How Low Can Stock Photo Prices Go?

For some years we’ve seen a decline in rights managed and traditional royalty free prices. If you look at the price calculators of major distributors it might appear that prices haven’t declined all that much. The problem is that nobody pays those prices.

If you think that’s not the case check your sales reports and then compare the price listed on your distributor’s web site with what you received. If the price quoted on the web site says $200 and you’re supposed to be receiving 30% if  they are paying you less than $60 then the distributor has charged the customer a lower price than the one quoted on their web site. Image creators tend not to run these numbers, but if you do you’ll undoubtedly discover that a huge percentage of the licenses are for less than the distributor’s quoted price.
 
Every customer that uses any volume of images negotiates special deals with the distributors. Recently a major distributor told me that 80% of the images licensed are part of these special deals.



Here’s how it works. A customer that uses 100 image a month (sometimes a lot less) contacts an image distributor and says, “we’ve been using distributor ‘X’ and we get our images for $75 each, regardless of usage size or circulation of the publication. If you want us to use your images you’ve got to match that price or do better.” Distributor “Y” probably gives a somewhat lower price hoping to shut out distributor “X”.  Then the customer goes back to “X” and says, “’Y’ is giving us this, can you do better?”

Sometimes the distributor can get by with giving more rights for the same price rather than lowering it, but in the long run the creator will receive less money. I’m told the price now for editorial use is about $75 and in Europe it can be as low as 30 Euros which works out to about $36 per usage.



Sometimes the customer will agree to pay more for certain major advertising uses and treat such uses separately from the bulk deal, but major advertising uses are rare and not the bread and butter of the industry.

The definition of “customer service” in the traditional stock photo industry has come to mean giving more rights for a lower price than your competitor.

My distributor friend said, “In other industries the seller tells the buyer what they must pay for the product. In our industry the buyer tells us what he is willing to pay.”

Why?

Let’s face it. Our industry has at least three major distributors – Getty, Corbis and Alamy -- and a number of other collections of significant size.

Customers can go to any of the big three and find a selection of images on virtually any subject they need. They won’t necessarily find the same image – although in some cases they can – but the customer will be able to find a good, usable images of virtually any subject on any of the sites.

One site may be slightly easier to use than the other, but the people managing the budgets in accounting could care less about that. All they want is to fulfill all their image needs (even if they are increasing) and spend fewer dollars than they did last year. Arguing that the images on one site are “better” than those on another site really doesn’t go very far with the people allocating the money. In the final analysis it boils down to dollars.

In order to compete, and make any sales at all to the major users, smaller and specialized collections are forced to match the prices set by the industry leaders. Occasionally, these smaller specialized sites will have an image that a customer really needs and which is not available anywhere else. Such instances are rare, but when they occur the specialized site can get a better price. However, it is becoming increasingly difficult to get customers to even look at these specialized collections once they are aware of the choices available on the sites of major distributor.

It is also important to recognize that picture researchers are rewarded for staying within budget, not finding the best, or most unique picture. They are also expected to find more pictures in less time. If they can go to one site and fulfill all their requirements that takes a lot less time than searching many different smaller sites and negotiating separate prices in each case.

The other reason for my question at the top is that those who establish budgets for the customers will always want to cut costs. Each year they will ask for a somewhat better deal and there doesn’t seem to be any way to reverse that direction, particularly if we continue to operate on the principle that “the customer is always right.”

Microstock

It is interesting that this isn’t the way pricing works in microstock. The prices are fixed for every file size delivered regardless of who the customer is. While typically these prices are a lot lower then RM prices, the price for any given image on a particular web site is fixed. Certain images may be more expensive but the prices are the same for all customers using that site. The same image may appear on many different web sites at a variety of different price points and sometimes prices for the same file size can very widely.

Customers can get better deals by purchasing larger packages or credits, but the prices for those packages seem to be fixed as well so everyone is treated the same with the only variable being how much they are willing to spend, or their volume of usage.

So How Low Could Prices Go?

At some point distributors have to make enough to cover their overhead in order to stay in business. They have steadily required creators to do more and more of the work of preparing the image for marketing so there is little cost there. Image storage costs are dropping. They have automated transaction costs, particularly when they negotiate monthly payments for bulk deals. They can continue to reduce the royalty share they pay creators until this expense is minimal.

The biggest costs for distributors are salaries for the staff that regularly offer customers better deals than their competitor are offering. If they can get these people to work on commission that keeps this cost manageable in relation to gross revenue. Of course, at some point when commissions get so low that it is hard for salespeople to support themselves they may not work as hard, or look for other work. However, long before it gets to this point royalty rates will have dropped to almost nothing.