Blend Images photographers have been notified that
Tetra Images has acquired the Contributor Contracts, Distribution agreements and the Blend trademark. Tetra has securely obtained all banking data from Blend and will be mailing the first pdf royalty statements for August sales by email at the end of September. Payment for August sales will be made October 1, 2018.
Blend has invoiced all licenses through July 2018 and will be paying out royalties until October, or presumably until all the licenses have been collected.
Tetra will be representing all the existing RF stills, RF motion and RM motion of Blend contributors. Tetra does not represent RM stills and will not be representing any of Blend’s RM stills. Blend photographers with RM content have the choice of converting that content to RF, taking the images to some other distributor or representing them themselves.
Getty has expressed a strong desire to represent this RM content and is willing to give contributors an elevated placement in search. Presumably, the RM photographers would get the same royalty share as Getty has been paying to Blend with no additional cut, but that is not clear.
The Blend owners have the option of placing all their images with Getty exclusively rather than having them transferred to Tetra, given their ownership contract agreements. A number of the owners seem to be taking that route. This option is not available to non-owners as their contracts differ from those of the owners.
Blend will remain a separate brand under the Tetra umbrella and the Blend website will remain separate for at least the time being.
Why Is Blend Making This Move?
Blend Images was founded 14 years ago as a production company by 23 of the world’s best photographers. It was believed that by working as a group they would have more leverage in negotiations with the major stock photo distributors than if they acted alone. The goal was to consistently deliver to the market exceptional imagery with an emphasis on ethnic and racial diversity. The initial plan was not to license images to customers directly, but to make the collection available to as many of the major image distributors around the world as possible. Each distributor would then handle the licensing and customer contact.
By agreement each owner would receive a 70% royalty portion of Blend’s share of license fees paid to Blend by the distributors. Initially the owners invested about $350,000 in start-up capital and added another approximately $150,000 five years ago. The owners also agreed, by contract, to take a sliding royalty share, if more money was needed to cover operational costs.
For a number of years this arrangement was very successful. At one point, gross annual revenue paid to Blend by the distributors was in the range of $7 million. Blend began accepting additional photographers who were paid royalties of between 30% and 50% depending on the number of images they had in the collection. These photographers are guaranteed their royalty share of sales regardless of the capital requirements of the company.
While Blend has always provided imagery of exceptional quality, they had no control over the pricing of these images. That was left to the distributors. In the last decade industry supply has increased much faster than demand (See
here for one example) and prices have dropped dramatically. In addition, the royalty share paid by distributors to Blend began to decline. At one point Getty Images was paying Blend 20% of the gross fee paid by the customer. That has now been dropped to 15%.
Early in 2016 Corbis, which had been the second largest distributor of Blend images was
sold to VCG. All the Blend images that had been represented by Corbis were also represented by Getty. Blend saw no significant increase increase in Getty sales, or those of any other distributor, once Corbis was removed from the market as a competitor.
About 2 years ago the Blend board of directors determined that to counter the declining income they would need to put more
emphasis on direct selling. While this effort initially produced positive results, it was not enough to offset declining revenue. It was determined that significant additional capital investment would be needed in order to grow the direct selling operation, to provide customer service and market the site to potential customers. When this proposal was presented to the 23 owners a majority were not prepared to contribute additional capital.
Prices continued to decline and there were not enough additional sales to offset the lower prices. In addition, the approximately 340 non-owner contributors, as well as the owners, were no longer producing as many new images to add to the collection.
There are a couple theories for this. Many of owners and non-owners who had been in the stock photo business for a long time, and had been major producers, were getting older, involved in other activities and had less incentive to produce new images. In addition, there is little question that the ever declining usage fees have made it increasingly difficult for any individual producing stock images as a business to ever recover costs.
It was decided to “wind-down” company operations and try to find a buyer for the company. Several companies were interested in taking over management of the existing collection, but none were willing to offer any additional cash for the Blend assets. After reviewing the offers Tetra’s was accepted.
Why Tetra?
Some contributors are asking the question “
Why Tetra?” If a big part of the problem is the “production company” business model where all the sales are made by distributors and the image producers have no control over pricing how is moving to Tetra going to change anything?
Tetra’s business model seems to be exactly the same as Blends. There is no indication that they make a significant percent of revenue from direct sales to customers. Virtually all their sales seem to come from the same 70+ distributor partners that represent Blend’s collection. When I do comparative searches on the
Tetra and
Blend it seems that Tetra has a much smaller collection. Tetra currently has 200+ contributors and Blend has 340, plus the 23 owners.
Among Tetra’s advantages compared to Blend is that there are two owners -Valerie Saunders and Tom Grill - rather than 23 owners as Blend has. Thus, in the current rapidly changing market climate this simple leadership structure should make it easier for them to adjust to new market developments.
Tetra has also been able to maintain lower overhead by having fewer employees than Blend although they have announced to Tetra contributors that they will be taking on new employees as a result of acquiring Blend. They have outsourced many of the company functions and made maximum use of virtual working spaces to keep company overhead low. As a result, its is expected that Tetra will need less money to run its operations. Over the past two years Tetra has also invested energy in “right-sizing” its business for maximum efficiency.
Finally, Tom Grill has been a top producer in this industry for more than four decades and he certainly has a great understanding of industry dynamics and all the players. If anyone can figure out how to adapt to this changing environment it is probably him. Due to his previous successes, he may also have the necessary capital that the Blend owners were not prepared to invest, if it turns out that is what’s needed.
Tom also has two children –Jamie and Daniel Grill – who are heavily involved in the business. Insuring a legacy for them seems to be a driving motivation.
Severance Packages
There have been conflicting rumors about payout that would be going to Blend managers and particularly Rick Lechrone and Sarah Fix. As best I can determine there are severance agreements, but they are much smaller than many of the rumors have indicated. As best I can determine the total combined severance costs will be less than $200,000. It is expected that all that will be paid out in the very near future (probably before the end of the year) from the Blend share of remaining operational cash.
I do not believe that Tetra will incur any ongoing obligation to make ongoing payments to Blend managers or owners other than the royalty share for the future licensing of each of their images.