January 2000 Selling Stock

Posted on 1/10/2000 by Jim Pickerell | Printable Version | Comments (0)

278

JANUARY 2000 SELLING STOCK




Volume 10, Number 3




©2000 Jim Pickerell - SELLING STOCK is written and

published by Jim

Pickerell six times a year. The annual subscription rate is $80.00 to have the printed

version mailed to you. The on-line version is $72.00 per year. Subscriptions may be

obtained by writing Jim Pickerell, 110 Frederick Avenue, Suite A, Rockville,

MD 20850, phone 301-251-0720, fax 301-309-0941, e-mail: jim@chd.com. All rights

are reserved and no information contained herein may be reporduced in any

manner 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

with Cheryl Pickerell of Negotiating Stock Photo Prices , a guide to pricing

stock photo usages.

Thought For The Month

"Finding photos has become more cumbersome and time intensive for clients. They

are required to do more work. As a result, they either go to RF which is more

hassle-free, or call fewer image sellers." - Gary Elsner


Story 276

SUPERSTOCK LAUNCHES EXPRESS PRICING


January 7, 2000 - In an effort to make the process of purchasing stock more hassle-free for

the buyer SuperStock has instituted a new pricing strategy they call

Express Pricing.

According to Gary Elsner, new President and CEO of SuperStock, "Express

Pricing combines the best of both worlds -- the fixed pricing and liberal

terms that make royalty-free attractive, plus the rights protection,

personal service and high-quality imagery of a stock photo agency."

SuperStock set out to develop a marketing strategy that would

differentiate them from the rest of the players in the industry. Express

Pricing was the result. They have established a list of just 18 prices

that cover the most popular stock photo usages. They believe clients

will use Express Pricing for 80% of the images they license.

SuperStock will launch a new print catalog, a major advertising campaign

and an updated 30,000 image web site at www.superstockimages.com in

January.

Price Schedules

ADVERTISING & PROMOTIONAL USE

     

     

     

Duration of License   

Collateral: Brochure, direct mail piece, annual report, etc.   

     

     

     

     

Inside Use   

$ 350   

One Year   

     

Cover Use   

$ 750   

One Year   

Magazine Advertising, consumer or trade   

     

     

     

     

1 to 4 insertions   

$ 750   

One Year   

     

5 to 12 insertions   

$1500   

One Year   

Newspaper Advertising   

     

     

     

     

1 to 4 insertions   

$ 600   

One Year   

     

5 to 12 insertions   

$1200   

One Year   

Web Site   

     

$ 325

One Year

Billboard

  

$ 800

One Year

Point of Purchase

  

$ 450

One Year

TV Commercial

  

$ 850

One Year

EDITORIAL USE

Book, text and trade

Inside use

$ 135

One Edition

Magazine and other pubs

Inside use

$ 125

One Issue (print or electronic)

Editorial Programming

  

$ 175

Life of Show

Editorial CD

  

$ 75

One Edition

MISCELLANEOUS

Credit or Phone Card

$ 700

Three Years

Display or Mural

$ 400

Three Years

Packaging

$ 750

Three Years

Multimedia Presentation

$ 125

One Year

Digital Delivery Fees

File sizes based on 300 dpi. Digital files are delivered as either

uncompressed TIFFs on CDs via courier or

compressed JPEGs via on-line download.

Reproduction Uncompressed Compressed

Size TIFF JPEG Price

Half page,9"x6" 20 MB 5 MB $ 40

Full page, 9"x12" 40 MB 10 MB $ 80

Two page, 18"x12" 80 MB 20 MB $120

Terms

Licenses are for the period of time designated for the use category.

Licenses are for U.S. distribution only (except Web usage). Licenses are

non-exclusive. No limitations on size or print run. The basic license

fee provides film only. Express shipping charges for film and/or CDs is

additional.

Custom Options

While the above prices cover the majority of uses SuperStock will also

offer custom pricing. Volume discounts will be available, and if someone

has a particularly small use, or a small circulation SuperStock will be

willing to negotiate lower prices. For additional fees buyers can also

purchase Limited Use or Exclusive licenses. Multiple uses and

International uses will be priced separately.

Express Pricing will be launched in North America immediately and they

expect to launch it in their other wholly owned offices around the world

in February.

Positioning In The Market

Superstock has attempted to position their pricing between Royalty Free

and the prices offered by the traditional Stock Agencies. This

positioning enables them to offer RP services at close to RF prices.

They believe buyers use RF because of the "simplified process" of

licensing, not because of price. With EP SuperStock has tried to

simplify the purchase of Rights Protected images and provide a very broad

license.

SuperStock has a clear understanding of what the RF buyers are looking

for having been a principle supplier of images to EyeWire which was sold

last summer to Getty Images. SuperStock's goal is to take back business

they have lost to RF.

EP offers the simplicity of RF prices, and as a traditional agency

SuperStock is able to provide several add on services that RF can never

offer. These include:

  • The ability to offer exclusives for an additional fee.

  • The ability to tell the user who has used the image previously

    because each use is licensed specifically.

  • The ability to provide similars shot in the same series that are

    not in the catalog.

  • A greater variety of shooting styles than are typically offered by

    RF suppliers.

  • Caption information and other material related to the image.

New Leadership

In December, Gary Elsner was named President and CEO at SuperStock by the

company's former co-presidents, Jim Ong and Bill Beermann. The agency,

headquartered in Jacksonville, Florida represents hundreds of

photographers, artists, archives, museums and special collections from

around the world.

Beermann and Ong have now assumed the role of co-chairmen, turning over

the company's day-to-day operations to Elsner. Elsner was VP of Sales at

FPG for over 32 years and left that company a little over a year ago.

SuperStock offers three distinct collections of images, each with its own

catalog line: The Portfolio Collection of Contemporary Photography,

Vintage and Historical Images, and Art Images, Classic and Contemporary

Art and Illustration.

Elsner's role at SuperStock will be to work with the executive management

team to reposition the company to effectively compete in the evolving

visual content industry. He will also oversee the complete digital

conversion of SuperStock's image archive, as well as the implementation

of a state-of-the-art e-commerce web site.

In announcing his appointment Ong explained, "Elsner's appointment is

the first step in the company's plans to pursue a new direction for the

next millennium." And Beermann added, "He will provide the vision and

momentum that SuperStock needs to fulfill its strategic mission."

Comparisons

For the most part Superstock's Express Prices are not that far out of

line with standard industry rates for 1/4 page uses for small

circulations. Where the differences become marked are when the image is

used 1/2 or full page, or when the print runs are very high.

For example when we compare "Express Prices" with those in Negotiating

Stock Photo Prices for brochures we find that $350 is about the right

price for 1/4 page use with 20,000 circulation. There are a many uses at

this small size and print run, but, NSPP says a full page picture in a

large press run brochure is worth $1,925. SuperStock will give up that

use for $350. This pricing is better than royalty free, but not much.

With advertising uses $750 is about right for a single 1/4 page insertion

with a million circulation. I assume that buyers will lower circulations

will push for lower prices and get them. For a single full page use in a

major large circulation publication NSPP recommends a fee of over $3,000.

For a single full page ad insertion in a major newspaper like USA Today

NSPP recommends a fee of $1,580 which is probably low considering that

the fee paid to the publication for the insertion is over $200,000.

Nevertheless, SuperStock will only ask $600 for that use and allow up to

12 insertions of the same ad for $1,200.

Elsner says the prices are only "slightly" lower than the average prices

SuperStock has been getting for these uses. This would indicate that

SuperStock has already been giving away larger sized uses (1/2 and full

page) and larger press runs for the price of small press runs in their

price book.

We have indications that a number of other agencies have been doing the

same thing, but this is the first public acknowledgment of this fact.

Most agencies do not report the size of the usage or the circulation

figures on their sales reports. As a result photographers have no way of

telling whether the fee they are being paid is for a 1/4 page use, or

full page; for 10,000 or a million circulation.

SuperStock photographers have reported a fall off in royalties in the

past year and Elsner acknowledges that SuperStock's gross income was

"down a bit" in the 1999 fiscal year that ended in June when compared

with the previous fiscal year. But, he says sales have now "turned the

corner" and are moving back up.

Elsner points out that SuperStock is the first agency to have a published

price list. Every other agency has a price book, often with prices that

haven't been changed in years, and they "negotiate down" from the prices

in their book.

Will These Prices Reduce Negotiations?

I don't think so. Buyers will say:

  • "I don't need a year license, I'm only going to use the picture

    one time; give me a discount."

  • "That's your price for full page use, but I'm going to use the

    picture small; give me a discount."

  • "That's your price for unlimited point-of-purchase and we are only

    going to be using the picture in 5 locations; give me a discount."

  • "That's your price for some major advertiser with a print runs in

    the millions. We will only be printing 10,000; give me a discount."

  • "Our TV commercial will only be used for a month, not a year; give

    me a discount."

  • "That's your price for a chapter opener in a book, but we will only

    be using the picture 1/4 page; give me a discount."

  • "That's your price for a major web site making bundles off of

    banner ads. We don't have any banner ads; give me a discount."

  • "That's your price to putting the picture on 100 billboards. We're

    only going to put it on two; give me a discount."

Delivery Fees

Delivery fees, which according to Elsner are priced basically at costs,

and which will not be shared with the photographers, will become a

significant part of SuperStock's gross revenues. For example, if they

make a $350 brochure sale - $175 of which goes to the photographer and

$175 which they keep - and deliver a 10MB compressed image to the client,

SuperStock gets to keep almost 60% of the transaction fee and almost 20%

of that fee was for delivery.

If they make a textbook sale for $135 and charge $80 for digital delivery

the total fee to the buyer is $215. The photographer gets $67.50 and

SuperStock gets $147.50, or almost 70% of the total transaction fee.

Elsner believes that down the road clients will expect these digital

delivery fees to be rolled into the usage fee. At that point the

photographer's percentage would be figured on all the fees charged the

client. But, the major question will be whether the agency will be able

to raise the overall fee enough to cover their costs.

In recent years major sellers have shown little taste for raising fees in

spite of rising costs of production and distribution.

Will This Strategy Work?

The important question for everyone to consider is will lower prices and

a moving away from pricing-based-on-usage enable SuperStock, or any other

agency, to capture enough additional market share to offset the lower

prices.

The buzzword, not only in our industry, but in everything connected with

the internet, is "eyeballs." Do anything you have to do to make more

sales -- and it doesn't matter how much money you lose. However, if you

read the reports out of Wall Street some are beginning to question this

mantra, and beginning, again, to talk about profits.

If Wall Street starts putting their money where the "profits" are,

instead of where the "eyeballs" are, our industry, like many others,

could see some major shifts.


TONY STONE DISCOUNTS


Buyers who call TSI sales to order an image from the catalog are being told they

can get a discount on the price, if they order on-line. One art director we know

was told he could get 15% off if he purchased on-line.

We have heard from various sources that the discounts offered range from 10% to

20%. Such discounts encourage a quicker adoption of the on-line model of selling

-- one of Getty's goals -- but it will also results in lower royalties for the

photographers.

A steady rise in the number of on-line user is of great benefit to Getty in trying

to sell their stock to the investment community.


Story 272

ARE NSPP PRICES STILL VALID?


December 7, 1999 - In early December I received an e-mail from a Negotiating Stock Photo Prices user.

She is primarily an assignment photographer and gets stock requests very

infrequently. Upon receiving a recent request, she decided that, in addition to

using the book, she would check with a friend who is a Tony Stone photographer to

see what he thought she should charge.

The TS photographers said, "Pickerell's book is 2 1/2 years old and prices have

dropped substantially in that time. The guide is no longer accurate." He convinced

her to discount the numbers in the book by 20% to 25%, and to use that new number

as her asking price.

She wanted to know how much I recommended discounting all the numbers that appear

in the 1997 edition of NSPP in order to come up with a number to quote.

Don't Discount -- Don't Drop The Prices

The numbers in the book are still a good initial starting point for a quote. In

some cases you should start even higher. I want to assure every reader that the

numbers we use at Stock Connection when quoting a price are always the number in

NSPP or something higher. (We go higher depending on the uniqueness of the image or

the use). If we were discounting the numbers in the book there is no way our

average sale per image licensed would be $650, which it is.

That doesn't mean we never negotiate. We do. But a surprising number of people

accept our price without any attempt to negotiate it.

We regularly get the question, "Why are your prices so much higher than Tony

Stone's?" There are several standard answers to that question. "Our prices are

based on our, and our photographer's, costs of doing business." "Why are

Nordstrom's prices higher than K-Mart's?" "Stone appears to operate on the

principle that by lowering prices they will increase volume and grab more market

share. We don't believe that if we lowered our prices we would increase our volume

enough to offset the lower prices."

At Stock Connection we have a basic policy that we will never match a Stone price.

We always ask for something higher and will lose the sale rather than match the

Stone price. Usually, when we get requests where we're competing with an image

supplied by Stone the number we end up quoting is 50% to 100% higher than Stone's.

The big variations often come on full page or cover use, not the 1/4 page uses. Our

price may be in the $800 to $1,200 range and the price they say they can get from

Stone is in the $350 to $600 range. Even with some negotiation our price ends up

being significantly higher than what the client tells us they would have to pay for

a picture from Stone. Despite this, we end up making the sale 80% of the time.

(There was something about our picture that made them want it or they would have

bought the Stone picture in the first place. And they knew that our price -- based

on the total cost of their project -- was reasonable and fair.)

In checking back with clients on that 20% of sales we lose, we find that more often

than not the project was killed, or they went in a totally different direction and

used a totally different type of image. Thus, neither Stone nor Stock Connection

made the sale. We would much rather lose that other small percentage of sales to

Stone than lower our prices and encourage discount pricing.

If your selling your own work direct to clients, you can get the prices listed in

NSPP, or higher. Don't discount those numbers as a starting price. And please, if

you are a Tony Stone photographer and someone asks you for advice, don't tell them

they have to lower their prices just because you are getting lower fees from Tony

Stone.

Feedback From On-line Readers

Harold Lee Miller said, "It doesn't surprise me that this came from a person not

experienced in stock sales. We use the book on every sale we make and rarely do we

lose a sale because of price. When we get a call from a buyer, usually we sell a

picture, and we always start a bit higher than the book price. Sometimes we have to

negotiate down, but never a great amount.

"These art buyers are very sophisticated about how to get a lower price and we have

to fight with them sometimes, but usually we come out with a good price. In fact,

we always do. We don't discount, we don't match price, and we don't take any grief

from buyers who try to make us do that. And to be honest, we don't run into it very

often. Most of these buyers seem to know what's reasonable and don't want to spend

their day haggling to get a price that they know is lower than market. My personal

opinion is that they have this same book and they use it as their reference, too."

David Madison said, "I believe the NSPP prices to be very valid, FotoQuote as well.

There has NOT been a substantial drop in image prices from what I see licensing my

own work, and from my agents. In fact, our average price keeps increasing from year

to year, both in house and via our agents (needless to say, none of my agents are

Royalty Free agents).

"The inexperienced stock seller must also remember that what a client tells you

when negotiating with you may in fact not be true; or it may be true but a case of

apples and oranges when it comes to the usage and rights involved."


Story 263

RF AND STOCK PHOTO USES


November 10, 1999 - At the recent Photo Expo and PACA International conference in

New York we talked with representatives from a number of the leading Royalty Free

companies.

Based on those discussion I make the following assumptions:

  • The average unit price for an RF disc sale is $225.*

  • The average price to purchase a single image on-line is $75.

  • Currently 20% of the total RF units sold are single images on-line and about

    80% are from discs. (The percentage of single images sold by PhotoDisc and probably

    Corbis is probably higher, but for most other companies it is lower.)

  • Eighty-five percent of the RF sales worldwide are in North America. So far

    there has been very little penetration of RF, or electronic search for rights

    protected images into Europe in spite of the fact that the European market for

    stock photography is at least as large, if not larger, than the U.S. market.

  • The percentage of sales for personal use is very small, but I could find no

    one who was willing to share estimates with me.

  • There is a rapid movement away from discs and toward single image

    purchase.

  • I estimate that the gross sales of RF still images are about $155

    million.**

PhotoDisc

$ 30 Million

Corbis Digital Stock

$261 Million

Eyewire

$ 8 Million

Digital Vision

$ 5 Million

John Foxx

$ 3 Million

Artville

$ 2.5 Million

PhotoAlto

$ 2.5 Million

All The Rest

$ 34 Million

  

  

Total

$ 155 Million

    * When someone purchases a disc they make on average the equivalent of three

    (3) traditional rights protected uses. This could be one-time use of three images

    from the disc, or it could be using one image for three different purposes that

    would have been priced separately in the rights protected market.

    ** These figures include still photography and illustration, but not

    cinematography, or other graphic arts products that are being sold by some of the

    companies engaged in the Royalty Free business.

There have been some customer surveys, but most of that information is very closely

held. However, even those with the best data are engaged in a lot of guess work

when it comes to the number of uses actually being made from the products purchased

because there is no requirement to report that information.

Yet assumptions about this number are critical in determining Royalty Free's

penetration into the current market and the potential growth of that market.

As a larger percentage of RF sales are to single images acquired through on-line

search it will become easier to estimate the number of images actually used, if not

the number of times they are used.

Analysis

One of the most important things to determine is the growth in usage of stock

photography. As we will see this doesn't necessarily track with growth in number of

sales or dollar volume.

Using the basic assumptions outlined above, along with generally accepted

statistics about the rights protected market, I can draw some interesting

conclusions about usage.

From the comments made in seminars in New York it seems to be generally accepted

that the size of the stock photo market worldwide is about $1.25 billion in annual

sales.

In the early 90's when there were almost no RF sales the size of the stock photo

market was about $1 to $1.1 billion. It was generally accepted at that the gross

fee for the average Rights Protected usage, worldwide, was about $400. That seems

to be dropping in two ways.

First, the average fee paid seems to be coming down. I believe it is now in the

range of $300 to $350. This is being driven by the pressure on many sellers to

compete with royalty free. In addition, customers are tending to get additional

rights for the initial fee. This is particularly true in book publishing where

certain uses that were previously charged as re-uses are now being included in the

initial basic fee. It also occurs when the clients get web use in addition to a

basic print use for about the same fee as they would have paid previously for the

print use alone.

Working The Numbers

In the early 90's with a market of $1.1 billion and the average use fee at about

$400 there would have been 2,750,000 uses annually.

Today, the average use of an RF image is $75 (3 divided by $225 for discs and $75

for single image purchase). This means that with $155 million in sales RF is

generating about 2,066,666 uses annually. (Keep in mind that if we have erred there

are probably more uses per sale rather than fewer which would result in an

increased number of annual sales.)

Meanwhile the RP side of the business has about $1.1 billion in sales ($1.25

billion minus $155 million). At $350 per use RP generates about 3,142,857 uses

annually. (If the average sale is as low as $300 then the number of uses could be

3,666,666.)

Thus, current total uses annually are: (RF) 2,066,666 plus (RP) 3,142,857 =

5,209,523.

This is a healthy 89% growth in usage in the last few years with virtually no

growth in revenue. Royalty Free has 40% of the usages (2,066,666 divided by

5,209,523) but only 12% of the revenue ($155 million divided by $1.25 billion).

North America Alone

The comparisons for North America are even more dramatic. Assume that 45% of

worldwide sales are in North America. Thus, in the early 90's 1,237,500 of the uses

were in North America.

Currently, with 85% of the RF sales in North America the gross annual income for RF

is $131,750,000 and there are 1,756,666 uses. On the RP side there is about $500

million is sales representing 1,414,285 uses. That makes 3,170,951 uses in North

America (1,756,666 + 1,414,285) and Royalty Free represents 55% of the total uses.)

Rights protected sellers in Europe should not be sanguine. While the impact may not

have hit Europe yet, at most the buyers are a couple years behind the U.S. in terms

of use of technology. The growth here in the U.S. has been very dramatic in the

past twelve months. My predication is that by 2002, RF will have the same type of

impact in Europe that it now has in the U.S.

Obviously, there are many variables in these equations that we are unsure about,

but the overall directions seem clear.

Where Do We Go From Here?

Royalty Free's claim that they have grown the market in terms of number is uses is

true. It is hard to imagine that there would have been such a growth in the number

of uses if there hadn't been a lower price model.

But, is it necessary for prices to remain as low as they are?

The RF people we talked to seemed to universally agree that price alone is not the

only, or even the main reason that image users buy RF. They recognize that they

could raise their prices significantly and still remain way under the price of

their Rights Protected competition. But most seemed to be afraid of the "Two Ton

Gorilla" (PhotoDisc), and are unlikely to raise prices before TTG. Digital Vision

is expected to break ranks and step out with higher price points in the spring, but

everyone else will probably wait to see what PhotoDisc does.

One theory offered is that Getty Images will have to raise the PhotoDisc prices

because that is the only possible way they can reach the revenue figures the

investment community is projecting for them in the coming year.

With the purchase of The Image Bank, Getty seems to have run out of companies to

acquire, within the stock photo industry, that will add significant revenue to

their bottom line. By the end or 1999 Getty's revenue will be around $300 million

and financial analysts are projecting sales of $360 million in 2000 -- a 20% growth

rate. Looking across the landscape it is hard to see enough companies that Getty

could possibly acquire in 2000 to add $60 million in sales to their bottom line.

It seems clear that if PhotoDisc were to raise prices everyone else in the industry

immediately match them. The big question is what will PhotoDisc do in 2000?

The RF companies also believe they have reached "critical mass" in terms of

content. One of their major concerns is that the new players entering the market

will dilute the market share of the existing suppliers. There no longer seems to be

the expectation that the market will continually growing unabated, no matter how

many new suppliers enter the market. The market leaders are getting much more picky

about what they offer. They have no trouble in getting content, but are accepting

fewer images and looking to add breadth rather than depth to their product line.

They seem to finally be accepting that there is a limit to the amount of imagery

the market can absorb.

Photographers will find it as difficult to get their images accepted by a good RF

company as it has been to get accepted by a major stock agencies. As more single

image sales are made, rather than discs, photographers, particularly those with

only a few images in the system, will find that they earn less per image.

Photographers will no longer earn a share of the sale, even if their image is never

used, as has been the case with disc sales.



Copyright © 2000 Jim Pickerell. 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

Jim Pickerell is founder of www.selling-stock.com, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  

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