Insights Gleaned from CEPIC

Posted on 7/19/2010 by Shannon Fagan | Printable Version | Comments (1)

Ed.: Shannon Fagan was one of the speakers at the New Media Conference held in conjunction with the June 2010 CEPIC Congress in Dublin, Ireland. Fagan has been in the stock business for a decade, is represented by most major agencies and is former president of the Stock Artists Alliance. He shares his observations about the state of the industry with Selling Stock readers.

An industry so small shouldn’t have a Goliath

Professor Johannes Glückler, chair of economics and social geography at the University of Heidelberg, who moderated the invitation-only Trade Association Round Table on Saturday, pointed to Getty as the Goliath. Glückler’s analysis puts Getty at 45% to 50% of the entire global market. Getty has been the dominant force since digitization became a reality in stock photography. In each wave of innovation, Getty took over the pioneer and thus kept pushing market development (e.g., The Image Bank, Photodisc, iStockphoto, etc.).

Less than $2 billion in annual sales

Sporadic estimates suggest that annual sales for the industry have never grown much beyond $2 billion. There is little research available to prove this point, but professor Glückler has run his own calculations, which suggest that potentially, it may even be as low as only $1.5 billion in overall stock licensing revenue. For those specializing in lifestyle and contemporary photographic stills imagery, the figure is actually even much smaller. Current estimates include everything that is licensed: music, fonts, archival and historical. The $2 billion figure does not take into account all the double counting of income that takes place industry-wide—and that number is increasing dramatically. In 2008, only 8% of new images in the European market were original new images. All the rest were cross-licensed from other agencies through a surge of new sales partnerships. With so small a market where 45% is held by one company, every other company is attempting to live off the leftover crumbs. In some industries, one can live comfortably off the crumbs, but in the commercial stock-image industry, this crumb size is flat or declining for each participant.

This brings up an interesting question: “What is the business model for an industry that itself is not growing?” Glückler noted that everyone in the room is fighting to steal one sector of the business from others. It is as if the stock licensing community has announced to the creative commercial stock image industry that $1.5 billion in spend is all that it will devote to licensing, ever. Could we be at the bottom? As prices increase in micro, they decrease in macro. It is a seesaw pendulum swing of money from one area transferred to another, but it seems there is no new money coming in. Glückler hinted that he did not anticipate any overall revenue growth, given that this flat line has existed through two significant changes already: film to digital, and macro to micro.

Volatility to continue and accelerate

Glückler’s presentation showed the rapid changes from film to digital (5 years), from digital to micro (2 years), and the acceleration on the technology side. He predicts that the industry will continue to see significant changes every few years. These changes are totally unpredictable. To be successful, one would have to place bets simultaneously into different areas: motion, online search, piracy protection, micro, rights-managed, etc.

He thinks that 80% to 90% of these bets would be inherently wrong, despite everyone’s best intentions at the outset. The changes may be initiated by outsiders (the tech industry is one example), rather than by CEPIC members or those attending CEPIC conferences. This occurred when royalty-free and microstock models were birthed. Given possible changes in copyright protection, search display and corporate structures (via acquisitions), the industry is subject to a high degree of uncontrollable volatility.

Future of motion: micro

It appears that mainstream motion stock will move immediately to the micro sector and bypass rapid development of the business in traditional areas. Sensors on digital cameras will soon allow for easy crowdsourcing of high-definition video. At the time of this writing, Sony’s Nex-5 digital camera captures HD video for $700. Eighteen months ago, the market was limited to the Red camera, with a $17,000 price tag. There might be a gold rush for motion in micro, but clearly certain barriers will exist vs. stills, such as the high production costs associated with core content and the slow work methodology. While the return per clip might be in line with an average return per image (a figure used to encourage motion participation by self-funded content creators), the number of achievable clips per production day is significantly less than stills. Veterans have suggested that motion clips take four times as long as stills to break even, given the higher costs associated. Given the low cost of living and difference in currency valuations, Eastern Europe may be a fantastic place to produce motion for the western world.

Eastern Europe: production powerhouse

If one’s operation is emerging, agile, and unconcerned about a potential need for a dramatic career change later (given the industry’s propensity for rapid, unexpected shifts in direction), there may be a major advantage in organizing production shoots in this low-cost part of the world. Eastern Europe has made strategic alignments for tech-sector innovation in the micro sectors of the market. It is likely that these will be the relationships to watch for both micro and traditional development of sourcing, search and sales for the next several years. The low cost parameter, close ties to vast western content needs, and abundance of talent make it prime.

In contrast, the darling of the stock-production world during the Internet licensing buildup—South Africa—has now come into its own for costs. No longer a means to save money, production operations shooting in South Africa report that expenses for labor, location costs and model fees are now on par with major western markets.

Hot topic: Asia growth forecast

The rapidly developing economy of China is facing an economic slowdown on the heels of a global recovery. Several sources indicate that initial triple-digit market growth for localized stock imagery during 2005–2008 has now slowed to double digits into the teens or lower, largely due to a natural peak in sales post startup. As a comparison, microstock agencies globally could be peaking similarly. In the most-watched economy of China, a plateau and reversal could soon approach as crowdsourced and micro sites in the Asian markets take aim to diversify the competition, combined with the low technical cost of entry for direct contributors to a variety of sites. Steve Jung with Multibits in Korea notes that Korea’s growth is 5%–10% a year; better sales are seen in Asian countries outside of the Chinese market.

A lack of breadth of creative imagery remains a concern amongst buyers in the local markets, and is combined with a small infrastructure for recruitment and training to service this need. Travel, architecture, landscape and wildlife are available in abundance in Asia, but buyer requests are for more creative, authentic (not staged) lifestyle imagery of Asian subjects. Korea and Japan continue to produce much of the lifestyle imagery applicable to all Asia sales and to the west.

In China, there are no good resources for identifying and marketing to mid-level designers who might need creative imagery. Daphne Fu with China’s Panorama Agency states: “Awareness of the image industry is very limited. A large portion of image users are not aware of this business, so they think using pirated images is normal.”

The micro agencies have Asia initiatives in the works, but so far there is little in terms of specifics. Currently, there are very few online e-commerce transactions. PicScout has entered the Asia Pacific region this summer with a primary initial focus on Japan.

Creative content production decline

Some sources suggest that the major partners distributing images are having trouble obtaining premium high-quality content from experienced professionals. At the same time, many stock agencies say publicly that they have never had more interest from contributors. However, more interest does not necessarily mean more content, particularly the brand of content on which agencies have built their businesses. Getty officials have acknowledged to some suppliers that it has become harder and harder in the past year to obtain top-quality content from their regular professional contributors. Shutterstock is seeking more high-quality content from experienced professional photographers, as evidenced by its blog.

Part of the reason there has not been a rapid shift in agency content-acquisition strategies is that there is a plethora of digitally shot imagery produced between 2004 and 2008. This content will not become dated as quickly as some might think. Due to the oversupply, the buying public will likely be satisfied for years to come and have ramifications in the supply vs. demand pricing metrics for the industry overall.

Return to wholly owned?

While most agencies will rely on self-funded contributors for the foreseeable future, some—such as Cultura—have created incentive programs for photographers when they join the collection. These are similar to incentives offered by micro agencies. At the end of June, Veer fully funded a four-day shoot in Calgary for two microstock photographers and nine traditional shooters. The company brought in 150 models, and the photographers shot in 10 locations. In-house wholly owned shooting was quite popular until 2008, but given the oversupply of imagery and fall in prices it may be very risky today.

Golden Age of Photography at an end?

Professor Glückler noted that it is possible that photography as a commercial artistic endeavor was never designed to be a middle-class, sustainable, and highly paid profession in the longer term. Glückler made comparisons to the work of painters and actors in a global macro-economic context.

Five years ago, I was pulled aside by a 55-year-old veteran of the stock photo business, a person whose income is easily a half a million annually. He warned, “Shannon, I don’t know if you have noticed, but photographers don’t age that well.” As light-hearted as the comment was, its humor echoes this time in the commercial licensing industry. Without side product offerings—such as concert tickets, merchandise sales or endorsements—photographers must get both higher paid licenses and more volume to have a secure business model. It is a profession geared to the emerging as a result of its current design. Veteran knowledge does not directly translate to higher scales of pay or increased intellectual stature, as is the case in corporate ladder and resume-based strategic hiring.

Copyright © Shannon Fagan. 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


  • Jonathan Ross Posted Jul 19, 2010
    I think this is based a lot on theory and a drop from what was unbelievable price returns to a more realistic sales point. I used to make a great deal more on my investment 5 years ago but I still make 6 times my investment to this day. It is not like printing money in your basement anymore but I would like someone to show me an source of revenue that is 6 times its investment. In any business. And my numbers have not changed in a year without shooting a single new photo.
    Thank you,
    Jonathan Ross

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