1INDEX PHOTOGRAPHERS TO BE PAID
November 6, 2006
Photographers and image suppliers to Index Stock Imagery welcome the news that after years of delay they will finally be given sales reports and paid royalties for the usage of their images.
The new owner, Photolibrary Group, has sent a letter to photographers promising to send royalty checks in "a week or two" for all sales made by Index Stock in the last six months and to pay according to contract going forward from November 1st when they took over.
More importantly KPMG, one of the big four international auditing firms, has been hired to do a complete forensic audit of the books which is expected to take about six months. Once that audit is complete other royalties from earlier periods that are discovered to still be owed to photographers will be paid. It is not clear at this point how far back this audit will go as there are indications that the problems of delayed and non-payment to image suppliers goes back at least four or five years. According to Glenn Parker, CEO, Photolibrary Group, "We are committed to see that everyone is paid what they are owed."
It is important to recognize that this accusation was not an "asset purchase" which might limit Photolibrary's obligations for past debts. Photolibrary bought all the shares of the company and thus is responsible for all past debts.
In the Photolibrary system, the most comprehensive general site is www.photoglibrary.com. About 150,000 of the Index Stock images will be added to the 2 million image photolibrary site. The entire photolibrary offering will be promoted in the U.S. Most of the other brands that Photolibrary purchased, prior to Index Stock, have been niche collections (See brand list in Story 890). Photolibrary has maintained each of the existing web sites of those brands as well as putting some images from each collection into its general photolibrary collection.
Parker says that his first goal, after paying the photographers, is to work out a future "brand strategy" for the Index Stock offerings. When asked about the low end products that Index currently offers he said, "There is certainly a market for the low end products, but we won't necessarily handle them in the same way. It may not make sense to offer low and high end products on the same platform."
While Parker expects the audit to be completed in six months, image suppliers should not be surprised if a comprehensive audit of a number of years of sales takes longer than six months. At this point Photolibrary does not have a clear picture of the condition of the books and it may take a long time to reconcile each past transaction. In past stock agency audits that I have been involved with it was discovered that in some cases invoices did not clearly identify whose images were actually being licensed. When that was the case tracking who should be paid royalties was time consuming and difficult as there was no easy way to determine who should receive a royalty share. I have no knowledge that this is a problem at Index Stock, but it points up the possible difficulties of sloppy accounting practices.
Audits have also uncovered missing invoices for some of the revenue generated making it difficult to know how that revenue should be shared. Finally, it is unclear whether such a forensic audit will seek to examine the books of the many other agencies around the world that have been authorized to license rights to Index Stock images, or whether the auditors will simply accept that all payments and reports from these agencies are accurate? Going into the books of other agencies could add an order of magnitude to the problem and greatly extend the time needed to complete an audit.
At the very least all invoices must be matched against payments and then each item listed on the invoice needs to be matched against the photographer's account. Only then can it be determined exactly what each photographer is owed. Considering the low fees charged in many cases there will be a huge number of transactions to justify.
Index suppliers have reported cases where they discovered a use of their image, but were never paid. When they checked with Index they were told, "That usage got credited to the wrong account. Now, we've made the correction and here is your money." How often this kind of thing has happened and not been caught by the photographer, we don't know.
Once paying photographers and brand strategy are dealt with the next step will be to edit the approximately 250,000 low-res images and determine which ones should be scanned to hi-res. Further down the road a decision will need to be made as to what will be done with the very extensive film files that are currently being stored, but which are almost never accessed in today's digital environment. No decision has been made at this point, but it seems likely that at sometime down the road most of these film images will be returned to the photographers.
Widespread industry rumors from many sources are that the only payment made for the Index Stock Imagery stock was an agreement to assume a certain level of the debt. Some place this debt figure at $900,000. There are also rumors that Photolibrary has been talking to other U.S. agencies and may make additional acquisitions. As would be expected Parker refused to confirm or deny any of these rumors.