Business Planning For The Future: Issues to Consider

Posted on 9/9/2009 by Jim Pickerell | Printable Version | Comments (0)

In the previous story we discussed four major trends in the stock photo industry and listed eleven other related issues that photographers should consider carefully as they try to determine the future prospects of their stock photo business. Below I have discussed each one of these eleven in some detail.

1. Growth in demand

Among the issues on which industry professionals hold widely differing opinions is whether or not there will be further growth in demand for images. It seems clear from figures we have been able to collect from Getty Images, Alamy and others who sell to traditional customers that there has been little, if any, growth in demand in this area of the market over the past few years. We estimate that in 2008, Getty Images licensed rights to between 1.5 and 2 million images and those numbers, while relatively stable for a number of years, may be beginning to decline.

However, there has been big growth in demand from small businesses and consumers. In 2005, 2006 and 2007, iStockphoto licensed rights to an estimated 4 million, 10 million and 17.55 million images, respectively. In 2008, iStock licensed rights to approximately 25 million downloads. The same year’s sales of all the other microstock companies combined were likely about equal to iStock’s. However, there are some indications that iStock sales have reached a plateau.

What can we conclude from all this? Traditional customers do not seem to have any growth potential. Growth in demand at low prices might have reached its natural level. Still, many in the microstock industry think the growth will go on forever; they cite the continued growth in Web sites and believe site owners will want more and more pictures.

2. State of the economy

The economy will eventually get better and probably result in higher demand for photos. However, neither the volume of traditional sales nor prices are likely to ever return to 2007 levels. Factors insular to the stock industry will have much greater effects on future trends than any changes the economy will bring about. Many photographers’ expectations for economic recovery are unrealistic.

3. Copyright

The Internet has made it very easy for image users to steal what they need. This is particularly true for consumers, and to some extent small businesses that have budgetary constraints. These users have little understanding or appreciation of the copyright laws, combined with a belief that the likelihood of being caught and punished is very slim. Stronger copyright laws might help, but the trend seems to be toward weakening these laws rather than strengthening them.

4. Useful life of images

With more and more images illustrating every conceivable concept now available, and new ones being created every day, it seems likely that the useful life of any given image will become shorter and shorter. In theory, if the subject matter happens to be something that few people shoot (unique), and something certain customers might need to use years in the future, the images may have a longer useful life.

In practice, last month, 15 of my images—of many different and unrelated subjects and all created more than 20 years ago—were licensed for various unrelated uses. Other photographers have hundreds of more recent images of very similar subjects available in files around the world, and yet mine were chosen.

In sum, there is no way to accurately anticipate which specific images future customers will want to use. However, it is possible, in general terms, to estimate the earning potential of a collection of images, once that collection has some track record.

5. Search-return order

Search-return order is an important issue over which photographers have no control. If an image is within the first 100 to appear when a customer searches for a particular keyword, it has a much better chance of selling than if it is the thousandth, regardless of how technically appropriate it might be for the customer’s planned use.

If the image is at the 10,000th spot, it has almost no chance of selling, no matter how great it is. Technological advances may result in changes in how images are slotted in the search-return order, but such advances will not necessarily benefit all photographers and could actually make things worse for some.

6. Cost of production

It seems likely that cost of production will increase. Equipment costs may decline, but they are only a minor share of the total costs of productions. There are costs for models, sets and getting to locations that must be considered; the pre-production planning and the post-production work on the computer should also be factored in. The photographer may be required to do more in preparing images for distribution. Photographers who expect to profit in any way from producing stock images must constantly look for ways to cut costs without sacrificing quality.

7. Royalty percentage

The trend among distributors is to pay image creators a smaller and smaller share of the gross licensing fee when an image is used. In cases where photographers receive higher royalties, the number of sales is often lower. Thus, photographers often earn more in gross revenue from distributors who pay lower royalty percentages than those who pay the highest.

There are exceptions, of course. While this does not mean that image producers should seek distributors who keep most of the gross fee paid and offer the creator a pittance, it does mean that royalty percentage should not be considered in isolation.

Unfortunately, there is no reliable way to determine whether a distributor’s offer is better than that of any other until you have had specific experience with both with the same collection. Thus, it is best, whenever possible, to simultaneously offer the same images to several distributors and base future decisions on your own personal experience.

8. Pricing trends

As customers have more choices, the laws of supply and demand tend to cause prices to drop. That has certainly been happening in the stock photo industry. Interestingly, microstock sellers have been able to steadily raise prices without losing customers over the last four year, mostly because they started at such an extremely low point. Microstock has also seen a major growth in customers, but it not clear that sellers can continue to raise prices and keep all the same customers.

There is some evidence that continued price increases will result in a decline in sales. Image suppliers should try to determine if microstock distributors have reached all the potential customers and are simply taking market share from each other, or if there is truly continued growth in the customer base. If microstock sellers start to lose low-end customers, they will need to find a way to modify their pricing structures in order to supply images to low-end users at prices they can afford. At the same time, sellers will want to continue to raise prices in those situation where the customer receives greater value from using the image and thus can justify paying more.

9. Foreign workers in the market

Opportunities are increasing for those working in areas where the cost of living is lower than in the U.S. American photographers need to be aware of the competitive advantage that these foreign workers have. This often means that certain production costs—particularly model and studio expenses—are lower for the foreign photographer than in the U.S., making the daily revenue of the foreign photographer significantly lower. Photographers operating in a number of locations can often develop profitable businesses on revenue that would be totally inadequate for someone working in the States or Western Europe.

In the microstock arena, photographers can easily identify the best selling images in any subject category. Many photographers in the developing world then focus on producing similar images at a much lower cost. This enables them to quickly develop viable and competitive businesses, but it reduces the useful life of images produced by the first photographer. Many in the U.S. will cry that this is unfair and it should not be allowed to happen; those in the developing world see it as an opportunity and a way to compete. Nothing will stop this trend; U.S. photographers must figure out how to live with it.

10. Technological change

No major technological changes are anticipated, but these can quickly alter the landscape. There is a natural resistance to jumping on the bandwagon of each new release, and there is often a great risk in being an early adopter. At the same time, it is important to try to get a clear understanding of how the new technology may alter the business climate. Factor that into your planning. New technological developments may make it easier for amateurs and customers to produce professional quality images, or at least images that are perfectly satisfactory for online uses.

11. Video

There is general agreement that the future of information distribution is online rather than in print. Unlike print, the Internet can effectively use video as well as still images. That does not mean that video will replace all still uses. If the reader simply wants to know what an author looks like, a still image is more appropriate than a video of the author reading his article. On the other hand, some information can be communicated much more succinctly, effectively and powerfully with video than with stills.

Many customers will also have a bias toward video because it is “new,” even when it does a poor job of communicating information. The challenge for future communicators will be to determine when video is the more effective option, when to use stills and when to use text alone.

Producing good video requires a skill set and costly tools that are much greater than those required to produce still images. As a result, there will probably be less competition, at least for a while. There is also the question of whether Internet demand will be for short clips of the type used in television ads, or whether the majority of Internet uses will be quite different.

Copyright © 2009 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 301-461-7627, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of, 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:  


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