April 3, 2006
In the past week I've had two unusual moments of revelation and insight into the stock photo business.
Cost of Producing Stock
The first came as I was trying to explain the business to an investment analyst. I was making the point that there comes a time when a photographer can no longer afford to produce stock images because his costs are greater than his income.
It turns out that the analyst was under the impression that a "stock photo" was one that had been produced, and paid for, while the photographer was on assignment for someone else. Thus the image was "expense free" to the creator. And, in theory, the only "additional costs" the photographer might have to make the image available for secondary licensing would be the cost of packing it up for shipping it to his stock agency.
Assuming that was the case, then the revenue the photographer would make from the additional licensing of his images would be pure profit, over and above his normal cost of doing business. Why, then, wouldn't every photographer be happy with whatever he could earn from the additional licensing of their images no matter how low the return-per-license or the total generated from stock licensing.
I'm old enough to remember a time when this actually was the way most stock photos were produced. Every image was shot and paid for while the photographer was on assignment for someone else. At the very least fees from assignments covered the photographer's overhead costs and provided a modicum of profit. At that time the revenue generated from the sale of stock images enabled the photographer to improve his standard of living, but was not critical to the continued operation of his business.
Later some photographers began to recognize two things. First, that there was a big demand for certain types of images, and secondly that the assignments they were getting were not generating many of the types of images that certain customers were clamoring for. At this point a few photographers started spending some of their time and a little of their capital (for film and processing) producing this other type of imagery.
For a number of years the demand was much greater than supply and photographers started earning significant revenue from their stock images -- in some cases more than from their assignments. This encouraged them to spend more and more time and money shooting on speculation to produce stock, rather than doing assignments. In addition, more and more photographers observed the success of their colleagues success and turned to producing stock images on speculation.
This worked fine for everyone as long as the demand stayed greater than the supply. But, since there was absolutely no system to control supply their came a time when supply not only exceeded demand, but relative to the demand escalated out of sight.
At this point it is worth considering Getty's supply/demand situation. Between November 2003 and February 2006 the number of RM images on the Getty site increased by 129% and the number of RF by 163%. Meanwhile, the number of RM images licensed increased by only 14% and the number of RF images licensed by 19.5%.
The economics of the business are changing radically and costs of production need to somehow be recovered.
The second insight came as I was reading the business section of the Washington Post and noticed that a photo used as part of the lead illustration was credited to iStockphoto. This got me thinking. In the past I've seen a lot of photos in the Post credited to Photodisc. Now we may be seeing the beginning of a move from the more pricey Photodisc images to those of iStockphoto.
I began to contemplate all the newspapers around the world that might be doing the same thing and to consider why art directors and illustrators might use iStockphoto instead of more expensive Royalty Free images. People who work for newspapers are always in a budget crisis. They will usually go for the cheapest image.
In the same edition of the Post there were some very fine concept photo illustrations (not news pictures) produced by staff photographers. Once a concept picture of this type is used in a newspaper its dead to that paper. They'll never use it again. But they could care less if someone else uses the same image.
In walks iStockphoto, an online community designed to connect art directors and other creatives so they can share information and resources. The Post has good wholly owned pictures and the costs are fully paid. They can post these photos on iStockphoto and maybe someone else will decide to use them. In that case the Post gets a few credits. But more important to the art directors at the Post, they can also go on the site, search for photos produced by the staffers of other newspapers or magazines, and buy rights to use any one of them for one credit or $1.
There is nothing wrong with the quality of most of the iStockphoto images and the community, sharing nature of the site has a strong attraction for many image users.
Problem For Photogaphers and Traditional Licensing Organizations
My readers who make their living producing images on speculation need to consider the implications of the above. Those making their living by licensing rights to the images produced by those described in the pervious sentence should also give some thought to the situation
Photographers have a cost of production they must recover if they are to stay in business. The price point of the iStockphoto model, while great for the image user, does not allow for recovery of costs. Because most photographers are not producing products or projects that use images, they have no desire to acquire, at the lowest possible prices, images produced by others to use in such projects which is the real benefit of the iStockphoto model.
Some photographers shooting images on speculation are posting them for marketing on iStockphoto, but at the quoted prices it seems unlikely that for the vast majority the volume of sales will ever be enough to offset the cost of production. Also so long as most of the user and image suppliers are more interested in obtaining photos at low cost than earning revenue from the images they post there is little likelihood that there will be much pressure to raise the prices charged to use the photos.
Agents, have no production costs, and may be able to match the prices charged by iStockphoto and other similar user communities. But it seems likely that if they do they will quickly lose their image suppliers. The agents could buy all rights to the images they represent, as some are doing, but in that case they have a cost to eventually recover. Agents could also hire photographers to produce wholly owned imagery, also as some are doing, but they still have a cost to recover and are in a disadvantaged position to the seller who is not worrying about recovering any cost whatsoever.
How successful is iStockphotos and others with similar business models likely to be in attracting image user? It is worth considering that Getty Images licensed rights to approximately 1.564 million images in 2005. On the other hand it is estimated that in 2005 iStockphoto generated between $4 and $8 million in revenue. If all their customers were getting images at $1 each that means that already photo users are getting significantly more images from iStockphoto than from Getty.
Some photographers believe that iStockphoto will never take a significant share of their market. Others say that now that Getty owns it, Getty could never afford to let it take a significant share and would kill the brand if necessary. I don't think that is possible because once the idea of users sharing the images they create has been established killing one company would only lead to the establishment of many others with the same business model.
We may have reached the point - or will get there in the near future -- where creating images on speculation in the hopes of licensing rights to them is no longer an attractive business model. Photographers may need to begin exploring others ways of making a living.