Customer Discounts and Percentage Share

Posted on 4/14/2011 by Jim Pickerell | Printable Version | Comments (1)

One way to satisfy customer demands for lower prices without reducing overall operating costs is to cut the amount paid for the product you’re selling. Over the past decade some stock photo distributors have used this strategy very effectively.

The charts below show how it is possible to cut the overall average price of the products without reducing revenue for the distributor. I should point out that photo distributors are not the only companies that treat their suppliers in this manner. Walmart is regularly accused of pressuring their suppliers to cut the cost of the products they offer for sale. And Walmart is not the only one.

The first column shows how much the average license price can be reduced, and still provide the same revenue for the distributor (column 4), if the distributors percentage of gross sale is increased (column 2). Note how the percent of revenue decline for the photographer compares with the decline in royalty percentage. Over the years customers see a significant reduction in costs and it all comes out of the photographer’s pocket.  

These numbers are hypothetical and do not represent actual numbers of any distributor I know. However, in 2000 the average price of an image licensed through a combination of RM and RF licensing was probably in the range of $450.00. Average prices have steadily declined over the last decade, particularly in the last five years since the introduction of microstock. Today, many photographer find that the average they are receiving per-image-licensed (number of transactions) is very low compared to what it was a few years ago.

As a business planning exercise, I urge every photographer to look at their total stock revenue for 2005 and divide that number by the total number of images licensed in that year. Then compare that number with revenue and images licensed in 2010. Revenue may be going up and total number of images licensed may be going up because the photographer has been producing more aggressively, but what is important is to be aware of  the average return-per-image-licensed (transactions) and the trends.

Average Distributor Photographer     Percent
License Fee Royalty Royalty Distributor Photographer Photog Rev.
For Image Percentage Percentage Share Share Decline
$150.00 50% 50% $75.00 $75.00  
$125.00 60% 40% $75.00 $50.00 33%
$115.40 65% 35% $75.01 $40.39 19%
$107.20 70% 30% $75.04 $32.16 20%
$93.75 80% 20% $75.00 $18.75 41%
$88.25 85% 15% $75.01 $13.24 29%
$450.00 50% 50% $225.00 $225.00  
$375.00 60% 40% $225.00 $150.00 33%
$346.00 65% 35% $224.90 $121.10 19%
$321.50 70% 30% $225.05 $96.45 20%
$281.25 80% 20% $225.00 $56.25 41%
$264.70 85% 15% $225.00 $39.70 29%

Copyright © 2011 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:  


  • Dean Siracusa Posted Apr 14, 2011
    Unless you can increase sales significantly, lowering prices is a losing proposition. An example is if you lower prices by just 20% you need to increase total sales by more than 50% to actually increase your bottom line revenue. Otherwise you're just racing your competitor to the bottom. How long can the major agencies keep this up? We've been able to actually increase our bottom line revenue by increasing prices a bit and offering much better service and support than the competition. If our sales growth that we're currently experiencing so far this year continues we'll be up over 50% over last year. I'm also considering pruning the dead wood distributors such as Alamy. Their complicated metadata requirements (increased costs to us) and continuing decreasing prices and sales revenue is not helping them or their distributors. But hey, that's just my opinion.

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