist Choice" a year or so after an image has

been working in the EyeWire file. At that point the photographer would have some

idea as to whether the image was likely to be a best seller at EyeWire.

Ms. Lazar indicated that they hope to get feedback from the photographers and

depending on photographer reactions modifications might be made in certain provisions.

One suggestion I would make is that photographers might want to try to

negotiate a higher number of "Artist Choice" images than ten. Ten is a very

arbitrary number.

Percentage Of What?

An important issue to be understood is exactly how royalties will be calculated.

When EyeWire sells directly to End Users it is clear what the royalty percentage

will be, but when sales are made by "distributors, agents, or

sub-agents," it is unclear what percentage of the gross fee collected will

eventually be paid to the photographer. EyeWire has not explained how they will

operate their "network" and the percentage of the total sales that are likely to

be made by other sellers rather than licensed directly.

If some other "agent" makes the sale what percentage will that agent

take off the top -- 30%, 40%, 50% -- before the remaining monies are passed on to

EyeWire? One of the difficulties with an organization that is starting a new

line of business is that things like this have yet to be defined.

Ms. Lazar said they have not had discussions with SuperStock or any other sales

agent in the U.S. about handling negotiated sales for images on the EyeWire web

site. "Our intention is to focus on the web which is a direct channel and

E-commerce." (This might imply a lot of fixed price selling and very little

negotiation.)

She acknowledged that the terms in the "Royalty and Payment Schedule" of the contract

leave open the option to sell through such agents, but, she said, "we haven't

gone down the initial road of trying to sign people up, or looking at this

possibility."

It is understandable that EyeWire may not know, at this point, what

kind of deals they will cut with distributors and sub-agents in the future. For

this reason one photographer suggests that it is necessary to add a clause that

establishes a floor, or minimum percentage of the "gross sale" price, that the

photographer will receive on every sale. This photographer believes that floor

should be in the range of 30% to 35%, but the percentage will have to be

negotiated.

Exclusives

EyeWire wants world-wide exclusive rights to selected images plus similars. The

similars issue has become a major problem in the industry because it can lock so

many images out of the market. EyeWire's definition of Similars, "means any

Contributor image (including a duplicate or composite) of any image whose principal

elements are depicted in a way that, when compared side by side to the

Contributor's images, would cause an End User to believe they are substantially the

same." For many photographers this is too rigid.

The contract goes on to say, "Exclusive means that, commencing on the Effective

Date ... Contributor agrees not to provide any Content, including composite works,

derivative works or Similars, to any third party on any basis whatsoever, except

for the Contributor's personal promotional purposes where no rights are granted."

At the very least this says you can't sell similar

images yourself, but moreover since it says "any content" and "any third party" it

may prohibit photographers from making any photographic sales to anyone.

This is probably not what was intended and it will probably be changed for those

who request a change, but it points out the dangers of signing a lengthy contract

like this without very careful examination.

The exclusive aspect of this contract will be a major

stumbling block for many photographers. Some feel it would be

foolish to risk their best images on this type of deal until there is some

demonstrated track record. If EyeWire had a large "rights protected"

file and demonstrated sales of those images, like TSI, The Stock Market, TIB or

FPG then a world-wide exclusive might make sense.

Mauzy indicated that they might be willing to negotiate on the "exclusive" issue

in a few special cases, but both he and

Ms. Lazar emphasized, that they needed exclusives in order to be able to offer

rights controlled sales.

My suggestion to those who have an interest in EyeWire's would

be to push hard for a non-exclusive agreement for the first couple years until

there are photographers with demonstrated "rights protected" sales from this

operation. The fact that EyeWire had been successful at selling RF is

no guarantee that they will be able to build a successful RP model.

Photographers should also be cautioned that a simple changing of the words

"Exclusive Rights" to "Non-Exclusive Rights" in the Grant of Rights section is not

enough. The word "exclusive" is sprinkled throughout this contract and

photographers need to deal with every instance very carefully to make sure they are

not giving away more than they intended.

Some photographers believe it is reasonable to give an agency world-wide exclusives on

those images that are actually placed in a print catalog. I

am not convinced that even makes sense with a start up operation like EyeWire's.

Considering the oversupply of print catalog images in the marketplace today, such

catalogs may tend to do more to promote the general file of the agency than

sell specific catalog images.

This may be particularly true for the "throw away" brochure type catalog that is

EyeWire's prime marketing vehicle. Buyers do not store these on the shelf like

they do a thick print catalog. This method of pushing individual images may work,

but as yet it is untested. Keep some options open.

If EyeWire has a client who wants to license exclusive rights to a particular image

make them come back to you and get clearance. These situations happen so

infrequently that this is no great burden and when they do happen the buyer almost

never needs an instantaneous decision.

Altering Work

EyeWire also wants the exclusive right to: "alter or modify the Content in any way

EyeWire sees fit, including, but not limited to, create derivative works, composite

works ... at EyeWire's sole or exclusive discretion."

There are two problems with this. First the photographer has no say over how his

work is altered. However, possibly worst is that it is not clear how the

photographer will be compensated for any

"derivative works" or "composite works" that are created. One photographer said

that if this clause can not be changed it would definitely be a deal breaker. He

believes that EyeWire should not be allowed to use his images to create "derivative

or composite works" unless they discuss the specifics with him prior to the

creation and work out an acceptable royalty division for future licensing of the

new work.

Risk Of An IPO

"EyeWire may assign any of its rights and obligations under this agreement without

prior written concent of the Contributor. The Contributor may not assign any of

its rights and obligations under this Agreement without the prior written consent

of EyeWire."

This sets EyeWire up to sell the company and photographers need to think long and

hard about what the new owners business philosophy might be. (At this stage, we

don't even know much about what the business philosophy of EyeWire.) The safest

thing is to insert a clause that says something like, "In the event of sale or

transfer of ownership of the company Contributor will have right to terminate

Contributor's agreement with EyeWire on 30 days written

notice until that time when a new contract is executed. Upon termination all files

of Contributor work will be removed from the database and all analog images will be

returned to Contributor within 60 days."

While this is a question for a lawyer, this clause may also prevent a photographer

from passing on rights in his estate and limit the options of his heirs.

Pricing Usages

One thing not mentioned in the contract, but very important to understand, is their

pricing strategy. Ms. Lazar said, "Given the web model it would have to be a lot

of fixed pricing, but we are feeling our way through this with input from key

suppliers."

It is important for photographers to understand what these pricing schedules might

be particularly in light of the fact that the company is coming from a "Royalty

Free" philosophy. EyeWire's sales staff works from fixed price schedules.

Photographers should want to know who will be training the sales staff in

negotiating techniques and what experience that person brings to the table. Mauzy

clearly understands that there are many uses that need to be negotiated, but the

key to success will lie in the person charged with providing the day to day sales

training in Calgary.

The percentage of fixed price sales relative to negotiated sales is also important.

For purposes of comparison, in the Picture Network International model the low

end, fixed price sales make up about 70% of the volume, but probably represent less

than 30% of the gross revenue.

Other Issues

The following are some of the other points in the contract that need to be

carefully examined. In some cases I have also suggested some negotiating

positions.

  • Captioning and keywording will be a critical issue that needs to be

    explained in more detail. Photographers should look at the "captioning guidelines

    for contributors" before they jump into this contract. Many photographers who

    initially put images with Corbis (and this business plan has a lot of simularities

    to the Corbis

    model) have said that they spent a lot of staff time and money preparing caption

    information for the Corbis system. Many said the $4.50 per image advance they were

    paid was eaten up in caption preparation. Many took months to get the selected

    images captioned to the satisfaction of Corbis. EyeWire is not offering an advance so

    the photographer will have to absorb this up-front cost.

  • In item 6(b)(ii) and item 6(c) the photographer is responsible to have all

    releases and waivers so Eyewire can use the content any way they want without

    having to get any other clearances. This can be very risky for people pictures --

    even third world people -- as lawyers in these countries get sharper. The strategy

    of laying all the responsibility on the photographer is not one that ought

    to please photographers, particularly in the current climate where many buyers

    tend to manipulate and

    misrepresent the original intent of the imagery. This is a time when image

    producer need to be looking for better ways to control how their images are used

    rather than laying them out without any controls whatsoever. The indications from

    the Contributor Agreement language is that

    EyeWire will place no controls on the use.

    Keep in mind the PhotoDisc story. Photo District News is reporting in their current

    online edition that PhotoDisc made a $1.9 million settlement for the uses that

    were made of one of their images without a proper model release.

    PhotoDisc is now suing the two agencies who were involved in supplying the image

    without a valid release.

    On Schedule "C", items 4(b) and (c) it talks about release guidelines and that

    releases "shall be required for all images selected". Before spending a whole lot

    of time reviewing this contract photographers need to get a look at these model

    release guidelines and see is they are going to be able to comply. If they can,

    then the question remains in light of 6(b) and (c) whether they will want to take

    the risk.

  • Item 7(c) seems to indicate that the photographer could write no-release on

    every image and would not be responsible if a model release question came up.

    However, in the "Warranties" (section 6) it seems that the photographer must

    warrant that all images have releases, or they will not be accepted. This is a

    question for a lawyer, but I don't think the photographer is going to be protected

    in this situation. I think the contract probably has to be

    amended or re-written on this point if photographers are going to supply people

    images. As I see it the contract is very burdensome from the warranties point of

    view.

  • Item 10 deals with the term of the agreement. It seems to me that if an

    image is only being marketed on-line it should be possible to pull it at almost any

    time. EyeWire may want three years because they want to recover their costs of

    drum scanning. The other issue is that the dates are based

    entirely on the date the image was accepted, not on the signing of the contract.

    Thus, in the event the contract is terminated there will be a long lag time in

    getting material back and it will come in dribbles and drabs. It will be a long

    time [12(c)] before the contributor can begin to license similars.

  • In item 14(i) it is clearly stated that Eyewire is not an "agency". This has

    become common among many major image sellers. This clause means that Eyewire has

    none of the fiduciary responsibilities to act in the best interest of photographer

    that an agent would normally have.

  • Every image that goes on-line will be drum scanned to at least 42MB and they

    are considering the possibility of scanning them larger. Current plans are to

    return the original film to the photographers, but a lot will depend on input from

    the photographers.

  • One good thing is monthly payment. This is certainly much better than Corbis

    which is still holding to quarterly payments for no reason other then greed.

  • According to Mauzy, EyeWire is focused on the "business to business" market,

    not the consumer market. This certainly separates them from other large players

    like Getty and Corbis who seem to be directing a lot of emphasis toward the

    consumer market.

    The two philosophies -- consumer or business professional -- require different

    focuses in marketing. In addition the image files will have widely differing

    characteristics. In choosing an agency to handle their work, photographers need to

    think long and hard about which one of these markets they are most interested in

    pursuing. Most agencies will do better at selling to one of these markets than to

    the other.

  • EyeWire is a Delaware company, with offices in Calgary, Texas and Seattle. This

    means there probably will be no payment and U.S. tax problems for American photographers.

    However, if there are any disputes they must be litigated in Canada according to the

    contract.

  • Ms. Lazar indicated that photographers would not be allowed to just put

    images in the "Artists Choice" category and put little or nothing into "EyeWire

    Selects." "We want photographers who will give us a significant number of images,

    but we didn't feel we could define minimum numbers of images in the contract," she

    explained. Nevertheless, if EyeWire starts providing a list of "name"

    photographers who have signed on, it may be wise to be skeptical and try to

    determine the number of images each has supplied to the file. Don't assume other

    photographers signed the same agreement you have been offered.

  • Corbis photographers may be in a strong negotiating position. One Corbis

    photographer pointed out, "There are many points where the Corbis contract gives me

    a better deal than EyeWire. I am going to lay the two contracts side by side and

    insist on at least as good as Corbis, if not better, on every point -- plus the 70%

    -- before I consider moving."


Copyright © 1999 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.  

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