5DRIVING IMAGE PARTNERS OUT OF BUSINESS
December 7, 2006
For every action there is an equal and opposite reaction.
With its Lifesize collection Getty Images has opened the door to its site to every photographer who can meet a certain quality standard. With this move Getty may have set out on a path that could put many of its image partners out of business!
How is that possible? Getty has 78 third party brands on the Creative section of the site. Combined these "images partners" have 628,333 images which is about 36% of the total images in the Creative section.
In the last year Getty has added over 611,000 images to the Creative section and about 63% of those have been RF. I have no idea how many of these images came from the Image Partners, but let's assume it was 36% or about 220,000. So if the Partners are only allowed to post 220,000 what happens if other competing photographers post the same or more images? It would seem that the return-per-image would fall and since the Partners are limited in the number of images they can put on the site their total revenue may fall?
Thousands of photographers are supplying images to these Partners. Now, most of these photographers will be able to go directly to Getty with the 40 best images they produce a year and cut out the middle man. Photographers dealing directly with Getty get 30% of any sale. If they give the images to the Image Partner to distribute for them they may get 50% of what the Partner gets, but in most cases the Partner is only getting 30%, or less, of the gross fee Getty collects. On top of this, if the Partner is offering RM images it is required to give Getty exclusive rights to any images it places on the Getty site. In most cases the Partner may be allowed to make direct sales to customers from its own web site, but it can not distribute the same or similar images through any other distributor.
Granted, the photographer will have to pay the $50 upload fee if he goes directly to Getty and he may not be paying such fees to his other agency. But chances are he'll make more by dealing directly with Getty rather than through another agency.
However, this isn't the only thing Partners have to worry about. Getty has told iStockphoto contributors that anyone reaching the "Diamond Exclusive" sales level (25,000 downloads) will automatically be offered a supplier contracts that enables them to put images on the Getty Images web site. It is not clear how this will work, but certainly one thing Getty could do is immediately move some of the images that have been in greatest demand among micro payment customers to its RF or RR collections.
For the most part the photographers who have reached this download level have lots of images on the site. iStock has also announced that once the kinks have been worked out "Gold Exclusive" photographers (10,000 downloads) will also be automatically offered contracts. There is nothing to keep any iStock photographer from applying directly to the Getty Lifesize program at any time.
The images certainly would not sell as frequently on Gettyimages.com as they have been selling on iStockphoto, because many of the iStockphoto buyers will be priced out of the market, but I would be greatly surprised if these "Exclusive Diamond" photographers didn't make more money being on the Getty site than they can make with iStockphoto.
Take, for example, Lise Gagne who first started putting photos on iStockphoto in April 2003. She has had over 400,000 downloads since then and produces some fantastic people pictures. (She also is iStock's number one seller earning over $200,000 this year.) She has a total of 4,141 images on the iStock site. Will Getty let her move all of them? Or will they restrict her to 40 images a year? Will they charge someone like her $50 per image to put them on the site, or will they make an exception? If they allow the top producers to put up volume what is that going to do to the other suppliers on Getty?
Getting back to Getty's Image Partners the main problem for them is that they are restricted to a quota each year. Many of them would like to post more images on the Getty site, but are not allowed to do so. I know some Partners that could easily double their collection size on Getty with images that they know will sell because they are selling them every day through their own web sites. Getty won't accept these image, because, at least with the Image Partners, they seem to be trying to put some control on the size of their participation. But, at the same time, they are now inviting a huge number of other photographers to get in the game.
Consider what will happen if a lot of iStockphoto photographers decide they want to put some of their image on the Getty site. Most can meet the Getty qualifications. Some will have to buy a new higher resolution camera, but it isn't going to take them long to see that such an expense might be justified. This year Lise Gagne will earn about $50 per image on file from iStockphoto. The next closest competitor to her is way below this figure. The average photographer is earning less than $2.00 per-image per-year on iStock. The average image on the Getty site earned $327.00 for Getty this year and 30% of that is $98.00. Thus, there is a big incentive for iStock photographers to try to move up the food chain with as many images as they are allowed to show.
iStock has over 25,000 photographers. Let's assume that 15,000 of them decide to put 40 images (the maximum allowed) onto Getty Images next year. This is not accounting for all the other photographers on other micro-payment sites or the photographers who have been hanging around the traditional industry for years and up until now haven't been able to get with a major producing agency. Fifteen thousand times 40 equals 600,000 images. Meanwhile the Image Partners may be allowed to post 220,000 in 2007. The Image Partners will be beaten down by the competition.
If Getty is going to open the floodgates to the masses, it would seem that the very least they could do is also open those same floodgates to the Image Partners who have helped Getty get where it is today. However, all indications are that Getty does not intend to do this.
The Real Question
But now we get to the real question. Will all these extra images generate more sales? I think not. In Q3 2006 the total number of unit Getty licensed were DOWN 4% from the Q2 figure and about equal to the number of units licensed in Q3 2005. The number of units licensed in a year is not going up. Putting more images into the system will give customers more choice, but it is not going to make them want to buy more images at the higher price levels.
I think the increased number of images will lead to a dramatic lowering of the average annual return-per-image. If Getty doubles the number of images on its site I believe the average return-per-image may be only half of what it is now.
By limiting each photographer to 40 images per year Getty is limiting how much any individual can earn, but there is no indication that there is any limitation on the number of photographers they will accept or how large they will allow the file to become.
Getty's revenue may grow somewhat, but it will be at the expense of Image Partners that will see a decline in revenue or be pushed out of business. Since November 2003 Getty's revenue from the Creative section of its site (80% of total revenue) has grown about 47%, but during that same period they have added 2.3 times the number of images they had on the site three years ago. Revenue growth is a long way from keeping up with the rate of adding new images. Also keep in mind that a good part of the revenue growth has been the result of Getty purchasing four major brands in two years for a total of $401 million.
Yes, iStock has certainly demonstrated that there is growth in the number of users at the bottom end of the market and a good percentage of them will probably pay somewhat more for images than they are paying now. (I would certainly expect to see an iStockphoto price increase in January.) But there is no way Getty will ever be able to bring a significant number of the iStock customers up to paying anywhere near what the traditional market is currently asking for images.
As supply increases the price tends to go down.
Here's hoping you can find some other way to have a Happy New Year.