As happens every fall there is a whirlwind of photo conferences – PACA Annual Conference, Visual Connection and PhotoPlusExpo (all in New York), and this year Microstock Expo in Berlin.
Actually, it’s the second edition of Microstock Expo organized by Lee Torrens and Amos Struck. The first was in 2011.
In light of everything I’ve seen and heard between October 20 and November 17, 2013 I’ll make a few observations. Others may read the tea leaves differently. If so, I would be happy to publish your thoughts and different ideas. Here are a few of my takeaways.
PACA
One attendee at both PACA and Microstock Expo described PACA as “my mother’s bridge party.” It is a collection of old friends getting together to try to understand what had happened to the business model that had been so successful a few years ago. In many cases they are also in denial.
PACA, of course, is an organization made up of stock agencies that offer Rights Managed and traditional Royalty Free license to use the images they represent. Many are struggling. There are some new start-ups most with specialized niche collections. But the aim of the old guard, as well as the new entrants, is to sell to a high-end market that is clearly in decline. A few customers are still willing to pay decent prices for the images they use and those are the customers PACA members are addressing. For the most part they have decided that the segment of the market that is not willing to pay decent prices is not worth addressing.
Nevertheless, in order to hang onto old customers they have been forced to lower prices. They often license rights for less than what is charged for premium microstock. Alamy says that 22% of the images they licensed in 2012 were for fees less than $25. Our analysis of Getty contributor royalties indicates that at least 25% of the images Getty license are for fees less than $25. If these low prices resulted in significantly more sales that might not be so bad, but that doesn’t seem to be what is happening.
PACA has become much more accepting of microstock distributors than it was a few years ago. But there is very little indication that most PACA members are ready to change their licensing strategy, or feel that it could work for them even if they tried.
PACA seems to be fighting a losing battle to protect image copyright. More and more images are being used without proper permissions. PicScout says that 85% of the image uses they identify on the Internet are not properly licensed. The organization is certainly putting up a good fight and trying to improve the business climate for its members. They are working to get legislation passed that will make it easier to enforce copyright, but very little real progress seems to occur.
RM customers are often confused by the complicated licensing agreements that define what they can and cannot do with the images they purchase. (See:
Buyer Confusion About Rights)
Many of the top photographers PACA members represent have either pulled back on the number of images they produce, or stopped producing altogether. They are no longer earning enough to justify continued production and have moved on to other lines of business.
PhotoPlus
A few years ago there was an entire track of seminars devoted to Stock photography at the three-day event. For the last two years there hasn’t been a single seminar. It is almost impossible to find anyone in attendance with an interest in stock photography. The stock photographers in attendance are taking seminars about how to use social networks to market themselves (mostly as assignment shooters), to protect their copyright or to learn video skills in anticipation that will be the market of the future.
Microstock Expo
Then we come to Microstock Expo where we found a vibrant mood of excitement, enthusiasm and hope. There were 212 people in attendance, about half were image creators and the other half agents and service providers. This conference had a creator focus while PACA is focused on how agencies and distributors can make money.
Before the conference I surveyed about 70 of the image creators who would be attending and got a 40% response rate. Only one reported a revenue decline in 2013 compared to 2012. Over half reported 10% or more revenue increases. The attendees were certainly among the most successful microstock producers.
Some shooters that license their images at RM and traditional RF prices will be quick to point out that these image producers are not representative of the tens of thousands microstock shooters, most of whom make very little because they only license few image use and they are at the low, low microstock prices.
Based on the analysis I’ve done over the years I feel sure that today there more microstock and subscription shooters earning over $100,000 a year in royalties than there are people who license their images at RM or traditional RF prices. There are also probably more microstock shooters earning over $500,000 a year than traditional shooters.
Sure, it is very difficult to reach these levels. Today, it is probably more difficult on the traditional side than on the microstock side. Sure, a huge percentage of producers on both sides sell very little and often don’t recover their costs, particularly if they think their time has any value. But, on the whole, I believe those engaged on the microstock side of the business are happier, more successful and have a more positive attitude toward the future than traditional shooters.
Changed Industy
Here are a few elements related to how the industry is changing.
- A much higher percentage of the images used are being used online.
- Customers need a lot more images.
- Customers need flexibility in how they can use the images they purchase because their needs change rapidly.
- Customers want to know that when they purchase an image they can do anything they want with it.
- Overall customer budgets have not increased. Therefore, they need to pay a lot less per-image than they did in the past. They also like a system that will allow them for a fixed annual price to get all the images they need regardless of what they happen to be of.
- Given the oversupply of images and the relatively short life span of an image use, very seldom is there a case where the customer needs exclusive rights
Pricing Models
The industry has two basic pricing models -- (1) Usage Based and (2) iTunes.
The Usage Based (UB) model started with RM. RF was introduced as a simplified UB model. RF fees have a few varied with file size and collection. There are limits (500,000 print impressions) and a few others. But, for the most part they are much simpler than RM.
However, customers are pushing more and more for an iTunes model. They are willing to pay a little for the convenience of being able to quickly find something that fits their need, and in order to avoid the anxiety of being illegal. But, raise that fee too high and they will find another way to get what they need, and, if necessary, accept a limited risk of being caught.
The fee they are willing to pay has no relevance to the value or cost of production of the image. If enough people happen to like a particular image it can generate significant revenue, but going forward it is unclear whether enough of a given creators’ images can sell for a combined total of enough to cover the overall cost of production.
Many top creators have decided they won’t be able to cover costs and are pulling out of the industry.
Shutterstock
The leader in selling images today is unquestionably
Shutterstock. With its subscription pricing model it comes closest to the iTunes model customers want. Of all the stock images licensed, by all the stock distributors in the world in 2013, I think Shutterstock will license about 58% of them. This is somewhat deceptive because given the way the subscription model works customers pay to download a lot of images they never use. Nobody knows what proportion of the more than 100 million images customers will purchase in 2013 will actually be used, but the image creator gets a small royalty for each image download regardless of whether it is actually used.
It is also important to understand that 40% of Shutterstock’s revenue comes from single image licensing, not subscription. They started at the bottom of the food chain and are moving up while everyone else – in one way or another – is moving down. The Shutterstock fees for single images are around $10 per image compared with around $1.40 to $1.50 per a subscription download.
An increasing number of major organizations are also paying Shutterstock higher fees that range up to about $400 for extended licenses. These licenses vary and may cover print runs higher than 500,000, use of the image on products, or permission for multiple art directors to use the same account. Creators occasionally get royalties in the range of $100 for the use of a single image.
For more on Shutterstock read my analysis of their
3rd Quarter 2013 conference call.
These are a few of the highlights. I’ll expand on some of these subjects later.