Carlyle Should Be Talking To Shutterstock

Posted on 3/12/2014 by Jim Pickerell | Printable Version | Comments (0)

Carlyle Group should be trying to sell Getty’s Midstock division (iStock, Thinkstock and to Shutterstock before the value of that segment of Getty’s business collapses.

Private equity firms typically invest in companies for three to seven years before selling but with revenue declining nearly every quarter since Carlyle acquired the company Carlyle should recognize by now that Getty Images has been a bad investment. Moreover, given the general state of the stock photo industry, there doesn’t seem to be much Getty could do to turn the company around. Every move Getty makes to try to shore up one segment of its business seems to have negative effect on another part of the business. It is the time to cut losses.

Getty’s latest desperation move is to offer Internet site developers free access to 35 million images in exchange for access to information about who uses the various web sites where the images will appear. If this is at all successful (somewhat doubtful) it will certainly have a negative effect on the three Midstock brands that have been licensing a significant number of images for web use. (The prices the Midstock brands charge for web use aren’t much, but they are more than zero.)

Getty’s hope is that they can start collecting data from Internet users and access to that data will make them attractive to Google, Facebook or someone else as a takeover target. There is a real question as to how much useful data they will actually be able to collect, but to the degree they are successful it will surely cut their licensing revenue.

There are rumors that Getty has been talking to a number of organizations, both from within and outside the industry. In one sense it is hard to understand why anyone with an understanding of this industry would want to take on the Getty train wreck for anything like Carlyle must be asking. On the other hand Carlyle may be ready to accept that the value of their investment will continue its downhill slide and maybe it is better to get what they can, while they can.  

I won’t even speculate on why a private equity firm with no experience or understanding of the industry might be willing to buy Jonathan Klein’s kool-aid and take the company off of Carlyle’s hands.  

Why Sell Parts Of The Company And Not The Whole?

Given the way Getty Images is structured, every time they try to shore up one segment of their business it undermines and damages another segment. At that point competitors with a narrower focus on a single aspect of the business come in and take market share. Thus, the logical way to move forward is to split up the company. Sell the various divisions to parties with expertise in those aspects of the business and let the market eventually sort out the degree to which any of the various aspects of the stock photography business will be successful in the long term.

Why Shuttterstock?

Shutterstock is probably the only company that has a good understanding of the Midstock segment of the industry and enough resources to possibly stabilize and successfully turn around the fortunes of iStock, Thinkstock and And Shutterstock could greatly benefit by having these three collections under the Shutterstock umbrella.

There are two theories in image licensing: (1) All images should be priced equally regardless of quality or use, vs (2) some variation in price are justified based on the services the customer needs, quality and use.

Initially, Shutterstock was a strong advocate for (1) but in the last few years the company has come to understand that subscription isn’t right for everyone. Many customers prefer to pay for the images they need, as they need them, even if the price per-image used is much higher than a subscription. In addition, Enterprise customers often need special services. (See here for some information on how Shutterstock’s strategy had changed.)

iStock has a strong database of customers willing to pay higher prices. Knowing who these customers are and what their price sensitivity might be could be of great value to Shutterstock.

A few years ago 100% of Shutterstock’s revenue came from subscriptions. Now it may be down to 40%. Enterprise licensing represents 15% of revenue and “Image on Demand” licensing may represent 35% of revenue.

They have also created their Offset brand aimed at customers who are willing to pay 100 to 200 times as much as they would have to pay for an image licensed through a subscription. In addition Shutterstock has also come to recognize that some images cost more to produce than other and some have a greater value than others.

iStock is generating about $175 million at price points between “Image on Demand” and Offset. In my opinion Image on Demand is priced lower than necessary for a significant segment of the market and Offset is way too expensive for all but an infinitesimal faction of 1% of today’s customers. This may vary from country to country. Offset also suffers at the present time from a limited selection of images.

Using iStocks collection and its data from historical sales could be of tremendous value to Shutterstock as it tries to discover the most efficient price points in this mid range for various segments of the available images. It would also be helpful to be able to examine the details of the pricing strategies that have not worked for iStock in the last few years.

iStock appears to have a clear lack of resources which is certainly not a problem for Shutterstock. iStock has had problems with paying contributors for subscription sales, a landing page that promoted Valentines Day long after the day had passed, search problems that haven’t been resolved after more than a year and a long list of other bugs that have never been resolved. iStock gives the impression of a shoestring operation, struggling through from one day to the next.?

Other Ways Shutterstock Could Benefit

1 - If Shutterstock were to continue to operate iStock as a separate company it would give them the opportunity to test various theories in various segments of the market. If Shutterstock is going to grow revenue significantly they have to find a way to charge more for certain images and certain uses.

As a result of Getty’s recent move to give images away for free, and the general decline in sales for many exclusive contributors many of iStock exclusive contributors are talking about leaving iStock’s exclusive collections (that generate 75% of the company’s revenue) and putting their images with Shutterstock and many other microstock distributors.

Shutterstock doesn’t need these images. The additional images wouldn’t make the Shutterstock collection more attractive or valuable to its existing customers. What would be much more valuable for Shutterstock would be for iStock to continue to exist (with Shutterstock owning the revenue) and supply images at a higher price point to those customers who have shown they are willing to pay such prices for the images in the iStock collection.

2 – If Shutterstock controlled Thinkstock and they would have two choices. They could either integrate all the Thinkstock and images into the Shutterstock collection, or they could A/B test and offer the two collections at different price points to identify customers who are less price sensitive. They could also put some of the same images in both collections (already the case) and adjust the quality of images in each collection to understand how that might affect sales. They could market the collections in different ways.

Shutterstock already does a significant amount of A/B testing. With two, different, strong collections the company could greatly expand such testing.
3 – Shutterstock has always been focused on detailed analysis of large data. If they could get access to all of iStock’s historical data to add to their own data it could provide them with a much more detailed and nuanced understanding of the market.

4 – One of main problems Shutterstock has in determining whether Offset pricing is at the right price point is that there are currently too few images in the collection. If they controlled iStock they could draw on images in the iStock collection to better test Offset’s potential.

Varying price points makes it possible to keep prices low for certain uses like the web while charging more for other type of uses. Offering various image collections makes it possible to designate certain images as having more value than others.

5 – iStock has a site with lots of “features” that in theory make things easier for customers, but the site is often too complicated and buggy. Shutterstock has a very simple and easy to use site, but they don’t benefit from the pricing variations iStock offers. Hopefully, Shutterstock technologists could improve on iStocks efficiency without giving up all the benefits of varied pricing for certain products.

Why would creators be happier if Shutterstock rather than Getty was running iStock?

1 – The Shutterstock staff is much better at communicating with contributors than is the case with iStock or Getty. Many on the Getty staff seem to be demoralized and fear for their jobs.

2 – In general contributors believe Shutterstock is a much better managed company than Getty.

3 – There is much greater trust of Shutterstock with regard to sales reporting and payment than there is of iStock or Getty. Getty reporting is less detailed and there have been a number of recent problems.

4 – The Shutterstock image upload system is a great improvement over that used by iStock. iStock contributors would look forward to a change.

5 – One contributor said, “Shutterstock is a modern, technology focused company that understands that both their customers as well as their suppliers are entrepreneurs. They see themselves as a service platform and put all their energy and the considerable brain power of their staff to providing the best service in the industry.”

This blog post by Sean Locke is also worth reading.

Copyright © 2014 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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