Investors punished Getty Images in the first day after its announcement of its Q2 2007 results. The stock dropped 19.4% to $36.14 from its previous close of $44.84. If we go back two years to November 2005 when the stock price hit its peak in the mid-$90s, we see a steady decline. There are big drops almost every time Getty has made a quarterly announcement. A chart of the stock price over five years looks like a climb of Mount Everest, reaching the peak in November 2005 and now almost returning to the bottom again.
After the announcement, most investment analysts were negative from their previous positions, but some still hold out hope. Mike Roarke of McAdams, Wright, Ragen, downgraded the company to "Hold" from "Buy," saying the negative growth in traditional images licensed had unraveled his investment thesis. But according to Forbes, he added: "Getty's challenges stand a reasonable chance of self-directed correction and the core images themselves would enjoy a relative predictable demand."
Photographers recognize that there is no core of images that enjoy a relatively predictable demand. Anyone who has been in the business for a few years and has an archive of film images, recognizes that demand has disappeared -- regardless of picture quality. The only images shot on film that are in demand are ones that have been digitized. And in nearly all cases, the process of digitizing remaining images is not cost-effective given the likely demand.
But even demand of digitized images is not predictable.
Getty's core collection in November 2003 totaled 535,614 images. In November 2006, it had grown to 1,767,214 images, 3.3 times its size three years earlier. But revenues generated by this collection had only grown 47%. This is not a picture of a healthy business model - and it is on a track to get worse.
From a user point of view, many of the 2,145,694 digital images - and we'll do another count in November - will be replaced by images taken by amateurs. Images in the Getty Creative collection have been selling for an average price of around $350 per usage, the amateur images sell for $2.00.
There is no good reason why amateurs shouldn't be allowed to participate in the market. Technology advances have made that possible. But the disruption that has already occurred will be a cake walk, compared to what is likely to happen in the near future.