Corbis/Getty Contract Comparisons

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August 3, 2000

Now that Corbis has released their new contract terms, with improved percentages and no catalog fees
for photographers, one of the major questions is, "Will Getty Images attempt to match the terms?"

Two years ago when the Stone contract was released, Jonathan Klein declared that it would set the
trends for future contracts between photographers and agencies. It now appears Corbis may be the new
trend setter.

One of the major questions for photographers is how much better -- if at all -- is the Corbis Model
of payments compared with the various Getty Images Models currently in existence? In order to assess
this we have taken the Getty Images numbers, applied certain assumptions and done comparisons of the
two models.

To begin, analysts on Wall Street are estimating Getty's revenues to be $480 million for the year
2000. I took this number and broke it down by brands. Most of the specific brand numbers are not
published by Getty Images, so my numbers are estimates.

VCG

The first brand to look at is VCG. I estimate Getty Images' gross sales for 2000 at $70 million, but
Getty Images will only own the company for a little over nine months. Gross sales for 1999 were
around $90 million and I estimate that gross sales for the brand will be less for the full
year in 2000, given the difficulties Getty Images will have in integrating this brand.

I estimate that U.S. sales represented about 35% of all sales for VCG. There are several categories
of sales that should not be included because there are no photographer royalties generated in these
categories. FPG's historical file probably generates about $7 million in sales. Giraudon's fine art
images are not included, nor are VCG's wholly owned images (mostly produced in Europe). Together, I
estimate that these represent $12 million in sales annually. This leaves approximately $73 million
for which photographer royalties will be paid in 2000.

The VCG selling offices outside the U.S., for the most part, retain 50% of the gross fee collected
and remit the rest for sharing with the photographer. This includes all the wholly owned offices. I
believe that at least 80% of the foreign sales are through wholly owned offices on the 50% basis.
Thus, the photographer will receive 25% of the gross fee collected. The other 20% are on a 40%
basis.

I believe that worldwide about 20% of gross sales are editorial and 80% are commercial. In the U.S.
market I believe the percentage would be closer to 10% and editorial sales outside the U.S. are
probably closer to 30%.

VCG Analysis

Estimated Sales

Thus, the photographers will receive 50% of the sum of $25.55 and $9.49 million or a total of $35.04
million. They will receive 25% of the remainder.

Estimated Sales

Using the Corbis Model

The big difference in the Corbis model is the fact that foreign wholly owned offices will only be
taking 35% of gross sale instead of 50%. I assume that in the U.S 90% of the usages are commercial
and 10% editorial, and outside the U.S. 70% of the usages are commercial and 30% editorial. The
sales and royalties would break down as follows:

Thus photographers would receive $ 330,000 MORE with the Corbis model.

TIB

I estimate TIB's gross sales for the still division in 2000 at $45 million. I estimate that U.S.
sales will represent about 45% of all sales.

Most of the major TIB selling offices are wholly owned. The only offices where photographers get 50%
of the gross sale are New York and Boston. All other offices retain 40% as a selling agent and split
the remainder with the photographer leaving the photographer 30% of the gross sale fee. Thus, Getty
Images gets to retain 70% of the money for all sales through wholly owned offices -- except New York
and Boston. I estimate that sales through the New York/Boston offices are about 10% of the gross.

Not counting New York and Boston, I estimate that 80% of the sales come from wholly owned offices and
20% from sub-agents. While the sub-agents retain 40% of the gross sale, the only part of the sale
that would be reflected on TIB's bottom line is the amount they pay to TIB. This is then shared
50/50 with the photographers.

I believe that worldwide about 20% of gross sales are editorial and 80% are commercial. In the U.S.
market I believe the percentage of editorial sales would be closer to 10% and outside the U.S. they
are probably closer to 30%.

TIB Analysis

I estimate that the still image division of The Image Bank will generate about $45 million in sales
annually.

**Note: This is not the license fee, only that
portion of the license fee that TIB receives
from the sub-agents.

In calculating the comparison using the Corbis model we assume that 80% of the usages are commercial
and 20% are editorial. The Corbis wholly owned offices will take 35% of the gross sale price rather
than 40%.

Thus photographers would receive $540,000 LESS with the Corbis model. It is important to note that
this would be even worse for photographers if the percentage of editorial sales is less than 20%.

Liaison/Newsmakers Analysis

I believe that currently all sales made for Liaison overseas are made by sub-agencies, not wholly
owed offices. Therefore, the royalty paid on all income recognized by Liaison - whether foreign or
domestic -- is 50%. I believe their annual sales are about $10 million split more or less equally
between U.S. and overseas sales.

Estimated Sales

If we use the Corbis model and we assume that 80% of the sales are for editorial uses and 20% are for
commercial we get the following results:

Estimated Sales

The photographers would earn $100,000 LESS using the Corbis model.

Stone

With Stone I have made the assumption that about 50% of their sales are in the U.S. and 50% are
foreign. While their contract allows them to pay a 40% royalty on digital sales, I estimate, based
on discussions with photographers, that no more than 7 to 10% of current gross sales are being paid
at the 40% rate. In all other cases the photographers receive 50% which is the analog rate. To
account for this I have figured 15% of the U.S. sales at the 40% royalty rate. I estimate that about
20% of Stone's sales are editorial and 80% are commercial.

I believe that 90% of the foreign sales are made through wholly owned offices where Getty Images
retains a 40% selling office fee and then takes 50% of the remainder for a total of 70% of the gross
fee billed. The photographer receives 30% of the gross fee
collected by Getty Images.

I believe that 10% of their foreign sales are made through sub-agents not owned by Getty Images. If
these cases these selling agents keep 40% of the fee collected before remitting the remainder to
Getty Images. Only the amount Getty Images receives shows up on Getty's books, not the actual amount
billed. Thus, the percentage the photographer receives of this payment is 50%.

Stone Analysis

The figures are based on an estimated $145 million gross sales with 50% of those sales in U.S. ($72.5
million) and 50% foreign. I have estimated the current total digital sales in the U.S. at 15% of the
gross and for the purposes of this calculation I have put foreign digital sales at $0.

In the Corbis model I have estimated that 80% of the sales were for commercial uses and 20% were for
editorial uses. The wholly owned foreign offices would take a 35% rather than 40% of the gross sales
and 90% of the foreign income comes from wholly owned offices.

Estimated Sales

Thus the photographers would receive $2.175 million LESS using the Corbis model.

The Stone photographers are currently earning significantly more with the current Getty Images system
than they would earn if the Corbis Model were used. However, the breakeven point seem to be when 30%
of total sales are digital and Stone is paying only 40% royalties on that 30% of sales. Anything
over 30% of the sales being digital and the Corbis model would be better for photographers than the
current Stone model.

This exercise teaches us is that the percentage figure used to calculate a photographer's royalties
can not be viewed in isolation. The process of how that percentage is applied in calculations must
be thoroughly understood.

CATALOG IMAGES

The point where the Corbis model could provide significant improvement when compared with the Getty
Images model is in the elimination of catalog charges. According to contract, photographers with
Getty Images are charged a fee for every image that appears in a print catalog. Corbis has agreed
that there will be no fees for catalog placement.

Stone photographers tell me that every month they receive a statement of charges which shows what
fees are owed for catalogs previous to 1999. However, currently, even when those images sell,
nothing is being deducted. The last time anything seems to have been deducted was June of 1999. One
photographer reports more than 30 sales of images since June 1999 which were listed on the charge
statement, but for which no deductions have been made.

In addition photographers have not even been informed what the charges will be on the catalogs that
have been produced and distributed since early 1999.

When I asked Jonathan Klein if Getty Images planned to change their policy with regard to collecting
catalog fees in the future, he assured me that there was no change in policy and that they intended
to continue collecting catalog fees. He said the delay in supplying information, and in deducting
fees, may be the result of changing accounting systems.

I have asked for a list of catalogs that Stone, TIB and VCG have distributed since January 1, 1999,
but after more than three weeks Getty Images has been unable to supply me with a complete list. A
partial list that I have been able to develop on my own includes:

Stone Catalogs

1999 - V18, Life, Work

combined total of more than 400,000 copies printed

2000 - Road Trip, Quest, and Play/Players

TIB Catalogs

1999 - C24 Perceptions, C25 Attitude, Bokelberg 7, C26 Annual

combined total of more than 500,000 copies printed

2000 - People/Contemporary Living and Retrospective 2

FPG/VCG Catalogs

FPG

1999 - Selects V9, Historical Select Volume 4, Stock Directory 7, Sports, Higher Ground

combined total of more than 200,000 copies printed (It is unclear whether this is only U.S. distribution or worldwide.)

2000 - Temptations, Business

VCG

Stock Directory 8, Best of Selects, Business

There may have been additional VCG distribution of these catalogs, but due to the change in ownership
Getty Images was unable to supply me with this information.

I estimate that over 10,000 images will have appeared in the Stone catalogs above. An average price
of $500 per image would not be out of line since Stone has charged over $800 per image for some
catalogs they have produced in the past. This would mean that in a year-and-a-half there might be a
photographer obligation in excess of $5 million for the catalogs that have been distributed.

I estimate that there are over 5,000 images in the TIB catalogs listed and TIB has been charging
photographers between $495 and $600 per image for the last catalog. At an average price of $550 per
image this would represent $2,750,000.

VCG has charged $170 per image for those that appear in the U.S. version only and $300 for those that
appear in both the U.S. and foreign versions. I estimate that the catalogs listed have in excess of
22,000 images in them. At an average price of $150 per image the photographer obligation for these
images would be $3.3 million.

Thus we have an 18 month obligation of approximately:

This would mean that the amount of new catalog fee obligations on an annual basis would be
approximately $7.67 million. If Getty Images were to eliminate catalog charges in the future that
would directly impact on their profits estimated to be $78.2 million EBITDA in 2000. This would result
in almost a 10% drop in profits.

While it might not be too costly, and maybe even beneficial, for Getty Images to move to the Corbis'
royalty percentage strategy, it is hard to imagine that they would ever eliminate all catalog
placement and dupe fee charges as Corbis has done.

It should be noted, based on past experience, that Corbis will probably produce fewer print catalogs
than the Getty Images brands have produced. Thus, the fact that Corbis has no catalog charges may
not be a fair comparison because Corbis photographers will not have the same opportunities to market
images through print catalogs as the Getty Images photographers have. If print catalogs continue to
be an important generator of income in the future then the opportunity to participate in more
catalogs may be worth the added cost for Getty Images photographers.

Getty Response

My analysis is based on the best data I had available and simply draws a few comparisons that may
be worth considering as photographers negotiate future contracts. Getty was given a chance to review
the data prior to publication and to make comments. Their comments were, "We do not generally release
brand-by-brand figures," and "we will not comment on this article or its conclusions, except to say
that many of the numbers and assumptions are significantly innaccurate."