683 CHEAPER RF FOR EDITORIAL
November 18, 2004
Image Source has been an innovator in RF pricing. In February they launched Easy Rights (See Story 614 ) as a way to offer "exclusive rights" for high fees to some of their RF production, for the first three months of the life of an image. At the end of three months if the image has not been licensed for exclusive use it is transferred to their general RF collection and licensed at normal RF prices. Now Image Source is aiming at the other end of the RF market.
In conjunction with Rex Features they have developed a new rational for offering RF to Editorial buyers at lower than normal RF prices. A normal RF license is for "unlimited rights" to make multiple uses of any image purchased. Now, Rex will be offering Editorial users "one-time rights" to any of the Image Source images for the same fees that that they would normally be charging for a RM license. It is worth noting that most people in the industry believe that the vast majority of RF images are only used one-time, not multiple times, by the people who buy them - although there is no way of verifying this.
This is significant because the normal fee for a RF image is often higher than that charged Editorial users for an RM license. Paul Brown of Rex Features says, "We know we have lost business in the past because customers have told us that they would like to use RF, but they can't afford it. This is not undercutting the RF prices. It is a new license model that permits clients who could not afford high RF multi-use prices to make use of the images. While there may be the odd editorial client who would have paid a higher fee on occasion, I believe most sales that we make in this way will be ones which would not have happened otherwise, and do not therefore cut into the RF business of other Image Source suppliers."
Editorial users include newspapers, magazines and books, but may also include newsletter, and some TV and web use. I believe that in excess of 40% of all still photo sales worldwide can be defined as editorial. (See story 635 for a fuller explanation.)
So how are "normal" editorial prices defined? They're not fixed prices. They are whatever a publication would normally pay for a RM image, but the price varies from publication to publication and are negotiated depending on the circulation of the publication, the size of the use, and the quantity of images the publication uses over a period of time. This is the standard strategy for licensing all RM imagery.
Now the customer that needs an image for a small use may negotiate price lower than the normal offering price for RF, just like he has always been able to do for RM. So on the low side the prices match and when it comes to extensive use of the image the customer has the choice of getting everything they need for the fixed standard RF price, or purchasing an image that is RM and paying possibly a much higher price based on usage.
Implications For The Future
I think we can expect this negotiating strategy for pricing low end uses to be immediately adopted by many other RF sellers. It solves a big problem the industry has been facing. The average RF price for usage of a single image has more than doubled in the last two years. Many buyers with tight budgets have been priced out of the RF market and forced to use RM because they could negotiate a lower price than RF sellers were sellers were charging for such usages. The industry -- and particularly Getty -- has been trying to figure a way to offer content at a price these budget conscious buyers can afford, without lowering their overall price for RF. This strategy helps solve that problem.
The disadvantage of this method is that it is more labor intensive because sales people must handle the negotiations. If you're going to sell for low prices the ideal is to automate the sales using credit cards in order to keep your costs low. That's what RF did originally. On the other hand where volume users are involved, a fee can be negotiated once and established to cover many future sales. This adds very little to the unit cost of each individual sale.
I would also expect this strategy to expand beyond the Editorial to small users in the advertising/promotional area such as producers of small brochure and non-profits with limited budgets.
This strategy could present a problem for many of the smaller RF portals that have built their business model around fixed pricing. They may find it necessary to build a larger sales staff to deal with negotiations.
As I see it, this will lead to another decline in sales for RM producers. While the hope of RM producers is that they will make big bucks for large advertising sales, one only has to look at all the small numbers on royalty statements to realize that a significant number of sales are for fees lower than the average currently being charged for an RF image. Many buyers who could not consider RF before because it was too expensive will now be able to choose between RM and RF. Some are bound to choose RF and that means lower sales for the RM providers.