A previous article in this “Business Planning for the Future” series noted that future growth in demand for images is a widely debated subject among stock industry professionals. In my view, traditional customers do not seem to have any growth potential, and there are also indications that growth in demand for low-priced imagery might have reached its natural level. Industry veteran Leslie Hughes—formerly of The Image Bank and Corbis, currently the principal of Equidyne Ventures—has offered an alternate point of view.
“I hate to nitpick, but the use of images is rising. In fact, I don’t think that anyone could argue that the use of visual imagery isn’t growing; it is as strong as ever, everywhere. It is the type of sale or business model that is changing, and the revenue stream that is challenged,” Hughes wrote in a lengthy comment, which is well worth reading in its entirety.
Before I discuss my views in more detail, it is important to recognize that this series of articles is directed toward individual photographers who see stock photography as a way of earning a living doing what they love. I do not deny that there is a growing demand for imagery. However, most of that growth in demand is for images priced at such a low level that it becomes almost impossible for photographers creating new images to sell enough volume to earn a living. Most photographers earning a living from stock alone are doing so because they have a huge body of work, produced in years past, that is still generating some revenue, although that revenue stream is declining at a very rapid pace.
Professionals must remember that the goal is not just to supply all the demand that exists, but to make a profit doing it. I can instantly create additional demand for automobiles: all I have to do is sell them for $1,000 each. At that price, there would be lots of new demand, but I do not think anyone can buy the steel, set up the factories and pay the labor needed to manufacture cars at that price. I also do not think hobbyists will produce them and give them away for less than the cost of production.
The stock photography business differs from most other businesses in that those who sell the product and set the price are not at all concerned about the cost of production. In fact, in most cases, the sellers have no clue as to the time and fixed costs that went into producing the images.
Sellers agree to pay the producers a certain percentage of the fee customers pay and set prices based on their own operating and marketing costs, as well as their judgment as to whether they can realize a profit from the percentage they retain. If the resulting profit is not enough, sellers ask for a larger royalty percentage or upfront fees—or require the producer to do a lot of extra work preparing images for marketing, thus reducing their own costs. Sellers are not required to even consider the production costs when setting the price.
This is akin to car dealers telling manufacturers: “We’ll give you 20% of what buyers pay us. It’s your job to figure out how to build all the cars we need for $200 each. And, by the way, we have no idea how many of the cars you send us we’ll be able to sell, but send us a lot.”
Sellers feel very little pressure to raise prices, as long as the number of sales continues to rise. If sales start to decline, the seller may then conclude that if he lowers the price, he’ll increase the demand, sell more product, and because he gets to keep a fixed percentage, make more money, as long as the revenue from the increased units licensed is greater than that given up by selling images at a lower price. In either of these scenarios, if the number of suppliers is also increasing (which is the case), the odds are that no individual supplier will benefit.
Some argue: “The sellers do consider production costs. If they didn’t, nobody would be supplying them with new images.” Unfortunately, that is not the way it works, because:
- Many producers are not trying to earn a living. They just want to have fun and see if they can earn a little extra pocket money. There have always been people at this level in the stock photography business, but their numbers are growing astronomically. They will continue to continue to produce whether they make a profit or not.
- The potential for success is oversold. New entrants approach this market with totally unrealistic expectations. They focus on the few top producers and forget about all those who devote huge amounts of time to the endeavor and spend more than they will ever earn. The only real benefit these people receive is the satisfaction of having created the image.
- Number of players dilutes individual revenues. For the professional, the competition from the part-time producers makes it almost impossible to sell enough images to earn enough money to support oneself.
Think differently
One suggested strategy is to accept that images are a commodity and have to be made available for low prices or free, and then find other ways to earn revenue from the images you produce. Providing a free service works for Google. Why not photographers? Fotoglif, GumGum and PicApp and experimenting with systems that would pay image creators a percentage of the advertising dollars generated when their pictures are seen. So far, I have not seen any evidence that this will generate significant revenue for the image creators, though it may provide some for the distributors. I hope it works, but I’m not ready to jump on this bandwagon until I can see some evidence of results.
Giving something away for free to draw in customers for paid services works if you have something else to sell them. If distributors give something away, they have something else to sell the next time the customer needs a picture. But the photographer who chooses to participate in such offerings will likely lose rather that gain. Photographer A gives away an image, but when the recipient of this largess returns, he does not buy one of his images but rather buys images by photographers D, E and F. It works for the distributor, but the odds are infinite that it will not average out in any photographer’s favor when there are tens of thousands of photographers in a group—particularly since some photographers give away nothing.
In the stock photo business, I have trouble recognizing any of these “other things” that photographers might offer. If they were to offer assignments or photo books, I can see how that might work. But both of these products have more cost-effective ways to market them than giving away images. If anyone has some other innovative ideas, please let me hear them. Maybe something new will come along, but in the meantime, my guess is that most people have to worry about paying tomorrow’s bills, not speculate on making some money several years down the road. Producing new stock images is rapidly becoming the wrong way to earn enough to cover living expenses.
If you know of some actual success stories where photographers have found new strategies, let me hear about them. We are continuing our “Reinvention” series to share such experiences.