Shutterstock makes a big deal about expanding its number of Enterprise customers. The last number they reported for Enterprise customers was 36,000 and just this week they said that Enterprise customers generate 32% of their revenue ($41.6 million for Q1 2017).
Getty has an Enterprise program for its best customers which they call Premium Access. We have no idea how many customers fall into this category, but based on examining photographer sales reports my guess is that it is at least as many as Shutterstock, and probably more. A few years ago Getty said that any customer that spent $6,000 a year with them could qualify for Premium Access. I suspect that number is much lower now.
Adobe Stock has talked about expanding its Enterprise program. Alamy has large users that they deal with in the same manner.
How Does Enterprise Work?
Basically, agency sales people go to the customers from whom they earn the most revenue and ask them what else they could be doing to insure a long term relationship with customer. Responses usually include:
1 – A fixed monthly fee for all the images the need.
2 – A discount.
3 – All uses by various employees rolled into one account (big users usually have many employees accessing the site on a regular basis.)
4 – Unlimited use of all the images they purchase (Occasionally companies will agree to small exceptions like paying more for large, major advertising or major billboard uses that rarely occur.)
5 – Access to RM images with no difference in price to what they pay for RF.
6 - Licenses for RM and RF exactly the same in terms of usage.
7 – Legal indemnity.
8 – Maintain a database of all images the customer has licensed and has a right to reuse.
9 – Detailed reporting on who uses what so the companies can easily track what various employees are doing.
The agency starts by looking at what the company has been using over time and proposes a monthly fee for unlimited use. They negotiate with the company’s Procurement Manager or Division Sales Manager and settle on a price, usually lower than the agency wanted. It is important to note that the art directors who will be actually choosing and using the images in the future usually have very little input in these negotiations.)
Shutterstock makes a big deal about pointing out to investors that they have some Enterprise customers from whom they earn $1 million a year. However, the average customer is spending about $4,600 a year and a huge percentage spend much less than that. They signed all their top producing customers long ago. Consequently, the gross annual revenue being generated by most new customers must be well below $4,000.
Implications For Creators
One of the first things to note is that RM image uses are priced exactly the same as RF. If the company pays $6,000 a month and uses 1,000 images, the average price of each image regardless of whether it is RM or RF is $6.00. The creator’s royalty is figured off of that number. Any Getty photographer can tell you that some images are being sold for less than $6.00. This means the customer is either getting use of a lot more images or paying a much lower monthly price.
If the customer pay $6,000 a month and has the right to download 1,000 images, but only downloads 500 it is unclear whether the creator gets the benefit, or if the royalty is fixed based on the allowed downloads, or whether the royalty is calculated based on actual usage. With Shutterstock subscriptions the royalty seems to be fixed regardless of the number of downloads. With Getty it seems to be fixed regardless of usage in many cases, but with the iStock subscription sales under the new Unification program it seems to vary based on actual downloads.
It is unclear how regularly these deals are re-negotiated, and it probably varies. If the agency discovers the customer is actually using many more images than they originally estimated the agency may ask for a higher monthly number in the next negotiating round.
However, the agency is always in a weak negotiating position. The agency doesn’t want to lose the guaranteed dollars and the company can always say, “We’ll check out what your competitors will offer us and get back to you.” There are three companies with major collections – Getty Images (plus iStock), Shutterstock and AdobeStock. They are fiercely competitive. In some cases, the customer can get the exact same images from any one of the three major competitors, and if not the same other images then very similar that fulfill the same purpose.
A little good news for RM creators, is that at least these Enterprise customers are looking at and considering their images on an equal footing with RF because there is no difference in price or rights.
Are Some Images Priced Higher Than Others?
The idea that some images should be priced higher than others because they are unique or cost more to produce is pretty well a dead concept with Enterprise customers. Customers need tighter controls on costs, and in todays fast paced publishing/communication world they don’t have time to negotiate individual deals. In rare cases, these Enterprise customers may go outside the major agencies to get something unique. In such cases they are willing to pay extra, but their art directors are instructed to rely heavily on the Enterprise collection.
High Volume Customers
When it comes to RM or RF all the high volume customers are “license agnostic” which basically means that they get the same same license rights regardless of whether the image is RM or RF. If a significant portion of the uses are for print runs greater than 500,000 an additional fee, something like a microstock “Extended License” may be tacked onto the base negotiated fee for the estimated total number of images used. But when it comes to determining the price per image the actual use will not be tracked and no distinction will be made between an image that was used in a very short print run and one with a huge print run.
The ideas that photographers are going to get more money by selling their images as RM rather than RF is a mis-characterization of the market.
Non-Enterprise
Photographers (particularly those licensing their work as RM) tend to earn the most for their images from the non-Enterprise customers. These customers tend to be small infrequent users. While occasionally they may have a large need that can command a high price these uses tend to be very sporadic.
Taking another look at Shutterstock they say they have 1.7 million unique users. It is unclear how many of these user are included among the 36,000 Enterprise customers since many of these customers have multiple users. If we assume the 36,000 represents even 300,000 total user that still leave 1.4 million whose annual use is not large enough to qualify for an Enterprise account.
Among the many things we don’t know is the percentage of images that these 36,000 customers actually use. It is not unreasonable to believe that they are responsible of 80% of the total downloads. Varying the price is very difficult in a high volume market. What creators don’t have is a good understanding of how big in terms of demand the high volume market is. Creators must to keep their production costs low in order to service the high volume market cost effectively.
If your engaged in producing high production value product the market has to be big enough to sustain your operation, For most creators it is not. (Think of producing Chevy’s vsRolls Royce’s.)
Based on Shutterstock’s 2016 revenue about $158.2 million would have been Enterprise and $336.1 million would have been generated by the 1.4 million customers, or an average of $240 per customer per year. These customers may pay higher per images fees, but they don’t use enough images to generate significant income for the creator. This amount might represent the purchase of 20 images or 3 video clips during the course of a year.
While locking customers into fixed agreements may be good for the Agency because their income becomes more predictable, it is not good for the suppliers who work on a royalty basis because their income tends to becomes smaller and less predictable.