3A SHORT HISTORY OF THE STOCK PHOTO INDUSTRY
August 7, 2006
Updated: September 2, 2006
Recently, I was asked to outline a brief history of stock photography examining how it started and how it got to where it is today. I did a Google search and found very little. Then I went to Wikipedia.com where I found an explanation, but one to my way of thinking that passes over significant events, and in some cases, particularly with relation to recent times, provides inaccurate information.
A SHORT HISTORY OF THE STOCK PHOTO INDUSTRY
After reading what was available I decided that a brief history, cataloging all the major sea changes that have occurred as the industry developed, would be useful. As we look to the future and consider our options it is helpful, particularly for young people just entering the profession, to be able to review past events and consider the timeline of how the industry got to where it is today.
Below I have outlined what I think are some of the important changes as the industry has developed. After I first published this story Stephen Mayes pointed out two important resources that I had overlooked. I recommend both of them. In the book "Design Writing Research" by Ellen Lupton and J. Abbott Miller there is an essay called "Pictures for Rent: From Stereoscope to Stereotype" that provides a thought provoking analysis of the stock culture and how it evolved. A deeper analysis of stock and its role in modern culture can be found in a book by Paul Frosh called "The Image Factory: Consumer Culture, Photography and the Visual Content Industry".
I would be very interested in hearing comments from anyone who can amplify or correct what I have written. Eventually, I plan to post this on Wikipedia.com to give it the broadest possible distribution.
Stock photography is the licensing of rights to existing photographs at fees usually below the cost of producing such photographs. It is based on the idea that if a photo can be licensed many times for fees that might be less than the cost to produce such an image the seller can still cover his costs and make a profit, and the buyer gets the photos he needs for less than it might cost to hire a photographer to produce photos for his specific purposes. Buyers include: book publishers, specialty publishers, magazines, advertising agencies, filmmakers, web designers, graphic artists, interior decor firms, corporate creative groups, and other entities that utilize photography to fulfill the needs of their creative assignments.
This article will explore how technology has changed the stock photo industry and yet, at its core, how the industry and customers needs have remained exactly the same for the last century. There have always been two important reasons for the industry to exist. First, when possible, customers prefer to buy something they can see rather than hiring someone to produce new images that they hope will be satisfactory. And, second, customers need photos at a price that is less than what it would cost to hire a professional photographer to create the image.
It is hard to determine exactly when the first stock photo was licensed, or when there was enough demand that companies could make a business of licensing rights to stock images. One of the keys is having a large enough collection that certain parts of it will always be in demand because there is no way to predict how much demand there will be for any given image in any particular period of time.
For most photographers the licensing of rights to stock images starts as a supplement to other lines of business. Since it is a sideline, finding the time to successfully promote and market the available images is often difficult and tends to take the photographer away from his primary and favored activity of taking picture. Thus, the need for agents who would represent many photographers developed early.
Commercial and Advertising Photography
A convenient point to begin my examination of the stock photography business is the 1920s when H. Armstong Roberts founded his agency. The agency continues today under the name RobertStock. Before Mr. Roberts got into still photography he was a script writer working in the motion picture industry in Southern New Jersey. He became familiar with the idea of production and understood how the movie industry arranged photo situations to tell stories. He understood the importance of planning shoots carefully, rather than shooting candidly, to make sure the resulting images told the story he was trying to tell. He also recognized the need of using the best equipment and models. His early efforts were similar to silent movie type productions, but designed to produce still images that told a story in one photo, rather than a moving picture.
Mr. Roberts focused on the commercial side of the business and recognized that certain generic subjects were used over and over in advertising. He also noted that small and specialized advertisers needed such pictures to promote their products and services, but could not afford the costs of mounting such productions for their own needs alone. In addition, it was of little concern to these potential buyers if someone else used the samd picture so long as it wasn't being used by a direct competitor. All most commercial buyers wanted was a print that would reproduce will and cost less than what they would have to pay a photographer to take the picture on assignment. Stock photographers could make the images available for less than what assignment photographers would charge because they hoped to sell each image many times.
Subjects that were in demand at the time were: men, women, smiling children, people using cigarettes, cigars, bread, beer, butter, milk, soft drinks, soap, washing, using a toothbrush and shaving. Local manufacturers and sellers of such products needed such pictures for marketing and promotion. Other concepts that were used over and over again were: Spring, Fall, Winter, Thanksgiving, Christmas, office workers, people using the telephone, mother and baby, father changing a diaper and families in all kinds of activities including buying a new home or a new car. All or these and more needed to show happy people enjoying life and how the products improved their lives. An insurance company might use a picture of a bride and groom to say, "Now's the time to get insurance."
In the early years pictures of models with Irish features tended to sell best. And the use of people with similar features tended to be self perpetuating because photographers looked for models that looked like the pictures that has sold in the past.
Bob Roberts, grandson of H. Armstrong Roberts, says that from the beginning 50% of the revenue came from advertising sales, although there was also demand for some of the same type of imagery for editorial and product uses such as magazines, books, calendars and greeting cards. During this time period everything was shot on 4x5 (or larger) film and was almost exclusively B&W.
There was also demand for editorial image, but for the most part different agencies focused on this segment of the market. Editorial users were often looking for photographers to shoot assignments more than they were looking for stock images and many agencies got assignments for their photographers as well as selling stock. Editorial users often wanted a series of pictures that told a story rather than single image illustrations. The needs of editorial users were often more specific and less generic than those of commercial buyers.
Culver pictures began collecting photographs of people, places, events, occupations, entertainment and artifacts in 1926. Popular subject categories include: business, family, history, personalities, transportation, recreation & sports, science & invention, movie stills and performing arts.
Dr. Otto Bettmann established his editorial oriented collection when he emigrated to the U.S. from Germany in 1934 carrying two steamer trunks containing 25,000 prints, books and negatives. He had begun his professional career at the Prussian State Art Library in Berlin as a curator of rare books and built a personal collection which he turned into a business when it became necessary for him to re-locate to the U.S. In 1972 he acquired the Underwood & Underwood Collection a rich resource of negatives and prints from the late 19th century to World War I. By 1995 when Bill Gates acquired the Bettmann collection it contained almost 17 million images.
Black Star Publishing Company was founded by German immigrants 1935. This company focused on obtaining assignments for the photographers it represented. However, since their customers were only buying first rights, they built a library and made stock sales, but stock was minor part of the business into their into the 1950s. Freelance Photographers Guild (later FPG International) was founded in 1936 and specialized in producing photo-essay material for magazines.
Other agencies with an editorial focus were Pictorial Parade founded in 1935 in Europe and the Hulton collection founded in 1938 by Edward Hulton, the publisher of numerous magazine titles. Also founded in 1938 was Frederick Lewis Stock Photos. Textbooks, encyclopedia and travel were a big part of the market for stock from these collections.
Some agencies like Bettman, Culver and Hulton focused on collecting, storing and cataloging pictures that they owned and seldom was it necessary for them to pay a royalty when they licensed rights to an image. Agencies like Black Star and FPG that specialized in representing photographers for assignments, filed the images produced and normally paid a 50% royalty when they were able to license rights to a stock image.
In the 30s most images were shot on 4x5. The first Rolleiflex was produced in 1928, offering a smaller film size, lower production costs and more shooting flexibility, but the 4x5 Speed Graphic remained the primary camera for most professional photography through the 1950s. In 1934 the first 35mm film was introduced but it was aimed at the amateurs and considered too grainy for most professional use.
Finding The Buyers
Most of the editorial companies established their headquarters in New York, London or Paris where most major publishing firms were located. Mr. Roberts, on the other hand, established his headquarters in his home town of Philadelphia and before WWII had representative offices with files of prints in: New York, Chicago, Boston, Detroit, Los Angeles and St. Louis as well as representatives in England, Germany, France and Italy. Potential buyers would either visit one of the offices to review the files, or request a selection of images for consideration. When Roberts decided to keep a particular photograph from a shoot he would make 25 to 28 8x10 prints. The prints that were not going to the offices were mailed to certain good customers. The company also had on-the-road sales people who visited potential customers all over the country, got listings of advertising agencies from local yellow pages and then sent these potential image buyers catalogs. In 1930 Roberts produced the first catalog of stock images and the company continued to produce up to 100 page catalogs and marketing brochures, largely black and white, right through the 1970s.
In 1935 Kodachrome ISO 10 was introduced in a 35mm format. Given its slow speed it was not very practical for stock photography as pictures needed to either be shot in bright sunlight, or with very expensive lighting productions in order to produce satisfactory results. Also, there was no good way to distribute high quality multiple copies of color pictures which was a key to making a stock photo operation work. According to Bob Roberts his grandfather spent a fortune before WWII trying to figure out how to bring color photography into stock, but was unsuccessful.
Making good quality duplicates of color transparencies was the major problem. The key to success in stock is having a way to simultaneously distribute multiple copies of each selected image. Not until Kodacolor was introduced in 1941 was it possible to make multiple color prints of negatives. Stock photographers started shooting color negative material, mostly on 4x5 and making large numbers of prints for distribution, but this was still costly and black-and-white remained the primary media for stock images for some time. It was not until the advent of Ektachrome in 1946 that it began to be practical to produce and distribute color material at a reasonable price that would be satisfactory for reproduction. Even then it took until almost the 1960's before there was significant use of color in stock photography.
Another major milestone in the stock photography business came in the early 1944 when the Society of Magazine Photographers, later named the American Society of Magazine Photographers was founded. The leaders of ASMP were some of the leading photojournalists of the day and the major goal of the organization was to improve the artistic, ethical and material standards of the profession.
At the time there were no minimum day rates and most magazine jobs were shot on speculation. Life, Time, Colliers and the Saturday Evening Post were among the major picture magazines with Life being the biggest user of photography. Every editorial photographer wanted to be published in Life, and consequently the magazine had great power to enforce low payment policies and not pay for secondary uses. At the same time, in order to have previously unpublished photographs of every major news event each week, Life found it necessary to use the services of many photographers around the world.
In 1948, Collier's magazine started assigning picture spreads on "a semi-speculative basis." The Society fought for the right to represent magazine photographers in matters of wages and working conditions, was licensed by the State of New York in 1951 to act as a labor union and in that year established a Code of Minimum Standards that, while not legally enforceable, spelled out what the Society believed to be fair pay rates for freelance magazine photographers. Many of the leading photographers who were members of ASMP refused to work for magazines that would not agree to the standards and one by one magazines began to conform to the standards.
The establishment of the Code began to insure that photographers would be paid reasonable and consistent rates for assignments and that they would be paid each time a photograph was used.
Despite this improvement in getting paid for every stock use most photographers and editorial agencies were still focused on getting assignments. During the period from the 40's to the 70's most editorial stock pictures were originally shot as part of an editorial assignment for some publication so the photographer could at least cover his basic expenses. The outtakes from such assignments were then made available as stock, but the revenue generated from stock was usually not a major part of a photographer's income. Photographers were encouraged to get some kind of minimum guarantee before embarking on an assignment. Seldom would photographers produce images purely on speculation and the mantra of ASMP well into the 80s was "don't shoot on speculation."
40s to 70s
In 1946 Kodak Ektachrome was introduced enabling still photographers to process color film themselves rather than having to send it to a Kodak processing lab as was the case with Kodachrome. This film had a much higher ISO than Kodachrome and it became the standard for many professional photographers even though it was not nearly as sharp as Kodachrome ISO 10. For this reason most customers insisted on 4x5 or at a minimum 2 ¼ x 2 ¼ film in order to obtain quality reproduction. Even into the late 70s and early 80s many printers were complaining that they couldn't produce high quality reproductions from 35mm transparencies and the photo buyers would insist on 2 ¼ x 2 ¼ at a minimum.
During the 50s there was some use of color, but still relatively little. For the most part the printing industry required a 10 to 14 day lead time to prepare and proof color separations. This made it impossible for many publication to use color on anything but long lead time feature projects. Color shots tended to be more staged due to the limitations of the materials and the large format equipment. In the editorial arena it was generally felt that B&W was the better medium for telling picture stories.
Parade and Family Weekly, and other Sunday Supplements did tend to use color because they had long lead times.
In some cases agents would carry packages of images around to various editors as they tried to sell pictures. However, it wasn't long until the agencies simply housed the images and the editors called with a specific request or sent a staff member to research the agency files. The standard percentage split at this time was 50/50 with the photographer covering all the costs of production and the agency covering all the costs of storing the images, marketing, negotiating rights, tracking of the images and collection.
In 1954, the first high speed black & white film Kodak Tri-X was introduced making it possible to take black and white pictures under much lower light conditions and to produce more action photos. This quickly became the favored film of editorial photographers.
One thing that would eventually drive magazine editors to use more color was competition with TV, but in 50's this was not a factor. The first color TV broadcast was in 1953, but TV's were rare and prohibitively expensive in the 1950s. All color broadcasts were live until 1958 when videotape was introduced. NBC was the only network with regular color programming in the 1950s and NBC did not become a 100% color network until 1966.
As world markets for still photography grew some editorial photographers decided they could earn more by taking pictures on speculation and making them available to various magazines at a "space rate" than they could get by doing day rate assignments for Life or other publications.
Stock production also had the advantage of being something the photographer could do on his own schedule rather than waiting for a magazine to give him an assignment.
Primary agencies representing photographers also began to make the same type of arrangements Roberts had made in the 30s to expand the distribution of the images they represented. They sought out agencies or distributors in other parts of the world to represent the work of their photographers in the selling agency's territory. In the event of an image being licensed, typically the selling agency retained 30% to 40% of the gross license fee and the remainder was split between the photographer and his primary agency.
During this period there were relatively few publishing outlet compared to today because the era of the specialist magazine didn't really begin until the 70s and 80s. Prior to that time, (from the 40s through the 60s) most magazines that used stock pictures tended to be general interest publications.
National Geographic and monthly magazines used color photographs in the 50s, but it wasn't until the early 60s that news magazines started using color on breaking stories. In order to reproduce color they had to have access to transparencies and usually preferred a large format original transparency.
Also, during this period there was comparatively little stock photography used in advertising. In general, stock was thought by the advertising community to be "seconds" of low quality. Part of this was because most of the color being shot was 35mm and the advertising community wanted 4x5 or 8x10 for the sharpness. But, comparatively few photographers were shooting stock with these large format cameras given the cost of materials and the lack of flexibility because virtually all shots had to be carefully staged. The U.S. copyright law also inhibited the production of stock during the period because it was often assumed that once a customer paid for a picture the customer owned the picture despite verbal or contractual agreements to the contrary. Thus, it was often difficult for a photographer to license rights to a picture more than once. European copyright laws may have been stronger in favor of the creator at that time.
1976 Copyright Act
The 1976 Copyright Act changed everything in the U.S. The creator was made sole owner of the copyright unless he or she signed a "Work For Hire" agreement, which virtually no photographer would do. As a result photographers had much more control over the use and re-use of their images. It became much easier for photographers to license multiple rights to a given image.
For many years, stock photography consisted largely of outtakes ("seconds") from commercial magazine assignments. By the 1980s, it had become a specialty in its own right, with photographers creating new material for the express purpose of submitting it to a stock house. Agencies attempted to become more sophisticated about following and anticipating the needs of advertisers and communicating these needs to photographers. Photographs were composed with more of an eye for how they might look when combined with other elements; for example, a photo might be shot vertically with space at the top and down the left side, with the conscious intention that it might be licensed for use as a magazine cover. Leading agencies during this time included The Image Bank, Four by Five, Comstock Images, FPG, The Stock Market and Masterfile.
Print Catalog Era
Previous to the print catalog era, buyers had either visited agencies or libraries to pour through file cabinets of images in order to find the one they needed, or they would ask researchers to make a preliminary selection of the subject needed and send them the selection for final consideration.
In the late 70's a few advertising photographers began to recognize that there were certain types of images that were used over and over in brochures and print ads. In many cases the buyer didn't care if someone else had used the same image to advertise another product or service as long as the image fulfilled the buyer's specific need. These photographers began to recognize that if they carefully produced images of the quality normally used in advertising using professional models and good production values they could sell the images many times and offset much higher production costs than might be the case for the editorial photographer. These images overcame the advertising communities' objection that "stock images" were seconds of low quality. A leading proponent of this strategy was Tom Grill who worked for Four by Five (later named Superstock) and was a partner in founding Comstock.
Another part of this strategy was to produce marketing brochures and catalogs that showed a selection of images and mail these catalogs to thousands of potential buyers. Catalogs had been previously used somewhat by Roberts and others to show calendar and greeting card images to prospective customers, but in general they did not contain a lot of the people and lifestyle imagery that was of greatest interest to the advertising community.
In the 80's the use of print catalogs began to grow, despite the fact that they were hugely expensive to produce. More and more companies began to release catalogs on an annual basis, and in some cases more frequently. At first these advertising catalogs were mailed free of charge to every potential photo buyer in the U.S. that the companies could identify. The catalogs were expensive to produce and distribute, but the return-per-image was so much higher than the average image in the file that the expense was justified. Before long the companies began to offer catalogs and sets of dupe images to other distributors around the world. The leading company in this movement was probably The Image Bank which at one point had about 70 distributors around the world.
The catalogs also began to get thicker and thicker offering the customers more and more choice of images for their consideration. At one point a distributor in Europe reported that one of his major customers had more than 450 different catalogs in its library.
By the late 80s, print deadlines were getting tighter, and many buyers no longer had the luxury of time to do this research. Thus, more and more they turned to making their selection from what was available in the print catalog.
Photographers discovered that if they could get images into one of the better print catalogs it would generate much more revenue than images that were only available in the general file. As a result photographers became willing to either pay large per-image fees for placement of their images in a print catalog, or give up an additional percentage of the sale on catalog images. But, as the buyers had more and more catalog images to choose from the return per-image began to decline due to oversupply.
Also, during this period photographers began to offer dupes of their best images to multiple agents around the world to have the potential to simultaneously make multiple sales for various non-competitive uses in various parts of the world. Some photographers started making "dupes in camera" by shooting multiple frames of each situation. Making film dupes was costly, but generated sufficient additional revenue to be worthwhile, particularly for those who couldn't get many images into the print catalogs. Later, when digital delivery became possible film duping became redundant. Digital dupes were much easier to move around the world and of higher quality.
By the early 90's probably 80% of the pictures used for commercial purposes were those that could be found in print catalogs. And the commercial market was equal in size, if not somewhat larger than the editorial market in terms of gross revenue. At this point many libraries that focused on the commercial/advertising market might have had 500,000 to several million images in their files, but 80% or more of their revenue came from the 15,000 to 20,000 selected images that were in their various print catalogs.
Methods of Licensing Rights
In the last fifteen years several new systems for licensing rights to stock images have been developed. There are now four different ways that images are priced and licensed -- Rights Managed, Royalty Free, Subscription and Micro Payment.
Prior to the 90s some editorial images were sold by subscription, but the principal method of licensing rights to stock images for commercial/advertising use was based on usage. The size of the use, the placement of the image (cover or inside), the circulation of the product, how long the image was to be used, and the country or region where it would be used were all considered when establishing a usage fee. It was also possible to purchase exclusive rights which prevented competitors from using the image for a specific period of time. Exclusive sales can command many thousands of dollars, both because they tend to have high-exposure and because the seller is gambling that the image would not have made more money had it remained in circulation on a non-exclusive basis. This method of licensing later became known as Rights Managed (RM). Certain extensive RM uses may be priced at $20,000 or more and some very small uses may be priced under $200. Getty Images current average price for an RM license is $578.
Images of people that have not been model released must be licensed as RM because they cannot be used in advertising. They can be used for news and educational purposes, but there needs to be some means to control who uses each image and how it is used and RM licensing is the only system that allows for such controls.
The Royalty Free (RF) licensing system offers a photo buyer the ability to use an image in an unlimited number of ways for a single fixed price license fee. RF license fees tend to be lower than RM. However with royalty free licensing there is no option for getting exclusive usage rights and many other customers may simultaneously use the same image. There are some minimal restrictions over how RF images can used, but basically there is no control.
Originally, sellers of RF images were very rigid in their pricing structures and maintained the same price for usage in all markets worldwide. Recently, they have become a little more flexible and distributors in various parts of the world often offer discounts and certain package prices below the list prices. The term Royalty Free was coined to distinguish these images from RM and to indicate that the fee charged was not based on usage. Some users have focused on the word Free and believed that they should not have to pay anything to use an RF image. This is not the case.
With the Subscription model the customer pays a monthly fee for the right to access a database of images and use as many images as she wants for any purpose and in any size or circulation. Most collections, are general, contain many thousands of images and are added to on a regular basis. Some subscription services have a limit on the number of images that can be used in a month, but the limit is usually so high that it does not place any effective limit on the customer.
The newest method of licensing is called Micro Payment and is supported by a worldwide community made up mostly of buyers. Again the database of images is huge just like the subscription model. Many buyers also supply images to the collection as a way of supporting the community. Instead of paying a monthly subscription for unlimited downloads the buyer pays a very low fee (as low as $1.00) each time she downloads an image. This provides a big benefit for those buyers who only want to use a few images a month. The system has particular appeal to sellers more interested in getting cheap pictures for their design projects than in making money from the licensing of their images.
Royalty Free and Consolidation
From around 1990 through 2005, as a result of developments in digital technology and particularly the Internet, we have seen a series of very rapid changes in the way images are created and marketed and these changes have radically altered the stock photo industry. The steps included: (1) graphic design done on computer, rather than in the traditional way, (2) easy digitization of film images, (3) delivery of digital files for final use eliminating the need for film, (4) Internet enabled online search, (5) the ability to deliver large, high quality image files online, (6) dramatic improvement in the quality of digital cameras, (7) images flooding the market as technological developments enable professionals to produce higher volumes, (8) customers find it easier to create many of the images they need rather than sourcing them from a professional photographer, (9) amateur photographers, for whom photography is a sideline interest find it easier to participate in the market, (10) development of online user communities, (11) users create content for other users, and (12) usage fees decline.
As those who designed the finished products - magazines, print ads, brochures - developed the capability to deliver a digital file to the printer for reproduction they needed their photographs in a digital format. At first the designers took on the responsibility of converting the film images to digital files, but it wasn't long until they began to express a preference for receiving digital files and it became the responsibility of photographers and agencies to provide images in an acceptable digital format if they expected to license rights to them. Some customers continued to accept film images throughout the 90's but the chances of licensing rights to an image delivered as film declined rapidly.
In the early 90's various companies decided to offer designers collections of images on CD-Rom discs and offer these discs at a fixed price that entitled the purchaser to make unlimited use of any or all of the images on the disc. The leading company in this activity was PhotoDisc. This new marketing strategy was called Royalty Free as opposed to the traditional system of paying a royalty based on usage. From the sellers point of view there were several advantages to this strategy. Managing a file of images was much easier because it was no longer necessary to send originals to customers and get them returned. If the discs were organized by subjects, buyers would tend to purchase lots of discs, and even though the prices were low it was believed that the seller would make it up on volume.
Up to this time most images were licensed based on the size of the reproduction and the circulation. Buyers needed to get a new license every time they wanted to re-use a stock image. The fixed price option was attractive to the buyers, not only because the images were cheaper on a per image basis, but negotiating a price was no longer necessary and the fear of losing a valuable image or making an unauthorized used was removed.
To market the discs producers embarked on huge direct marketing campaigns mailing tens of thousands of 64-page print catalogs monthly. At one point one producer was mailing over 6 million catalogs per year. By comparison the largest stock agencies were mailing one large print catalog about once a year to 100,000 to 200,000 potential buyers.
Discs of 100 or more images were priced below the average cost of a single RM image license. Given the low cost of the discs, and the fact that the producers had huge direct mail advertising expenses as well as costs to produce the product, the producers convinced the image suppliers that the royalty split should be 80/20 with 80% going to the producers rather than the traditional 50/50 split.
Initially it was thought that disc buyers would build their own library of images, but it turned out that the one thing buyers didn't particularly like about Royalty Free was managing a library. For many it was easier to buy a specific image when they needed it and bill it to a specific project. Also searching through a pile of discs with a hundred or more images on each disc was more difficult than flipping through print catalogs. The disc producers solved this problem by producing catalog discs and print catalogs with thumbnail views of all the images that appeared on several discs.
The majority of photographers rebelled against the RF concept because it was so radically different from the existing system of producing and selling stock images, and because the photographers believed RF would significantly reduce photographer revenue. Traditional agencies also rebelled because they anticipated that these lower priced offering would begin to cannibalize their existing market. (No one in their wildest dreams anticipated that two-thirds or more of all commercial images licensed would eventually be RF as is the case in 2006.) Many agencies were also opposed to digital delivery of images in general because of the huge investment that would be required to implement the change from film and the status quo.
Most of the early adopters of the RF strategy were new companies that had not been involved in licensing stock images previously. One big advantage for these companies was that they were not hamstrung by an existing infrastructure.
Some suggested at the time that the industry leaders should "quietly bury the Royalty Free concept", but there was no practical way to do that because the industry leaders did not control the production and marketing of RF. Many sellers were very slow to transition to digital delivery, and later to online search, but customers embraced the new offering because it greatly benefited them. Nevertheless, a sufficient number of photographers were willing to supply images and that enabled this marketing system to take off.
Also, about this time Nathan Benn developed Picture Network International (PNI) the first online portal to license rights to stock photography. Unlike the RF strategy that sold discs for a flat fee, PNI continued to license rights to the images based on usage and this had much greater appeal to traditional agencies and photographers than the RF model. Initially the company used Kodak's PhotoCD technology to scan the images and focused on the editorial side of the market. PNI made deals with 5 editorial stock agencies - Stock Boston, Black Star, Allstock, Contact and Woodfin Camp -- to scan and keyword 50,000 images from each agency in order to develop a core of imagery to launch their offering. PNI designed the online workflow that became the prototype for the industry. The portal went live in 1993 and became the first company to offer a searchable database of images online.
One of the difficulties in the early stages was the costs of storing digital image files. It was estimated in 1992 that it would cost $1.00 per-image per-year to store a 6MB photo file. It was also recognized that less than one percent of the images in editorial stock agency files were ever licensed. Thus, it seemed likely that each image licensed would have to offset a huge storage cost. In the intervening years storage costs dropped substantially making a large searchable databases of images much more practical. PNI moved through several generations of development, strategy changes and ownership and in 2006 is part of JupiterImages.
The next big change in the industry began in 1995 when Mark Getty and Jonathan Klein recognized that the stock photography industry was made up almost entirely of mom and pop companies and could benefit from capital investment in technology and consolidation. They formed Getty Images.
At that time the largest company in the industry probably controlled less than 5% of total sales. Getty Images began with the acquisition of Tony Stone Images and set about the systematic acquisition and integration of more than 40 companies by 2006. At the beginning of 2006, I believe that Getty Images generated at least 55% of the commercial/advertising revenue from stock images, 12% to 15% of editorial revenue and 70% of footage revenue.
As digital technology improved, and wider bandwidth was available on the internet it became possible to transmit large files on-line rather than having to ship physical CD's. The delivery system for digital image files began to move from CD Rom discs that had to be physically shipped to on-line delivery. This forced all image sellers to move more rapidly toward digitizing their entire libraries as buyers became less and less willing to review film or wait for the delivery of film or CD-Rom discs. This development eventually forced many of the small agencies to either sell out to a large company, or go out of business, because it was financially impractical for them to try to digitize a significant portion of their entire library.
This technological development also made it possible for RF producers to begin selling single images in addition to discs and to deliver their images online. Because all the RF images were already digitized the RF sellers had an advantage as the industry moved into digital delivery and most of the RM sellers had to play catch up in the digitizing process. Initially RF single images were offered at prices in the $14 to $19 range for the smallest files. This price has been pushed up slowly and after almost a decade the average price for an RF image licensed by Getty Images is $250.00 and the lowest price for the smallest file size at about $55.00.
I can't leave the discussion of consolidation without mentioning Corbis and JupiterImages, the current second and third largest companies in the industry. Corbis was founded by Bill Gates in 1989. Initially this company placed an emphasis on the editorial market rather than the commercial, and their growth has been much slower than Getty Images. Over the years they have acquired about 18 companies, plus a number of private collections and are now about 30% the size of Getty Images.
JupiterImages, a relatively new entrant into the stock photography business, started out as an Internet company providing information for creative, business and information technology professionals. They moved into the stock photo arena in about 2003 and have been rapidly acquiring companies ever since. Unlike the other two leaders, Jupiter's initial focus was to offer a low priced subscription service that gave customers access to a large library of images for a monthly fee. Subscribers are entitles to virtually unlimited downloads. Using such a service large users of images could easily get all the images they needed for way less than $10 per image. Later Jupiterimages moved to also supplying some images at the more traditional RF and RM price points.
The transition of the industry to the internet also made it possible for start-ups with none of the liabilities from the old infrastructure to gain a foothold and grow rapidly. One such company is Alamy. They focused on building an efficient search and delivery system and made it easy for image producers (photographers and photo agencies) to load their images onto the system with very few restrictions. Alamy handled the transactions and took a much smaller percentage of the fee for its services than most traditional agencies were taking. After only five years in business Alamy has amassed a database of over 6 million pictures.
There is an increasing trend for larger companies to buy images outright paying the photographer a fixed fee per image, or a day-rate fee for producing a certain set of images. Those with the resources want to wholly own as much content as possible believing that over a period of time they will realize greater profit than if they were to accept the images on consignment and pay a royalty based on usage. Another reason for this strategy is to provide the image owner with greater flexibility to offer images at various price points and in various packages than might be impossible if they were representing the interests of hundreds of producers.
Some photographers have always dealt directly with certain stock photo customers. The advantage is that the photographer gets to keep 100% of the fee negotiated. The disadvantage in most cases is that it is very difficult for the photographer to make potential customers aware of his work. Many photographers have developed their own web sites, but given the thousands of photographer web sites they still have the problem of getting customer to look at what they have to offer.
User Created Content
In about 2003 another new business model for licensing stock photography, referred to as micro payment, began to emerge. The current leader in this field is iStockPhoto.com with ShutterStock.com and Fotolia.com not far behind. The initial focus of these companies was to build a community of art buyers around the globe and enable them to use the Internet to share information and resources. It quickly became apparent that one of the things these buyers wanted to share was images.
Many of the early adopters of this model were web site designers who were attracted by the opportunity to "talk shop" with other designers. Many were looking for sources of cheap images to integrate into their designs. Initially, most image suppliers were also buyers. Rather than making significant money from licensing rights to their images, they were more interested in finding ways to keep their costs low for the projects they were designing. Profits came from their design work, not their photography.
This model also opened the door to amateur and hobbyist photographers from around the globe and made it possible for them to easily make their images available for consideration by professional users.
At the same time as the micro payment model was introduced, the prices of traditional RF images started to rise. Traditional RF sellers discovered that their market had matured and the number of new users was no longer growing. Therefore, since volume was not increasing, the only way to increase profits was to steadily raise prices. In a matter of three years the average price of an RF image increased almost 250%. This was acceptable to many buyers who recognized that RF prices had been very low for a long time, and were still reasonable compared to RM.
But for web designers (the most price sensitive buyers who tended to use high volumes of images), these price increases were a serious problem. They looked for other ways to find lower priced images and the micro payment and subscription sites proved a solution to their problem.
Up until this time the focus of most image producers had been on big budget users who tend to pay high fees for the images they use, even though they used many fewer images than the small budget users. Small budget users have been mostly ignored given the prices they were willing to pay. Also, their volume of use was often underestimated because there was no good way to track such uses.
In 2006 there are indications that the volume of uses by those with small budgets may be much more significant than previously anticipated. In 2005 Getty Images licensed rights to about 1.5 million images to mid and high level users. Growth in usage in this segment of the market appears for all practical purposes to be flat. iStockPhoto licensed rights to 5 million images, a significant portion of them to web developers, and the company is on track to license rights to 10 million images in 2006. It is not clear whether the volume of sales of the average micro payment image, at average prices of about $2.00 per image licensed, will be enough to generate a significant portion of industry revenue.
Looking To The Future
It seems clear that the use of images sold at the micro payment level will grow and that quality, already at a reasonably high level, will improve. However, there are some major unanswered questions.
- - Once designers get comfortable using the micro payment sites for their really small, low budget projects will they begin to use images from these sites for bigger more expensive projects rather than sourcing much higher priced images from traditional royalty free?
- The Subscription and Micro Pricing people argue that their customers are new buyers of stock photography. To the degree that is true the revenue generated by these buyers is add-on and should not hurt the other side of the business. (It should be noted that this is exactly the argument RF producers made relative to RM when RF was first introduced.) As quality improves and more high end users begin to used these sites for certain of their low budget projects will the micro payment sites begin to cannibalize traditional sales?
(It is also worth remembering that nearly all purchasers of RM images by RF images, at least occasionally, for some of their projects.)
- To what degree are micro payment sites controlled by image users who have an incentive to keep prices low rather than image producers who seek the highest possible price? How will this change the long term dynamics for photographers?
- Given that the original RF producers were slow to raise prices, will the micro payment sites be able to increase prices to the point where photographers can earn a reasonable amount of money by selling through these sites?
Some believe that the introduction of RF caused the total revenue generated by the industry to decline even as the actual number of uses and users increased. However, no one has solid enough figures as to the revenue the industry was producing in 1990, or the number of images licensed prior to the introduction of RF, to determine if this is true or not.
This time around, as a result of consolidation and the fact that a much greater percentage of the total stock image revenue is controlled by a few major public companies, it should be easier to determine if a significant increase in users, at a much lower price point, will result in increased gross revenue, or not.