Floor Price For RM

Posted on 1/27/2012 by Jim Pickerell | Printable Version | Comments (0)

Recently, a stock agent suggested that the industry needs to establish a floor price for Rights Managed (RM) images to stop the continued decline in license fees. He is frustrated because his overseas distributors seem to be making an increasing volume of sales at prices that are “close to microstock pricing.”

When he asks these distributors about this trend they say there are certain projects where they can only sell RM images because RF is too costly. The U.S. agent pointed out that if the industry can’t find a way to stop this trend, “there is little to prevent the eventual plunge (of RM) below microstock prices just as RM plunged below RF pricing long ago.”

His solution was for each agency to establish its own minimum (to avoid any charge of price fixing). Then the agents would push the distributors to not license any usage for a fee below the specified minimum.

What Price Is Too Low

In general the proposal is worth considering and something the majority of RM shooters would initially applaud. However, there are several aspects that need  to be examined in some detail.

To begin we need to determine which current prices are too low and where the floor should be. For some types of use a price below $200 is too low. But the floor price is the lowest possible price regardless of how minimal a use might be.  Some RM sellers might say that there images are of such quality, and cost so much to produce, that no one should be allowed to use them if they are not willing to pay at least $100 for the use. I believe the point where RM sellers really get upset is when the usage fee starts to fall below $50. Thus, for the purposes of this discussion, I’m going to start with the assumption of $50 as a possible floor price.

There are a lot of RM uses both in the U.S. and abroad that are being licensed for less than $50. Also, it should be recognized that microstock prices have been going up and some microstock images are now priced much higher than $50. Thus, if the worry is that RM prices will plunge “below microstock prices just as RM plunged below RF pricing long ago,” that’s already happened for many usages.

Image and Metadata Quality

One of the agent’s arguments for why certain RM images should be licensed for more than other images is based on the quality of the RM images and the quality of the metadata (particularly caption information). Certainly with some specialized RM subjects, at some agencies, much more attention is paid with regard to the accuracy of the caption information than is the case in the microstock environment. However, a very small percentage of the customers care about such captions.

The customers who care the most about accurate captions are the book, newspaper and magazine customers. While book publishers are paying less than they should for the usage they are being granted they are not the ones paying extremely low fees below what would be a “floor price.” It is hard to determine which customers are being charged low, low prices for usage because typically the RM agencies and distributors don’t supply detail about who the customers are.

We suspect they fall into three categories:
    1 – Small newspapers and magazine, or any struggling publication - which is most of them. Many are being offered volume deals much like a subscription for “all they can eat” in a period of time. When the average price-per-image is calculated it is often very low.
    2 – Editorial organizations that are posting images on the Internet. Many of them are totally Internet based and have no print offering. These organizations tend to use lots of images for very short periods of time. Sometimes they change images several times a day so the volume of revenue for the distributor is significant. But, again it doesn’t average out to much in the way of price-per-image.
    3 – Other web and mobile based users.
For the most part these customers just need something to fill a hole. They will take the best image they can get for the right price, but they’ll also be happy with something that may not be quite as good as long as it’s cheaper. Image quality is of secondary importance. Despite the fact that the creators of RM image think they should be paid more as a result of all the work and care they put into producing the image that extra effort and creativity usually have no appreciable value for the customer.

Image Quality

Another factor concerning quality is that it is hard to argue that the images in RM collections, as a whole, are really better than the images in traditional RF or microstock collections. In each collection some images are much better than others, but the quality of the available imagery on any particular subject is seldom an issue.

My friend talked about the time it would take a customer to search through some of the huge microstock collections as opposed to using his much smaller, tightly edited collection. Actually the microstock sellers have solved that problem for the customers, by letting them organize the search returns based on the most popular images. In effect the new customers get the benefit of a host of individual “editors” who have been looking for the same subject matter in the past. The more people who visit a given site the more likely the top search results will appeal to a broad base of customers. This tends to give the microstock sites an advantage over RM.

The Bigger Hurdle

The bigger hurdle to floor prices is convincing the distributors that such pricing would be in their best interests. In theory, if you charge more for your product you”ll make more money, but in the stock photography business the customer has the choice of going to a cheaper source. So, if the distributor institutes a floor price many of his former customers will go somewhere else to buy the images they need. If the distributor offers a variety of floor prices for different images, and some images without a floor price, the distributor may be able to hang onto his customers and sell them something different. But the whole process is likely to do nothing more than limit the number of sales the distributor and producing agent will make without earning either of them any extra money.

Floor prices would also make it very difficult for distributors to structure bulk sale deals. In many of these cases the customer pays a flat price (based on the customer’s average use) for unlimited downloads during a month or quarter. In such a case the distributor doesn’t know the average price per image downloaded until the end of the term. Thus, it would be impossible to guarantee that a particular image would not be sold for less than its floor price. In addition, the distributor would need to work out a way to prevent his bulk sale customers from seeing the floor priced images which could be a complex problem.

Very seldom is there a specific image a customer must have regardless of price and for which the customer will pay any amount asked. These low prices also tend to be a growing share of the businesses of the distributors as well as an entrée into Internet uses which everyone feels will be the market of the future. Internet sales may not generate any money for photographers, but distributors see it as the next opportunity.

My friend believes that if buyers who need 100 or 1,000 image, but only have a budget of $12.95 per images were forced to choose between the 10s of millions of variable quality files and metadata in micro instead of being led straight to RM they'd have to rethink the way they operate.

As for me, we could certainly use a new pricing model, but establishing a floor price may not be the answer.

Copyright © 2012 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 www.selling-stock.com, 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: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  


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