189 JANUARY 1999 SELLING STOCK
Volume 9, Number 3
©1998 Jim Pickerell - SELLING STOCK is written and
published by Jim
Pickerell six times a year. The annual subscription rate is $80.00.
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whatsoever without written permission of the editor. Jim Pickerell is also
co-owner of Stock Connection, a stock agency. In addition, he is co-author
Cheryl Pickerell of Negotiating Stock Photo Prices , a guide to pricing
stock photo usages.
Thought For The Month
Agencies say: The cost of marketing imagery has become prohibitively expensive in the
past three or four years. It is clear that the split has to improve for the agency if
it wants to actually survive the battle of the lightbox.
Photographers say: The cost of producing excellent photography has increased
dramatically over the past few years. If the split changes toward the agency,
photographers will no longer be able to produce new material.
Story 186 PHOTOGRAPHER PERCENTAGES
January 9, 1999
At Photo Expo 1998 in New York on October 31st Jonathan Klein, CEO of Getty Images gave
a keynote speech entitled "Content in the 21st Century." The full text of this speech
is in Story 180 no the Selling Stock Online site.
During the question period Klein was asked:
Question - What is the justification for reducing the photographer percentages? Will
percentages continue to go down?
Klein - I feel quite frankly that the existing Tony Stone photographer's contracts -
most of the photographers have now signed -- is the right percentage. That's why we
proposed it. That's why we stuck by it. We have no intention of further reducing it.
That percentage is 40% for an on-line in-territory sale and 30% for an out-of-territory
sale. Now, one can debate what the right percentage is.
And I have often made the point, and I'll make it again now that the percentage the
photographer gets is the highest of any industry I know, with one slight exception and
that is Hollywood. If you take the percentage cost of a movie the star may get,
sometimes, a higher percentage, but not even then. So I feel that the relationship
between the talent and the business of marketing and distributing that talent is
extremely favorable to the talent [in the stock photo business]. If you are asking me
from the Getty Images perspective, do we intend to change, the answer is no. The top
selling writers in the world do not even get 15% of the royalties.
Photographer Laurance B. Aiuppy provides a reaction to the comparison of photographers
to movie stars as a justification for why photographers are overpaid.
It will seem paradoxical for a thinking stock photographer to be grateful to Jonathan
Klein, CEO of Getty Images (for some, stock photography's Anti-Christ) for anything he
said in New York during Photo Expo. However, as a full-time stock photographer with
major agency representation (not Getty), I thank him for doing two things.
First, he has finally broken the heretofore biggest taboo in stock photography. That
is, challenging the 50/50 split on gross photo licensing sales. This split, whose
origination is lost in the mists of stock photography's distant past, has been
sacrosanct, a kind of third rail between photographers and agencies that all were
afraid to touch for fear of frying.
This split only made sense when stock photography was the underfed stepchild of the
assignment industry. Back then assignment photographers didn't much care about the
50/50 split, since it was "found" money after being paid up front for their time,
talent, and most importantly the production costs, of assigned images. The agencies
certainly liked such a generous split for simply distributing pictures that cost them
nothing to produce. Who wouldn't. But that was then, this is now.
Contemporary stock photography is now a stand-alone specialty, with its own unique
demands and forms. No agency today can survive without these expensive, difficult to
produce specialized images. Images made by highly skilled stock shooters at the top of
their games producing unique images for which they assume all the up front costs and
I think we deserve more than a 50% return, not less. However, like everyone else who
understands the economics and traditions of the industry I was willing to leave the
50/50 split alone. Until now. I am delighted that someone with the position of CEO at a
major agency had the temerity to touch the rail. Now that the taboo has been broken, we
can all begin a dialogue about the real cost of producing today's highly specialized,
expensive to make stock photos.
Certainly the agency proportion should not be 50%, I agree with Klein about that. If
things were truly fair and reflected actual economic realities, it should probably be
around 25-35% for the agency, and about 65-75% to the photographer. After all, what the
agencies essentially do is just distribute the images. Stock photographers assume the
bulk of the industry costs and risks- the actual up front production costs as well as
all (or at least most) of the marketing and distribution costs of catalogs, CD's and
now internet marketing. This in the form of "participation fees" that I have it from at
least one PACA agency head cover all an agency's costs in this area.
I know of at least one agency with the integrity and honesty to work within the above
range, and turn a profit. Why can't the others. I am sure there are plenty of agencies
out there privately furious with Klein for opening up this debate. But so be it. It is
The second thing I must thank Klein for is his unwittingly, in the broadest sense of
the word, giving photographers a very helpful business model and industry parallel with
which to understand the economics of stock photography. Ammunition to use when dealing
with agencies over "the split."
When Klein, in answering a question following his keynote address at Photo Expo,
compared photographers with actors ("talent") in the movie industry, he got the overall
industry analogy right, just not the particulars. The parallel to actors in the motion
picture industry are models in our industry. Like directors in the "motion" picture
industry, we (the directors of our "still" picture productions) do use models-actors,
but that is as far as that aspect of the analogy goes.
The proper parallel to stock photographers in the motion picture industry is the entire
production side of the motion picture industry. Independent stock photographers are the
same as independent motion picture studios. That is, for the stock photography industry
we are the developers, financiers, producers, script writers, casting directors, film
directors, cinematographers, editors and the various production units (production
department, art department, set construction, set decoration, prop department, vehicles
and transportation departments, special effects, camera operations, special equipment,
grip department, lighting and electric operations, wardrobe department, makeup and
hairdressing dept., set operations, site scouting and rental department, stage
department, post production, film processing and testing, film editing and effects,
etc., . . . as well as the marketing department). You get the picture (if Klein does
not). We, independent still stock photographer/studios, are all these things rolled
into one entity.
The agencies are simply the distributors of our still photography productions. Should
they get 50% of the gross for what they do? You tell me.
Oh yes, one more thing. Since the agencies conveniently forget it, it behooves us to
constantly remind ourselves that out of whatever is left over from our 50% of the
gross, after subtracting all of our up front production costs (see above), we must pay
our studio/business overhead (space rent, upkeep and depreciation; business liability,
equipment (including vehicle) and disability insurance; personnel and labor costs;
office supplies, materials and equipment; camera equipment purchases; etc., etc.). And
after that is paid, we must somehow feed, clothe and shelter our families, insure our
family's health and well being, pay for higher education, and fund our retirement
accounts. I don't think we can do it, long term, on less than 50% of the gross. Not and
live like free human beings.
Story 187 TSI SITE EXCEEDS EXPECTATIONS
December 21, 1998
Tony Stone Images announced a better than anticipated performance
from its full commerce website, www.tonystone.com. Launched only eight weeks ago, the
site consists of 50,000 high quality and creative images available for search, purchase
and download with 1,000 new images being added every week.
It has attracted over 1,000 registered users each week and has generated a higher
revenue per individual sale than is currently being achieved in the analog environment.
The website has achieved a 25 per cent weekly growth rate in sales since its
mid-October launch. In addition more than 25 per cent of all online purchases have
come from new customers.
Getty's full web commerce sales reached more than 10% of total sales and digital sales
for the third quarter of 1998 were $16.8 million, representing 34% of total sales.
(These sales were principally from PhotoDisc and AllSport.)
Getty also reported that they acquired Sporting Pix in Melbourne, Australia. This
acquisition is part of a strategy to own and operate offices in key markets in order to
build client relationships and increase sales. Getty now has a network of 14 wholly
owned outlets in all the major markets for visual content, as well as agents in 54
Story 187 PERSONNEL CHANGES
December 21, 1998
Deborah Free has resigned as president of Natural Selection Stock. David L. Brown,
Chairman of Natural Selection Stock has assumed the additional title of CEO.
Ellen Boughn has become VP of Artville, the RF company that was purchased by The Image
Bank earlier this fall. Ms Boughn left Corbis last summer and was briefly at
Definitive Stock in Seattle before moving to Madison, WI and taking this new position
Story 181 MODELS SUE RF PROVIDERS
December 4, 1998
PhotoDisc has been sued by Victoria Newell-Simon, and her husband
Keith Simon over the repeated use of a photo of the couple and their newborn daughter
McKenzie. The photo shows them sitting on the ground in a park and was taken for their
personal use by a professional photographer. The photo later made its way into the
This suit was first filed in June 1997. According to Forbes magazine the suit could
result in a settlement of more than $1 million for the plaintiffs. The image in
question is number 2391 on Volume 2 of PhotoDisc's CD-ROM series, and on November 30,
PhotoDisc published a nationwide apology to the Simon family in USA TODAY. The ad was
5 1/4" x 6 1/4" and included the offending photo and the following text:
Have you seen this image?
The image shown below has been used in a variety of commercial projects ranging from
brochures to packaging materials over the past several years. We regret that this image
was supplied to PhotoDisc without a valid model release and distributed without the
knowledge or permission of the Simon family. We deeply regret and apologize for any
disconfort or embarrassment this may have caused the Simon family.
To help make amends, PhotoDisc will donate $5,000 to the charity of the Simon family's
choice."It is our understanding that the total settlement with the Simon family is much
higher, but the actual out-of-court agreement will not be made public.
In an unrelated action, attorney David Gallo, who represents Karla Lyon, filed in San
Diego Superior Court on October 2nd seeking certification of a class action against
Corel and Fry's Electronics. The complaint asks for damages for nearly 1,000 people
whose photos are allegedly being sold without their permission. The photo of Lyon shows
her diving into a pool and was probably taken during a competitive diving event,
according to her attorney.
Lyon does not claim her privacy was invaded. But she, and other potential class
members, were harmed by the unauthorized sale of their likeness and by not being paid
royalties, the complaint alleges. The California Civil Code forbids the use of a
person's name, voice, signature, photograph or likeness, in any manner, on or in
products, merchandise or goods or for purposes of advertising or selling or soliciting
purchases of products, merchandise, goods or servicves without such person's prior
Also named in the suit against PhotoDisc were West Stock which was doing business with
PhotoDisc under the trade name PhotoLink, Zephyr Pictures which supplied the image to
West Stock and photographer Melanie Carr. West Stock has supplied more than 8,000
images in the PhotoDisc collection and was the principle image supplier during the
early years of this royalty free company.
According to sources at Zephyr, Ms. Carr originally hired Mrs. Newell-Simon for a photo
shoot of a pregnant woman. Mrs. Newell-Simon signed a release for this shoot. However,
in lieu of payment for the pregnancy shoot, Mrs. Newell-Simon asked Ms. Carr to take
some family photos after the baby arrived. Ms. Carr agreed and when the family pictures
were produced no release was signed and there was no discussion about stock usage.
Later, the photo was delivered, in error, to West Stock and still later to PhotoDisc.
Ms. Carr is an experienced and prolific stock photographer.
West Stock would not comment on the matter while there is on-going litigation. This
image is on the second disc produced by PhotoDisc, and has been in royalty free
circulation since the early 1990's. Over 10,000 copies of the disc have been
In 1997 the Simons began to hear that their family photo was appearing in a lot of
strange places. The Christian Coalition featured them as the "June family" in a
calendar. The Coalition's politics aren't those of the Simons. Costco used Keith's
receding hairline to promote Rogaine, a baldness remedy. The San Diego Union-Tribure
put their image atop a personals ads for single parents. Two trade magazines had them
illustrating a story on chronically ill children. One of the things that seems to have
percipitated this suit was the fact that many of the early uses were offensive to the
One of the risks associated with supplying images through royalty free products is the
likelihood that users tend to resort to royalty free as a way to obtain the images they
need when they have difficulty finding models who will agree to promote their products
The Simon's photo also appeared in a Macy's sales catalog that went into at least 3
million homes. An ad for a Quicken software product called Family Lawyer had a 9.3
million distribution. As Forbes pointed out, "The more impressions you make of an
offending photo the bigger the damage claims."
From a legal point of view, one of the problems with Royalty Free is that it is very
difficult to turn off future uses. PhotoDisc sells a large portion of their product
directly to the customer and thus has pretty good records as to who has purchased
specific products. Not many, if any, of their discs are sold at retail. For Corel, this
is entirely another matter. A large percentage of their discs are sold at retail where
they have no tracking of the purchaser. Thus, Corel will probably probably find it very
difficult to turn off future uses.
The Simon image is not on PhotoDisc's web site and PhotoDisc has withdrawn two discs -
V2 and V32 - from the market. Sources tell us that PhotoDisc has contacted their
distributors and is trying to identify all buyers. (Much of the sale of CD-ROM products
overseas is handled through distributors.)
We also understand from customers that in a few instances in the past PhotoDisc has
offered "replacement images" when a problem has arisen with a particular image.
PhotoDisc has had some trademark as well as model release problems.
In an effort to try to deal with similar problems in the future, PhotoDisc has sent out
a letter to most of their photographers requesting copies of their releases and
indicating that if they do not receive them in a short period of time they will repress
the discs on which they appear and release new versions.
While model release problems occasionally arise with Rights Protected agencies as well,
they are usually more localized and errors are more easily corrected. When an agency or
photographer is notified of a problem, they can immediately remove the image from
future use and distribution.
In the Forbes interview, Heather Redman, general counsel for Getty Images, said, "As
the industry gets bigger and better known and the players in it get bigger and better
known and the general litigation environment gets more and more difficult, the
potential for awards gets larger."
These cases point out that the "hassle free" nature of royalty free photography may be
somewhat of an illusion. It may be "hassle free" in the beginning to not have to
discuss the specifics of a planned usage, or to confirm that the release actually
exists and is adequate for that usage, but it may present a lot of hassles for the
customers down the road.
In the PhotoDisc case, all purchasers of the product were sent a letter to determine if
they had used the image. At that point they had to research their usage of the product
and describe any usages made. If they used the image they were then named in the law
suit because they used it for commercial purposes without a valid release.
There are many potential uses that might be offensive to different models. Some such
uses may seem benign to some people, and totally unacceptable to others. But it is the
model's reaction that is critical.
Lessons To Be Learned
There are several lessons for photographers to consider when supplying images to a
royalty free company, or to any stock agency that will be conducing on-line
transactions without negotiations
Are all images that are model released clearly and accurately identified as having
Make sure you have solid identification with each release so they can not be mixed
up. A polaroid of the model, attached to the release is the best solution. Some
organizations are reqiring a copy of a photo ID to also be attached to the release so
they can be sure the person signing is who they say they are.
Any non-released images being offered for sale or licensing should have a clear
statement, delivered at the time of sale, that indicates that it is the obligation of
the purchaser to obtain proper releases before making any commercial use of the images.
The agency will have some releases available, but the user must check with the agency
to be sure that the release covers the specific use that is planned.
Is there any way to restrict the "e-commerce" customer from using the image in
connection with a "sensitive issue" without requiring negotiation with a human?
Determining what is "sensitive" is a very abstract concept and can not be defined as
having a universal meaning for all people.
If a photographer is considering supplying an image to a RF distributor he or she
should be sure that the releases for all people in the photograph are sufficient to
allow someone to use the picture in a way that might be considered degrading by one of
the individuals. If the release won't do that don't put the image into the RF market.
Recognize that the clients who have trouble getting images through traditional
"Rights Protected" agencies due to the nature of the product or service they are trying
to sell, are naturally drawn to royalty free. It is for this reason that a high
percentage of the uses made of royalty free images may be offensive to the customers.
Recognize that in cases where future usage can not be shut off the exposure for the
seller is tremendous. It never goes away. If you settle a case this year and a new use
is discovered, a new case can be filed.
Make sure that in the license given the user, is it clearly pointed out that any
image used for any commerical purpose whatsoever, must have a model or property release
and the user should be required to request a copy of that release before using the
As a photographer, determine who would be responsible if a use is made without an
acceptable release? What agreements, if any, did you make to indemnify your agency? If
as a photographer you told the agency that there was no release, and then the agency
allowed the image to be used as if there was a release is the agency solely
responsible? In the new Tony Stone agreement the photographer is responsible, even if
he or she told the agency there was no release, or if later it turns out that the
release was inadequate.
You may have to pay litigation costs, even if you later win your case.
Check your general business liability insurance. Is this type of problem covered? Do
you have "errors and omissions" coverage? A lot may depend on the genesis of the event.
If it was a "mistake" or inadvertent it might be covered. If it was intentional fraud,
or gross negligence it would probably not be covered.
Story 182 NET STATISTICS
October 19, 1998
In considering the role the internet is likely to play
in the future, it is worth examining a few internet statistics. The statistics I have
included were drawn from four principle sources: Andrew Kantor's seminar at Internet
World in October, Barbara Brundage's presentation at Photo East and a recent PACA
members survey on image scanning and storage practices and TrendWatch's survey on
"Creatives Use Of The Internet". Barbara is president of Pacific Stock in Honolulu.
Andrew is executive editor or "Earth Web" in New York.
It should be noted that most internet statistics are based on projections based on very
small amounts of hard data. Thus, various "authoritative" sources can produce widely
differing results. The numbers below may be more indicative of trends rather than hard
There will be somewhere between 120 and 150 million web users by the end of 1998. In
1994 the estimated number of users was 25 million. By the end of 1996 it had more than
doubled to 57 million, and the steady growth is expected to continue.
About 55% to 60% of these users are in North America. Europe has 20% to 25% of the
users, but the level of growth in Europe has been flat. Use in Eastern Europe is going
up and the use in the northern countries (Norway, Sweden, Finland) is among the highest
per capita in the world. The Asia/Pacific region represents about 15% of total users
and that percentage is increasing. This leaves the rest of the world with maybe 5% of
81% of internet users have some college experience and half have a degree. However, in
the U.S. only 54% have college experience which means that in the U.S. younger people
and non-college educated business men and women use the net to a much greater degree
than they do in other countries.
In the U.S. the average household income of families using the internet is $52,500
which is much higher than the $37,005 average for the country according the U.S.
census. The average age of internet users is 35 to 36.
Sixty percent of internet users in the U.S. are male. Blacks, American Indians and
women over 50 are the fastest growing segments of the internet population.
Eighty two percent of net users say they have used it for shopping and estimates of the
numbers that have actually bought something on-line range from 27 million to 36
In 1997 consumer sales on the net were estimated to be just under $1 billion, but one
year later there are estimates that the worldwide spending on-line in 1998 was between
$26 and $32 billion. Thirteen billion of that was in the U.S. market.
It is important to note that internet shopping is still less than 1% of the $2.6
trillion annual retail sales in the U.S. Nonetheless, there are some segments of the
market where sales are much higher than others. It is estimated that 5% to 8% of total
book sales will eventually occur on line through companies like Amazon.com. A huge
percent of computer equipment is already being purchased on-line. Sales of financial
and travel services are big on the web.
Most notable in our industry is Getty's claim that full web commerce represented 10% of
their total sales in the third quarter of 1998 (thanks largely to PhotoDisc and
Allsport). Given Getty's size, and considering their sales alone, their on-line sales
already represent almost 2% of total still stock photo sales worldwide. If we add in
all the other on-line stock photo sellers, on-line sales may currently represent 4% to
5% of current worldwide sales in our industry.
Fifty nine percent of the revenue currently being generated on-line comes from
established retailers using the web to complement other sales channels, such as
mail-order catalogs and physical stores.
Other sources estimate that by 2002 around $300 billion in goods and services will be
purchased annually on the web. John Chambers, CEO of Cisco Systems goes much higher and
says net sales will be between $1 to $2 trillion by 2002.
Business to business transactions are expected to account for 80% of the e-commerce
throughout the next 5 years. By 2002 the U.S. is expected to account for 63% of all
Right now, internet users say they are more likely to buy on-line than to buy from
print catalogs -- but the difference is just a couple percentage points. Nevertheless,
it is clear that a large number of interent users are very comfortable with buying
The principle reason people, in general, give for not shopping on-line is that they
"can't see the product" and they "can't test it." Clearly, this will not be an issue
for stock photography buyers. Reviewing an image online gives the buyer the same
information that they get when purchasing from a print catalog -- and much more
accurate information than they would get if if they request a file search or make an
Other reasons people give for not shopping online are: (1) that they don't feel safe,
(2) concerns for the privacy of the data they supply, (3) unreliable web sites, (4)
lack of coordination among web sites and distribution channels, and (5) that it is
easier to shop locally.
Internet shoppers tend to shop by brand because they know the quality of the product
and service that certain brands provide. In the stock photo area the "quality of
product" issue is unlikely to play much of a role because stock photo buyers see
exactly what they are getting. Selection and service will be extremely important.
Customers will want to fulfill as much of their needs as possible at one location. They
will want prompt and courteous attention when they need service. Andrew Kantor pointed
out that the web can't do service nearly as well as a human, and that the large on-line
operations have trouble concentrating on service.
Barbara Brundage also said, "The internet will force many middlemen and distributors to
transform their business models or face decline or liquidation."
According to a Price Waterhouse/World Economic Forum survey, nearly 80% of global CEO's
surveyed believe e-commerce will reshape how they do business. Fifty nine percent said
it will create a significant change to their companies while 20% said it will
completely change the way they do business.
The challenge for many in the stock photo industry will be to modify their current
business model to fit the new realities.
Barbara Brundage surveyed selected foreign agents in the UK, Netherlands, Belgium,
Austria, Japan, Brazil and Argentina to get their perspective on the internet.
All agents either had a web site running, or had one under construction which will
offer clients a large selection of images.
All agents plan to feature images from their affiliates on their web sites and all but
one said they would provide their images to be featured on the U.S. agency web sites.
The general consensus was that printed catalogs will be good for at least 2 to 3 years,
but will be replaced by the Internet within 5-10 years. Some believe print catalogs are
here to stay. Foreign clients prefer personal contact and want the agent to do
research. Foreign agents expect this to continue. As it has been with print catalogs,
the clients will either find the image they need quickly and easily, or contact the
agency to help them with research. Agents view web sites, and print catalogs, as
marketing tools that promote the entire library.
The majority of agents surveyed felt that the availability of royalty free images had
not cut into their sales at this time.
One concern of foreign agents is what will happen when the same images are offered on
the web sites of several different affiliates. It is generally believed that if each
agent is offered territorial exclusivity for the images handled, as is the common
practice today, there should be no problem.
What Are U.S. Agencies Doing?
PACA recently surveyed their members on the subject of Image Scanning and Storage
Practices. Fifty Seven agencies responded and seventeen of these had more then 20
employees which means that the survey is somewhat overweighed with responses from
More than 85% of the agencies are doing some scanning of images in house. Almost 90%
send digital files to customers, at least occasionally. When asked how they deliver
these digital files to their customers 77.2% responded on-line, 75.4% said zip or jaz
disc, and 56.1% write the image files to custom CD's.
The file sizes delivered are: less than 16MB (21%), between 16MB and 24MB (16%), larger
than 24MB (9%) and (51%) depending on size requested by the customers.
Almost all members are storing images in JPEG format, but most also store images in at
least one other format with 70.2% naming TIFF.
Among the problems encountered when sending images to customers are dissatisfaction
with scan quality, customers wanting higher resolution than the agency's scanners are
capable of producing, and complaints that the files took too long to download.
Creatives Use Of The Internet
According to TrendWatch 32,000 creative businesses have web sites. Only one-third of
these actually host the site themselves, another 1/3 use Internet service providers and
the remaining 1/3 rely on outside webmasters.
More than 21,000 of these businesses work on client web sites. Of this 21,000, 83% work
on promotional projects, 63% develop web strategies for their clients, and 83% provide
web page design services. Only 8% host a client site, but 20% do serve as webmaster for
their clients. Only 9% of clients's websites were used to check order status or account
Thirty-one percent of the sites use digital photography on the sites and 29% use stock
photography. Fifteen percent use audio clips and 14% use video clips.
The TrendWatch survey is based upon nearly 750 statistically representative creative
firms including ad agencies, design firms, publishers, commercial photographers and
corporate esign departments. The survey was of 3200 creative firms with a response rate
of 27%. TrendWatch uses a 'bottom-up process' that starts with business owners to yield
clear and accurate trend monitoring.
Story 187NEW PRINT CATALOGS
Indications are that the publication dates of a number of stock agency catalogs are
being delayed. The longer it takes to get an image where it can be seen by clients,
the longer it takes to recover production costs. Check with your agency to see what is
happening with their scheduled catalog release.
We are not sure, but agencies could be finding that it is taking longer to recover
costs from previous catalogs. They may not want to further reduce the sales of the
images that are already in the hands of clients by making new options available.