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IMPACT OF MAJOR AGENCY CONSOLIDATION
When Agencies Don't Represent The Best Interests Of Photographers
January 6, 1999
In recent years there has been a dramatic consolidation of stock photo
marketing into the hands of a few large organizations.
The leading companies in this acquisition binge are: Getty Images, Visual
Communications Group, The Image Bank, Corbis and Index Stock Imagery. I
estimate that these companies currently control over 45% of the total sales
of stock images worldwide. In addition to licensing rights in the traditional
manner, each owns or has plans to establish a royalty free division.
These organizations bring capital to our industry at a time when there are
huge costs in transitioning from analog to digital systems of marketing and
delivering images. They also bring a management style that is focused on
reducing costs and increasing profits for their investors.
Improving the bottom line for their supplier/photographers is of secondary
importance. Some major sellers of stock photography even proclaim that,
"We are not here to serve the photographer. We are here to serve the
customers."
Granted agents have always provided service to the customer and neither
agent nor photographer can earn anything from their product, if there are no
customers. Customer service is important.
But, there has been a significant change in the photographer/agent
relationship that for many years focused on serving the needs of
photographers. This new reality is increasingly difficult for
photographers to understand in all its ramifications.
When I started in this business 35 years ago it was understood that the
purpose of an agent was to "Serve The Photographer" and to be the
photographer's representative in negotiations with the customer.
Now there is a very important change in emphasis that many photographers
fail to recognize. This change may require photographers to think and act
in different ways than they have in the past, if they hope to continue to
be successful.
Some photographers want things to remain as they used to be, but for the
most part that system is dead. As we move toward the new millennium
photographers must accept that the system for marketing images has changed,
and develop new strategies for survival in this changed environment.
The change is not the result of a single sudden move by any large
corporation, but has come about through a long transition of chipping away
at the share of gross stock income paid to photographers. Nevertheless,
there certainly has been an acceleration in this trend in the last few
years, and particularly in 1998.
In the new environment photographers need to examine, with a much more
critical eye, the methods and business strategies of the companies they
choose to represent their work. They definitely can not accept on faith
that their "agent" will act in their best interest.
Photographers used to look for an agent to help manage their career. Such
agents still exist, but are increasingly rare. It used to be that agents
would accept only those photographers who they believed they could
adequately represent. The agent was concerned about providing adequate
income for the photographer. Agents would prosper in direct proportion to
those they represented. Stock agents used to tell us that they always
acted in the best interests of all the people they represented.
Many agents now believe that photographers are overpaid and that it doesn't
cost much to produce the pictures that photographers are suppling.
Today, the word "agent" -- and all the fiduciary responsibilities it
entails -- has been removed from many stock agency contracts. The photograph
is just a product. These marketing organizations we call
"agencies" could be selling software, shoes or any other consumer product.
The product is incidental, it is the process that is important. They
concentrate on the most profitable, high demand segments of the business
and ignore buyers with special needs. As a way of increasing profits they
seek to institute management efficiencies that will cut costs.
Cutting Costs
There are a number of things stock marketing organizations can do to cut
costs and improve their bottom line. Some may not be in the best interest
of some of the photographers they represent. Photographers need to
understand these issues, evaluate them in terms of their own needs, and
consider their options.
Once these large organizations have established a policy it will be very
difficult to bring about a change. On the other hand, these organizations
will often be willing to negotiate special deals with individuals they
really want. It is worth proposing other options. The standard agreement
is not the only option.
Most photographers will find it difficult to force significant changes in
proposed agreements, or proposed methods of operation. Nevertheless, it is
still worthwhile for the photographer to make the effort to understand how
these changes are likely to impact his or her business. Constantly compare
and reassess all your options. What works today may not be nearly as
productive a year from now.
Some key issues are:
Photographer Share -- The biggest cost is that portion of the gross income
the marketing organization pays to the photographers. Thus, it is natural
that these organizations would move to reduce that payment. This can be
accomplished in several ways. The most obvious is to lower the percentage
of the gross sale paid to the photographer.
This is particularly advantageous because it is a percentage and not a
fixed cost per unit. As they lower the percentage they pay for the product
it also enables them to sell the product for less and still make the same
profit.
Assume that the operating costs of a marketing company are $50 per
transaction, and they want to make a $10 profit on each transaction. If
they have to pay the photographer 50% of the fee collected, then the
average transaction fee must be $120 ($60 to the photographer and $60 to
them.) If they only pay the photographer 20% they can reduce their price
to the customer to $75 and still cover their costs and make the same
profit. By reducing the price they probably will sell more product. They
may not sell enough to make up for the loss the photographer is
experiencing, but every additional sale is not only additional profits for
them, but it also cuts their average cost per transaction.
They are willing to sell for lower prices because all the product costs
them is a percentage of the sale.
Increase Marketing Fees -- There was a time when the agency paid all
advertising and promotion costs out of their share of sales. Then they
started producing print catalogs designed to sell the images in the
catalog, and the photographers were asked to "share" the costs of catalog
products. It wasn't long before that "sharing" turned into the
photographer paying most of the cost and the agency paying very little --
at least at some agencies.
One thing the photographers don't share are the fees paid by foreign
agencies to handle the catalog. One hundred percent of these fees go
directly to the catalog producing agency. In some cases these fees get so
high that the foreign agencies are unwilling to take the risk.
At this point the catalog producing agencies offer another option. "Pay us
the higher fees we ask upfront, and we'll let you retain a greater
percentage of the gross sale." This way the photographers gets to pay even
more to be in the catalog (because they receive a smaller share of the
gross sale) -- and in most cases the photographers aren't even aware of
this increased cost.
Photographers have started questioning some of these costs in the last few
years, but the questioning has not resulted in any adjustments.
This type of cost is not that unusual in other businesses or industries.
Take, for example, the grocery business. The grocery store controls access
to the consumer. Some manufacturers pay the large chains for favored
positions on their shelves. In some cases they pay to keep the competition
out of the store.
What it boils down to is that when those who control access to the
consumers need more profit, they will come up with an additional fee.
Image Building -- There are two types of advertising. One is image
building and designed to promote the marketing company. The other is
designed to sell specific products. Both are useful and necessary in order
to maximize sales.
Originally print catalogs were designed to sell specific images and one of
the justifications for charging photographers a fee based on the number of
images they have in a catalog was that the catalogs helped sell specific
images.
Now, some agencies have started producing elaborate books designed more to
excite art directors and convince them that the agency has "cutting edge"
material, rather than sell the specific images in the book. These books
are often referred to as "hearts and minds" books. Their purpose is to get
the art director to think of the agency whenever they need an image rather
than sell what is found in the book.
This is not to say that the agency has no expectations of sales from these
"H&M" books, but they can recover their cost of advertising with fewer
sales, and in the worst case they are getting some of their "image"
advertising paid for that otherwise they might have to pay for 100%
These books may have some major disadvantages for the photographers whose
images are selected.
To begin, these books usually have fewer images played bigger so the price
per image to the photographer is often much higher than in the average
catalog.
Additionally, photographers are encouraged to spend time, energy and
resources to produce images for these books when the images themselves may
not produce as much return for the photographer as some other things the
photographer could have been doing with his or her time.
The agency editors also get into a mindset that the only image that is a
good image is one of the type that is found in these flagship "H&M"
catalogs. Thus, when it comes to selecting images for the files that will
back up the "H&M" catalogs, editors often fail to select images of the type
that art directors actually buy.
One of the leaders in producing this type of catalog is Tony Stone Images
with their "Interpretations" and "Twist" catalogs. The company insists
that sales from these catalogs are great, but I have had trouble finding
photographers that would say the sales of their images in these catalogs
are great. In fact, the photographers who have talked to me have said just
the opposite.
The other question about this type of advertising is whether it really
belongs in a catalog format which is a hugely expensive product to produce
and mail for that single impression it makes on the art director. Certainly,
one of the reasons for putting this advertising in a catalog is
that TSI has already established the precedent of charging photographers
for catalog insertions. So far they aren't charging photographers when
they use one of their images in a direct mail promotion on in a print ad.
Thus, the catalog format enables them to offset some of their advertising costs.
Another question to consider is: if the purpose of the advertising is image
building for the organization so that all photographers might benefit, and
if it is established that the photographers should pay for this
advertising, wouldn't it be fairer for all photographers in the
organization to pay a proportional share of the ad costs based on their
income rather than a few bearing the total burden?
In House Production -- There is an incentive for the marketing organization
to hire staff to produce subjects that are in greatest demand. They have
sales statistics that point them in the direction of what to produce. If
they own the work there is zero percentage to be paid to the photographer.
Of course they have the cost of production and the staff salary to offset.
But if their theories that photographers are overpaid are true and if they
manage their expenditures carefully and shoot only high demand subjects
they have an opportunity to increase profits.
A production strategy is somewhat risky because the agency also wants to
continue to receive the low demand material from freelancers shooting on
speculation. If the freelancers get the idea that they can no longer get
high demand subject matter into the files they may stop supplying work
altogether. Nevertheless, many corporate owned organizations are quietly
moving in this direction.
This is particularly happening in the Royalty Free area, by companies like
PhotoDisc and Digital Stock. The percentage they offer freelancers who
cover all their own production costs is 20%. But, they will also fund
shoots and pay photographers a day rate in exchange for an even lower
percentage of future sales. Many photographers, particularly those who
have made most of their living in the past doing assignments are accepting
these offers.
One advantage to such deals is that the photographer has a greater
assurance of getting a large number of images into the files if the agency
is laying out funds to produce the images.
As their files build in this direction the RF agencies will pay out less and
less of the total usage fees in royalties. If they are
careful to only fund those shoots that will be in high demand, based on the
statistics they have developed from previous sales, they can recover the
costs of the shoots after a few months sales and everything from that point
on is gravy.
We believe that in some cases PhotoDisc may be paying U.S. photographers
close to $3,000 a day, plus all expenses, for a total buyout. In such case
the photographer receives no percentage of future sales. In other RF cases
the photographer may get all expenses paid and a small stipend for his or
her time, but receive 10% to 15% in royalty on future sales. Each shoot
can be separately negotiated depending on the specific situation.
Mark Austin of Digital Vision, a London based RF company, says he can find
plenty of photographers in the UK who will do shoots for $1,000 a day and
sell him all rights.
While this is what the RF companies are doing, traditional agencies are
headed in this direction as well. Both Tony Stone and the Telegraph Colour
Library have studios and in house staffs that produce some of there
material. If these companies have trouble getting photographers to accept
lesser percentages, then the next obvious step will be to produce more
wholly owned material.
Agencies like Super Stock and Comstock have been producing in house for years.
Ninety percent of the material in the Comstock file is wholly owned.
Comstock represents some freelancers and seeks to flesh out their file with
specialized material that their three staff photographers don't produce.
But, most of this is of subjects that are generally in lesser demand. Comstock
also protects their wholly owned material by refusing to accept from
freelancers any variations on high demand subjects that might compete with
their wholly owned images already in the file.
Multiple Price Points -- Another strategy for greater profits is to try to
offer the market multiple price points. This is being accomplished by
having separate divisions that offer product at different price levels.
All of the major companies have Royalty Free divisions or have announced
their plans to build them. The RF business was established on the premiss
of making images available to clients at greatly reduced prices by paying
the photographers a much smaller percentage of gross sales.
It is greatly to the advantage of the parent company to sell as much
product as possible from the division where they retain the highest
percentage of the sale. Corporate advertising and promotion may tend to
push such divisions.
On the other hand one of the disadvantages of RF divisions for the traditional
agency is that so far the RF companies have paid all the catalog and marketing
costs and charged nothing back to the photographer. Traditional agencies may
be reluctant to give up this perk.
The marketing corporation is interested in overall profits, not compensating
suppliers based on their contribution. The limit of their interest in
photographers is to keep them supplying product. They have very little
interest or concern in seeing that there is fair compensation for every
image used.
One clear example of this is Corbis' Production division which creates
products, primarily aimed at the consumer. The original purpose in
building the database was to further this goal, not to license rights to
images. The idea of Licensing rights in the traditional manner was an
after thought at Corbis.
Production has access to any images in the files and pays only 3.5% of
"profits" for their use. Many of the current projects are designed to
build a user base for the future, and are unlikely to earn a profit in the
near term. Thus, there are no profits to share and Corbis gets to use
these images free of charge, other than the $4.50 they paid the
photographer when the images were originally acquired for the database.
Someday, the production division may find a way to make a profit and the
3.5% on the images they use may have some real meaning for photographers
whose images are used at that time. Meanwhile, those photographers whose
images were used to learn how to make that future profit, receive no
benefit.
Editing -- The editing process can be streamlined by holding photographers
to rigid submission standards. This will lead to reduced costs in the time
it takes to edit and integrate selected images into the library. But,
there is a risk that images that would sell will never be seen by the
editor.
At many agencies editors are purging the files of old material and in some
cases returning material that photographers believe is still saleable.
Editors are also instructed to be much more selective in what they choose
so the agency will have fewer images to integrate and less costs in
maintaining the file.
The guidelines under which these editors operate are often difficult to
explain in detail, and photographers may be left to guess at what the agency
is really looking for relative to any specific subject matter. This is
particularly true if the approach to the subject matter breaks new ground
and is not something the photographer has shot before, or the agency has
previously shown in its catalog. This ambiguity makes it very difficult
for the photographer to know what to
shoot and what to submit. In the end over control by editors leaves
photographers frustrated and may result in fewer submissions.
Large agencies have tended to accept more images than they really needed as
a way of keeping their photographers happy. There is certainly some room
for cutting back. But, the challenge when developing a strategy to cut
back is not to miss saleable images.
Another editing aspect is a drive to remove logos on everything so all
images can be used by anyone. Thus, in order to get an image selected at
some agencies, the photographer needs to do Photoshop work on the image
prior to submission.
Take aircraft photos as an example. In an effort to build a file of images
that can be used for advertising at least one major agency will accept no
commercial aircraft images that have any logos. This results in automatic
rejection of certain types of images. Most pictures of several aircraft at an
air terminal would look stupid if all logos were removed. This editing
strategy disregards a huge number of images that might be useful for
editorial purposes.
Different companies have different editing philosophies and within any
company various editors select different types of images depending on their
background and experience. The more restrictions placed on the editor, the
greater the chance that saleable images will never make it into the files.
In the long run tight editing of the files does not benefit the clients or
the photographers, but it does improve the agency's bottom line.
The challenge for photographers is to get their particular vision seen by
potential buyers. At a minimum this means getting the image into an agency
file, but it is more important to get them into digital or print catalogs.
Research -- Stock images are found in two ways. A client may pick an image
from some type of catalog, or an agency employee goes through the agency's files,
pulls images that fit a description supplied by the client, submits a
selection for the client's review and later refiles everything.
Clearly, there is much more potential for profit when the client does the
research work and selects the image than when an image is pulled from a
general file -- particularly if the fee for usage is the same for both.
File research is a very costly process when you calculate man hours per
image sold. The bankers who don't want to be agents have pointed out the
inefficiencies and have determined that the costs of the research side of
the business must be cut in order to increase profits. There are wide
variations in how agencies handle research.
Some have no catalogs and all sales result from researching the files.
Such agencies are happy to do research. In the middle are agencies like
The Stock Market. They say 40% of their sales are from non-catalog images.
They put a lot of emphasis on their catalogs, but file sales are still
important. For other agencies over 80% of their sales come from catalog
images and their goal is usually to cut research costs.
The larger agencies want to streamline and automate their in house
processes as much as possible. They concentrate on those activities that
bring the greatest return for the least cost. Activities that require a
lot of effort to produce a small return are eliminated or reduced as much
as possible.
In the old days the "agents" felt a responsibility to "represent" their
photographers, to store all the images the photographer produced that met
certain quality levels, and to have them available whenever a client made a
request. This was very costly and had a lot of inefficiencies, but it was
considered a fiduciary responsibility of being an agent.
Now the landscape is different.
Control The Marketing Chain -- The marketing chain in selling images can
sometimes be very long with many hands in the process between production
and final sale. The goal of the large organization is to get a percentage
at every step in this chain.
The important thing for the photographer to realize is that the percentage
the photographer receives from the parent agency is of little importance,
if large cuts are taken before anything is paid to the parent.
There is a big movement for parent agencies to acquire local selling
agencies so they get both the local selling percentage plus their parent
agency percentage. The parent can also increase its percentage of the
total take by giving a larger percentage to the local selling agent that
they happen to own. The amount on which the split with the photographer is
calculated is then smaller.
Photographers ask, "What is the justifications for wholly owned offices
getting a higher percentage of sales?" The justification is that they will
take as much as they want as long as photographers continue to supply
images.
Some companies that own both the selling agency and the producing agency
retain 75% of the gross fee collected from the client.
Limit Content Available To Competitors -- It is to the advantage of most
agencies to restrict the amount of content available to their competitors.
Everyone agrees that there is an oversupply of images of many subjects that
are in frequent demand. It probably would be better if not as many
photographers were shooting and if those shooting didn't produce as much.
Many agencies want to restrict their photographers from selling anything
they don't accept. Often they try to argue that if they don't select the
image it is not saleable. Experience has shown many photographers, many
times, that this statement is false. Photographers should be very careful
not to accept this as an argument. Many agencies want to select only the
cream.
The challenge for the photographer is to get as many of his or her images
as possible, seen. It is very risky for photographers to produce without
some assurance that the production will at least be made available for
clients to view.
Options Available To Photographers
First, recognize that large agencies are limiting the variety of content
available to clients. They do this to increase their profits from the
material they have chosen to handle. Recognize that this can be a
weakness for these agencies and look for ways to capitalize on it. Many
clients will be looking for a broader and different selection than the
large agencies offer.
- Negotiate for the right to separately market work your agency refuses
to properly promote. Don't let them lock up work in unproductive files.
- Examine contracts carefully. Don't assume everyone else signed the
same agreement. Negotiate. Talk to others. Don't assume that the
contracts are written with an effort to be fair to the photographer.
- Don't become too dependent on agency editors, unless there is some
guarantee that when you do what they ask the resulting images will make the
catalog (at least the on-line catalog).
- Keep in mind that making the catalog is only the beginning; the true
test is sales. Keep careful records of sales and compare various marketing
options.
- Spend time learning what the market needs by looking at what is being
used. Trust your own judgement. Don't be too quick to conclude that your
work is unsalable just because an editor from a large agency rejects it.
- Use on-line resources to see what is already available before you
shoot. Don't waste time or money producing redundant material.
On-line databases offer the photographer some tremendous advantages in
production planning. It used to be difficult to determine what agencies
already had in their files. Now a huge amount of that material is
available in keyworded databases on-line and additional large quantities
will be appearing in coming months.
Assume that you have an idea for an illustration on Time. Go to the
popular URL's and inputs the appropriate keywords. See what is already
available and learn whether what you have in mind has already been done, or
whether the buyer already has so many choices that what you planned to do
has little chance of ever being selected. Look for gaps in the files and
consider shooting that type of material.
This method is not fool proof because it still doesn't tell you about the
images that are being sold be agencies that do file research, but it is a
much better research tool than we have ever had in the past.
- Seek production support -- even if you can afford to pay the costs
yourself. If the agency has a financial commitment to the images they will
be much more inclined to promote them heavily.
- Take another look at RF (much as I hate to say it). They provide
production support for an increasing number of the photographers they deal
with. They do not charge catalog or other types of advertising fees. Look
at your actual percent return from your traditional agent after all the
fees they charge are deducted. As the percentages that Rights Protected
agencies pay drop, and their "charges" increase, the RF option becomes more
attractive for certain types of material.
It is not clear that the volume of sales at the lower RF prices will really
pay off for most photographers in the long run, but it may be worth testing
in your own situation. Presently, RF is experiencing growth as more and
more new customers are learning when to use RF and when not to. But, the
competition is also increasing.
- Diversify. We are in a period of transition, and during this period
you need to test a variety of marketing options to see which will work best
for you.
Larger organizations, don't always bring efficiencies. Sometimes they
bring more decision by committee and added confusion. Don't assume
everything large will automatically work better.
You also need to look for other ways of producing income other than relying
solely on stock photography. In the future very few photographers will
find that they can earn their entire living from stock photography.