January 2005 Selling Stock

Posted on 1/4/2005 by Jim Pickerell | Printable Version | Comments (0)



Volume 15, Number 3

(c)2005 Jim Pickerell - SELLING STOCK is written and published by Jim Pickerell six times a year. The annual subscription rate is $145.00 to have the printed version mailed to you. The on-line version is $125.00 per year. Subscriptions may be obtained by writing Jim Pickerell, 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-251-0720, fax 301-309-0941, e-mail: jim@chd.com. All rights are reserved and no information contained herein may be reproduced 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 DiFrank of Negotiating Stock Photo Prices, a guide to pricing stock photo usages.

Thought For The Month

      "I'm not saying that advertising is going away. But the balance is shifting. If today the successful recipe is to put 70% of your energy into shouting about your service and 30% into making it great, over the next 20 years I think that's going to invert."

Jeff Bezos, CEO, Amazon.com

(In Wired Magazine)

[Three years ago Amazon stopped doing TV advertising. They discovered after a long test that while they could drive sales somewhat with increased advertising they could accelerate their growth much more by using the dollars spent on advertising to lower product prices and offer free shipping. If that trend catches on in other industries consider what it might mean for a business that is heavily focused on producing images that are to be used in advertising.]


January 3 2003 (Story 691) - The beginning of a New Year is a good time for reflection. Sales improved for many in 2004, but a significant number are still trying to get back to where they were in 2000. And industry changes are still coming fast and furious. As we move into 2005 here are three issues worth watching for developments.

Subscription Model

Subscription pricing has gained some major attention in the past year-and-a-half due mostly to major moves by Jupitermedia in acquiring the two leading brands involved in subscription sales - Photos.com (part of Art.com) and Ablestock.com (part of Hemera). They have also made Comstock's RF images available to subscription buyers. I believe the total 2004 revenue from subscription sales by Jupiterimages properties will be in the range of $15 million and it is certainly growing.

The next largest licensor of subscription content is LiquidLibrary.com and I believe this brand's 2004 sales were in the range of $3 to $7 million. There are a number of other smaller providers. In total, I would guess that subscription sales in 2005 will be under $30 million worldwide with Jupiterimages clearly dominating this segment of the market. Thus, even if it grows at a very good rate it may have very little impact on the overall $1.5 billion market for still stock images.

Most sellers believe that people who are interested in buying images by subscription are totally different from those who buy single RF and RM images, and thus are no threat to this other segment of the market. I'm not so sure. At the very least, I would think that many of those who have been buying CD-ROM discs and virtual discs (representing 17% to 20% of current RF revenue, or maybe as much as $60 million) might be inclined to take a hard look at the subscription offerings as it improves with imagery like Comstock's. If Jupitermedia can capture a significant share of the CD market it could represent significant growth for them and hurt all the other RF sellers. This is certainly something to watch carefully.

Photographer's Choice

One thing that surprises me about Getty Images is the relatively low number of images on Photographer's Choice. The biggest complaint I hear from Getty Images photographers is that can't get enough images accepted by Getty. Yet in a recent count I could only find 14,220 images as part of Photographer's Choice.

It is my understanding that every contract photographer has had the opportunity over the last two year to put up 50 to 60 images into Photographer's Choice. If every photographer were taking full advantage of their opportunity then less than 300 have participated. It is my understanding that Getty has well over 1,000 photographers under contract. What's happening to the rest of them? I suspect that many more than 300 are participating, but not posting their full complement of images. Why? It's hard to imagine that these photographers can't produce 30 saleable images per year.

Everyone says the sales of images offered on PC are great. In addition many of these photographers have had good selling images returned as a result of the film file purges, or new images the Getty editors reject. Many of these would continue to sell if they were just placed online.

It is hard to feel sorry for these photographers who are missing the opportunity to put images into Photographer's Choice.

Lower Royalty Percentages

Photographers, particularly those represented by Getty, should begin to brace themselves for another cut in royalties. Getty needs to increase their margins and the only way they can do that is lower the royalties paid for content.

Currently Getty's gross margins are 67.4% for Rights Managed and 75.9% for Royalty Free. That means on average RM producers get 32.6% of the sale and RF producers get 24.1% of the sale. Getty is already pushing 3rd Party suppliers to percentages below these numbers and that will bring some improvement. But as they add more and more suppliers it will become increasingly obvious that they make more money when they sell the 3rd Party content, or images that they wholly own, than when they license rights to images owned by their contract photographers.

At that point they can either start weighting the image returns from customer searches toward the 3rd Parties and their wholly owned material, or cut the royalties paid to contract photographers. Either way the contract photographer loses. It will be easier to hide what is happening by simply changing the search results. However, with this strategy they risk making it more difficult for the customers to find the image they really want to buy.

Reducing the photographer's percentage by a few points is likely to have a much more dramatic effect on revenue even though such an action is sure to raise a lot of complaints and rebellion from photographers. On the other hand there is nowhere else photographers can go to earn anywhere near the revenue they earn by having images on the Getty site. (See "Return Per Image" Story 689.)

Getty won't mind losing a few photographers. They've got more now than they want and they can easily replace any loses by adding 3rd Party suppliers. All this leaves photographers in a very difficult negotiating position.

Image suppliers who feel they are being unfairly persecuted should consider what has been happening to Walmart suppliers over the last few years. All have been forced to cut their margins. Some have been forced to make products available at prices below cost, and eventually forced out of business. (To all those who think their art should be handled differently -- it's a product.) When a company controls a significant share of a particular market they can dictate to suppliers in this manner. Getty Images is the Walmart of the stock photo business. Suppliers have little alternative but to go along with whatever Getty asks of them.

If I were Getty, I would cut the in-country royalty by 5% and at the same time offer photographers the opportunity to put up 15 images per Photographer's Choice offering instead of 10. This would give those willing to work aggressively a chance to make more sales, and Getty doesn't want non-aggressive producers anyway.


November 11, 2004 (Story 680) - Industry consolidation continues as Corbis, the second largest seller of still stock images, moves to acquire Zefa, the third largest seller. Gross revenue for Corbis in 2003 was about $140 million and they have projected $164 million for 2004. (Since Corbis is a private company actual figures are not reported.) Zefa 2003 annual sales were reported at about $43 million.

Sources tell me that a "letter of intent" has been signed and Corbis management is currently in Dusseldorf doing due diligence. In a statement to his staff earlier this week, Steve Davis, CEO of Corbis said, "We are in talks with Zefa's management to gauge the potential for acquiring their company and its subsidiaries. Zefa has publicly stated their intention to sell, and Corbis often considers these kinds of opportunities. In this case the talks have reached an advanced level and we are examining Zefa's operations very closely. There is nothing more to report right now."

In August, I reported (Story 656) that the 3i private equity group that owns a minority interest in Zefa was interested in cashing out, a normal procedure for equity investors after five or six years. However, Erwin Fey owed the majority interest and at that time told me, "I have control and I do not want to sell my shares. If someone offered me something ridiculous for the company, I might lose a nights sleep, but we've got a good team here and I want to continue to operate this company." 3i had estimated the company's value at two-and-a-half times annual sales, or in the range of $110 million. Evidently, the offer was too good to refuse.

It appears that a few industry insiders had wind of this as much as a month ago, but by last weekend photographers in Dusseldorf and Toronto (home of Masterfile) were beginning to discuss the potential sale online. Despite Davis' low key statement sources indicate that the deal is now on a very fast track and Corbis hopes to close before December 31, 2004.

[As we enter 2005 there is no indication that the deal has been completed, but we believe it is still on track.]

Where's Getty?

Getty has been making a major push to expand its operations in Europe, and particularly in the German speaking countries, and it would seem that Zefa's content might have been a benefit to Getty. The strengthening of Corbis in that market is certainly not good news for Getty, but it is possible that Getty feels an independent Zefa was a stronger competitor than it is likely to be once integrated into Corbis. However, if Getty had seriously wanted Zefa they could have easily out bid Corbis. It is our belief that the potential anti-trust issues were the principle factor that kept Getty from moving on this one.

What About The Sales Partners?

Zefa has 16 subsidiaries and a network of 70 "sales partners" around the world. In previous acquisitions a lot of these people have been quickly made redundant. Chief among those likely to suffer is Masterfile. In the last few years Masterfile has developed a very special relationship with Zefa. Masterfile has closed many of its offices in Europe and turned the marketing of their imagery over to Zefa. Likewise, Zefa has used Masterfile as their marketing arm in North America. Zefa has contracts with Masterfile, and they will be honored, but it is unclear when they will expire.

Once Corbis takes over it seems likely that they will move as quickly as possible to be the sole seller of Zefa images in North America. Corbis does represent a number of 3rd parties on their site, but to date most of them have been either editorial suppliers or RF companies. It will be interesting to see what Corbis' attitude will be toward adding a strong RM 3rd party content provider like Masterfile to their existing offering, and whether they will offer a royalty rate that would be acceptable to Masterfile.

Other Questions

Here are some questions that will need answering as the deal moves ahead.

  • Will they integrate Zefa into Corbis as they did the other brands they've acquired, or will they allow Zefa to continue to operate as a separate brand? There are rumors that they will let Zefa operate as a separate brand, but that would be a surprising change in strategy.

  • If Zefa operates as a separate brand with its own web site will the images also be available on the Corbis web site?

  • If they plan to fully integrate, how long is integration expected to take?

  • Will the Zefa editing department continue to operate as it has in the past and be allowed to make decisions, independent of the Seattle office, about which images will be added to the site?

  • After Corbis' previous acquisitions of The Stock Market and Sharpshooters a number of photographers for those brands refused to sign a Corbis contract and joined Zefa and Mastefile. Now, as a result of the acquisition, Corbis will once again be representing the work of those photographers. What will Corbis' attitude be toward a continued relationship with these photographers?


    January 3 2003 (Story 690) - As we begin 2005, I am raising the annual subscription price of Selling Stock to the following:


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    Basic Online Service*  


    Print Edition - U.S.  


    Print Edition - International  


    Seat License**  

    $40 per extra reader  

    * Basic Online Service - The basic online subscription is designed for two readers and included timely updates at least twice a month or whenever important news breaks. If you want to distribute the information to more than one other person Seat Licenses are available.

    ** Seat License - If you would like to distribute to more than one other person you need to purchase a Seat License. Seat license purchaser may distribute the information either electronically or in printed form. If you wish to circulate the material to more than 8 people contact the publisher for special rates.

    Subscription to the Print Edition includes full online access at no additional charge.

    When Due?

    The price increase is due when your current subscription expires. Readers who have recently renewed will not be asked to pay the new higher price until they receive their next renewal notice. In some cases that will not be until the end of 2005.

    One major change in our pricing policy is the shift from site licenses to seat licenses. With the industry consolidation it has become apparent that many non-subscribers are getting full access to my stories, usually through a subscriber within their company. With a site license that was technically legal because for a small additional fee subscribers had the right to show the stories to as many people as they want to "at their site." Email has also made it much easier to pass links and full copies of stories to multiple friends. The end result of fewer subscriptions is that I am forced to raise the overall price per subscription to cover my costs and make a profit. Individual photographer who are reading, but not passing on, the information tend to be the ones hurt by this practice.

    Seat licenses are based entirely on the number of readers, regardless of where they are physically located. I hope this will change the balance in a fairer way and that people who feel the information is of enough value to pass along to associates within their company will pay for the appropriate number of seats.


    December 9, 2004 (Story 686) - Getty Images, Inc. has announced its financial guidance for 2005 as part of its 2004 Analyst Day in New York City. For 2005, the company expects revenue growth of 12 to 14 percent, resulting in annual revenue of approximately $690 million to $700 million. The company expects an operating margin of approximately 30 percent and diluted earnings per share for 2005 of $2.05 to $2.15.

    The company also reaffirmed guidance for the full year of 2004, with revenue of approximately $615 million and diluted earnings per share of approximately $1.70.

    The above guidance for 2004 and 2005 assumes consummation, by year end, of the company's offer to exchange up to $265.0 million aggregate principal amount of its newly issued 0.5% Convertible Subordinated Debentures, Series B due 2023 for an equal amount of its outstanding 0.5% Convertible Subordinated Debentures due 2023. If the exchange offer is not consummated, the company would expect diluted earnings per share for 2005 to be $1.94 to $2.04 and for 2004 to be approximately $1.61.

    Guidance for 2005 does not include costs related to the expensing of stock-based compensation, which is expected to become mandatory in mid-2005 based on the Financial Accounting Standards Board issuing its final statement.

    The breakdown of revenue for the various lines of business is expected to be as follows: (The figures are in millions of dollars.)













    Other Services  









    The company expects a 5% growth in RM volumes in 2005 and an average price increase of 2%. The RF volume growth will be about 7% and the price increase is expected to be about 10%.

    Editorial is expected to grow by about 18% and Film by about 15%. In the film area about 7% of the growth will be due to volume increase and 7% due to price.

    In the Other category photo assignments grew in 2004 by about 30% and are expected to grow by another 40% next year. It was pointed out that assignments were never expected to generate major revenue for the company, but that being able to offer this service is extremely important in building customer relationships and being able to provide customers with a full range of services including RM, RF and Media Asset Management. About $4 million of "Other" will be from Publicity Distribution and the company expects growth in Media Management Services as well.


    December 17, 2004 (Story 687) - I want to acknowledge a complaint of some readers that I spend too much time writing about Getty Images. I'm aware of the concern, but given the company's dominance in the in the industry it seems that everything relates, in one way or another, to what's happening at Getty.

    When Getty sneezes everyone else gets pneumonia. If you want to survive in this industry you cannot afford to ignore Getty's next move.

    On the plus side Getty provides good, solid information, in much greater depth and detail than is the case for leading companies in most other industries. CEO Jonathan Klein should be commended for this, and while it certainly has benefited his company, its relationship with analysts, and its stock value, it can also benefit others in the industry when they take time to analyze what Getty is doing and where they are heading.

    Often, after such analysis, many of us won't like the choices facing us, but they are the reality. Armed with information about where Getty is heading every company and individual in the industry should be able to better anticipate the future and make wiser decisions.

    Recently, CEO Jonathan Klein and other senior Getty Images executives met in New York with investment analysts that follow the company and outlined some of the directions and initiatives the company intends to take in 2005. The following are some of the highlights of the event.

    Growth In Volumes

    Getty expects to see a 5% growth in the number of RM images licensed in 2005 and a 7% increase in the number of RF images licensed. Analysts Paul Coster of J.P. Morgan noted in his report to investors, "Increased volumes is a refreshing change from prior years, when most of the sales growth was fueled by price increases."

    But, in 2004 Getty Images added about 28% more images to the Creative section of their site, and the number of images licensed only increased by about 1% when Q3 2004 is compared with a year earlier. Despite this significant increase in the number of images in the database there was a slight decline in sales on an annual basis. Thus, it would seem that at Getty's level of operation adding new images has little effect on the number of images customers will purchase.

    One conclusion would be that Getty already has access to ALL the customers and that each of these customers uses about the same number of images year-to-year. Thus, the customers may like the fact that they have greater choice, and a large selection of newly produced images, but that does not cause them to actually purchase more images.

    For the image suppliers, the growth in the volume of images on the site probably means that the average image will sell fewer times over the course of the year than was the case in the past. Each supplier must try to annually add more images than the average growth (that 28%) just to stay even with competitors on the site, or trust that license fees will steadily increase allowing them to earn more revenue for the licensing of the same or fewer images.

    On the RM side of the business it is hard to see what has changed that will begin to generate growth after such level sales for the last two years. Possibly, Editorial buyers who Getty has been courting heavily in the past year may begin to buy more images from the Creative section of the site as well as Editorial images. If that happens it will probably mean a corresponding decline in sales for Getty's competitors.

    In RF, Getty intends to make a significant marketing push to bring back some of the credit card customers that have been disappearing and this could add to the number of RF units licensed.

    Robert Gubas, VP, Marketing for RF and Credit Cards said credit card buyers come from all major segments of the market, but they are distinguished by the relative small size of their operations. They tend to purchase only 1.2 times annually. About 75% of what they purchase is RF and the remaining portion is RM.

    One of the major challenges is in finding a way to market to these customers and to remind them of Getty Images at about the time they are ready to purchase. To accomplish this Getty will be doing more frequent direct mail promotions and is exploring the use of Google and Yahoo to reach them. They have also introduced "RF Zone" which makes it easy for customers to search only for RF images. And they plan to create new Virtual CD's and Image Bundles.

    Klein indicated that they were "looking at the possibility" of offering a Subscription Licensing Model (a low cost option that appears to be attractive to credit card customers) and told the analysts that they "may" see a subscription offering from Getty in 2005.

    International Markets

    Getty intends to make an increased push into the International markets in 2005 by increasing the depth and breadth of "local" images (particularly in editorial). They also will be focusing more on non-English speaking countries.

    Klein pointed out that much of their imagery has been produced in the English speaking areas or the world and marketed on a web site where the search is primarily in English. He believes that the opportunity for expansion in the non-English speaking countries requires content that is targeted toward each country's unique characteristics. And they also need to make it easier for buyers from non-English speaking countries to search in their local language.

    To solve the content problem they will focus on adding Image Partners (3rd Party Suppliers) rather than getting the imagery directly from photographers. In some cases they will relocate some of their editorial staff photographers in an effort to expand their coverage in a certain area. They have recently relocated one photographer to Spain.

    In 2005 the company will be particularly focused on expanding their sales in Germany and Spain and will introduce local language versions of their web site in these countries. They also believe they have found a way to let customers in smaller markets, such as Russia, search in their own language without building a total web site in that language. The roll out of this technique may begin in 2005.

    Editorial revenue is expected to grow 18% driven by international expansion especially in Germany and Spain.

    This focus on the international markets may mean that image suppliers in the U.S. and the UK will find it more difficult to get images accepted while suppliers from Italy, Eastern Europe, Brazil, Turkey, Middle East, Asia, Latin America etc. may discover that Getty is more open to considering their offerings.

    Improve Search

    While customers tell them that their search engine is the best in the industry, they have plans to improve it, not only by adding local content as described above, but in several other ways. They plan to develop systems to track the kinds of pictures individual customers use and advise them when new imagery on the same subject area is available.

    They also want to "localize by relevance". For example, in Japan, the new Japanese imagery that they have recently added to the site comes up first in any given search even though it is a very small percentage of the total imagery available in any given search.

    They intend to blend the creative and editorial sections of the site. Klein pointed out that due to the splitting of the site into Editorial and Creative, much of the content that might meet customer's needs is currently "not on the shelf". They intend to make it possible for customers to enter one search command and simultaneously search both the Editorial and Creative sections of the site.

    Depth Of Search

    Klein indicated that Getty serves 1.5 billion thumbnails a month which raises some interesting questions. They license rights from the Creative section of the site to about 112,900 images per-month. This would mean that over 13,280 thumbnails are delivered for review for every image licensed.

    The 1.5 billion undoubtedly includes Editorial images and there is no way of determining how many of these images are actually used, but given the much smaller amount of revenue the Editorial side of the business generates it would be surprising if it is an equal number of images. In addition, there will be people who search and end up purchasing nothing. Photographers check to see if their images are online. And the staff prepares lightboxes and does research that may or may not result in sales. There also may be a lot of unpaid web use if the Getty site experiences the same ratio of unauthorized use that PicScout is finding on other web sites (See Story 641). Even considering all these factors the 1.5 billion is an amazing number.

    Not mentioned in the meeting with Analysts, but something to think about given these numbers is the number of thumbnails customers are willing to review to find the particular image they want. In talking to another portal manager, he indicated that the average for his site is about 300.

    I also did a story 681 in November outlining changes Getty made in September in how search results are delivered to customers. For many of the suppliers this meant that in the first 270 images delivered from each search a much smaller number of their images were being shown than had previously been the case. I predicted that this might result in a decline in sales for some of these suppliers. The surprising thing is that several of the suppliers have indicated that in the first two months after the introduction of this new search algorithm, their sales did not fall off but, in fact, increased.

    I'm not sure what all this means. It may indicate that serious buyers are willing to review many more thumbnails than most of us had previously thought, or that the buyers are employing searching techniques that allow them to find images that would normally be buried deep in the search return.

    If buyers are willing to review so many images, it may mean many sellers need to revise their thinking relative to strategies for populating web portals.

    Platform Battle?

    One analysts asked if a platform battle would eventually take place in the industry if Adobe starts offering images? Adobe's Creative Suite currently offers page layout and image editing and adding image aquisition to that might be a powerful incentive for designers to stay with one platform. Klein responded that Adobe does intend to launch a new version of Creative Suite in 2005, but he feels it is not a threat because:

    • Adobe does not intend to create any content themselves,
    • Their intentions are to represent royalty free exclusively,
    • Getty is partnering with Adobe and sees them as another distribution channel for their content, and
    • Adobe does not intend to supply any customer service whatsoever such as having a call center where people can help with file sizes, rights or other issues.

    Klein said, "if they don't have content from Getty it is a bit like selling soft drinks without having Coke or Pepsi."

    Other Points Of Interest

  • Klein does not think that Visual Search will be a benefit to the industry. He says this is what their customers have told them. Getty is certainly talking to more customers than everyone else in the market combined. If they are right the agencies that are moving ahead with Visual Search technology may find that it is a wasted effort. On the other hand if they are wrong then Visual Search may offer those who employ it a strategic advantage over Getty and those who buy in to Getty's strategy. It is worth recalling that at one time customers were also saying that they didn't want on?line searching at all.

  • Currently Getty has about 7,000 Japanese oriented images in the database and expects to add 20,000 new Japanese images in 2005. The expect to earn about $8 million in 2004 and have 50% growth in 2005 to $12 million. Their projections are to reach $50 million in sales in Japan in 5 years and if they can accomplish that it would represent about one-quarter of the total Japanese market according to most estimates.

  • Getty plans to increase their spending to create wholly owned content in 2005. Undoubtedly, they will use their statistical resources to generate images of the subjects that are in greatest demand.

  • The company has 110 staff photographers on Editorial side of the business.

  • They expect to make an announcement about doing something in India in the first half of next year

  • They believe there is no ceiling on where they can go in pricing RF.


    November 18, 2004 (Story 684) - a21, Inc. has reported gross revenue for third quarter ending September 30, 2004 at $2.1 million. This is down from the $2.5 million in the second quarter, the first full quarter after the company acquired SuperStock on February 29, 2004.

    Prior to the acquisition, SuperStock generated gross revenue of $2.2 million for the third quarter of 2003. At the time of the acquisition Albert H. Pleus, Chairman of a21 indicated that SuperStock's annual sales were approximately $10 million.

    Net loss for the third quarter of 2004 was $928,000 or $0.02 per share, versus net loss of $456,000 or $0.02 per share, for the same period in 2003. Earnings per share for the third quarter of 2004 is calculated on the basis of 38.1 million weighted average shares outstanding, compared to 18.3 million weighted average shares outstanding for the same period last year.

    Gross revenue for the nine-months ended September 30, 2004 was $5.4 million, compared to $0 for the same period in 2003. (At that time a21 had no marketable products.) Had the acquisition of SuperStock occurred at the beginning of fiscal 2004, gross revenue for the nine-months ended September 30, 2004 would have been $6.9 million.

    "During the third quarter, we focused on several key areas: 1) upgrading and launching our new customer portal, SuperStock.com; 2) expanding our base of over 900,000 images by adding new royalty-free and rights-managed providers and images; 3) pursuing copyright protection through our new affiliation with PicScout to track unauthorized uses of our property; and 4) re-purposing non-core assets, including subleasing our underutilized headquarter space for $3.5 million over six years," commented Albert H. Pleus, Chairman and Chief Executive Officer of a21. "We look forward to the initiatives undertaken this quarter contributing to the company's future growth."


    November 18, 2004 (Story 684) - Grant Heilman Photography, Inc. has acquired the 30,000 image file of Photo Network Stock, from Cathy Aron, owner and founder of the Southern California based stock photography agency. The official transition will occur on January 1, 2005.

    Aron, recently accepted an offer from the Picture Archive Council of America to be its Executive Director. "The addition of Photo Network's library of outstanding images broadens Grant Heilman's general appeal in the market and allows it to be a more competitive agency," Mrs. Aron said.

    "We are very excited about the acquisition," Sonia Wasco, President of Grant Heilman Photography, said. "Adding Photo Network's library of lifestyle images will allow us to further fulfill the needs of our existing clients and open up new markets to clients we have not been able to reach."

    Approximately 13,000 images will be added to the existing total of 45,000 on www.heilmanphoto.com. For more than half a century, Grant Heilman has accumulated some of the finest archives available in agriculture, natural science, horticulture, wildlife, and special subjects. Throughout the past 56 years the library has grown to more than a half-million images, including a vintage collection of black and white photography that showcases farm life during the great depression and beyond. The library is perfectly situated in the beautiful farming country of Lancaster County Pennsylvania.

    Grant Heilman will honor all Photo Network contracts with photographers for approximately six months, or until a new contract is signed, whichever comes first. All images will be shipped to Pennsylvania and no images will be kept in California. Heilman will edit the photographer's files in a timely fashion and return all images not retained.


    November 6, 2004 (Story 678) - Jupitermedia Corporation has reported revenues for the third quarter of 2004 of $18.8 million up from $17.8 million in the previous quarter and compared to revenues of $13.3 million for the same period in 2003. Net income for the third quarter was $5.1 million, or $0.15 per diluted share, compared to a net income of $653,000 or $0.02 per diluted share, for the same period last year.

    The company is on track to generate between $70.4 and $71.4 million in revenue in 2004.
    Given current trends total sales for the Online Images division for the year should be in the range of $22 million. Online Images includes: Comstock Images, Photos.com, ClipArt.com, Thinkstock.com and Thinkstockfootage.com. Revenue for the Images division grew approximately 20% in the last quarter from $5.791 million in Q2 to $6.797 in Q3. About half of this growth resulted from the acquisition of Thinkstock on July 28, 2004.

    Jupitermedia's Chairman and CEO Alan M. Meckler said, "What we're seeing is a transformation of Jupitermedia from a Media company that has images to an Image company that has Media."

    It should be noted that virtually all the growth of the company in this quarter resulted from the Online Image division while sales in the other division were either very flat, or lower from the previous quarter and a year earlier.

    In July, Jupitermedia announced that it acquired over 30,000 high-resolution image assets from a variety of leading content providers in several transactions. These images had been produced for Photos.com on a royalty basis and Jupiter bought out the copyright. Owning these images did not in any way increase gross revenue, but it did help to increase Jupiter's gross margin on online image sales to 82% of gross revenue up from 80% in the second quarter. Their Operating Margin for online images was 67% compared with 54% for the previous quarter.

    "Our financial results this quarter provided both record quarterly revenues and net income," stated Meckler. "Significant highlights for the third quarter included continued growth of our JupiterImages division both organically and with the acquisition of the assets of the Thinkstock Images and Thinkstock Footage businesses on July 28, 2004, as well as growth in our Events business lead by a very successful Search Engine Strategies Summer trade show," added Meckler.

    Sales Trends Within Image Division


    Q3 2003   

    Q4 2003   

    Q1 2004   

    Q2 2004   

    Q3 2004   

    Art Today   


















      It should be noted that they only owned Thinkstock for about two months of the quarter so the revenue it contributed is not an accurate comparison of its size relative to the other brands. Meckler also said that while Art Today generated a little under $1 million a month on average, today it is over $1 million a month and probably closer to a rate that would generate $15 million a year on an annual basis.

    In the first quarter of 2005 Jupiter expects to have an overall digital asset management system that will allow them to offer all the wholly owned RF images from all the brands on one site. It will be the largest collection of wholly owned images in the world.

    Currently they wholly own over 177,000 digitized still photo images. Not all of them are online at this time, but they are working rapidly towaard that goal. They also own several million clipart images and are building animation, flash and stock footage collections. With prospective acquisitions there is a good chance they will finish the year owning several hundred thousand additional photos. They intend to continue to aggressively purchase images in 2005.

    Comstock Developments

    Last week Jupitermedia made the lowest resolution (1.7MB) of the 20,000 image Comstock collection available on a subscription basis (See Story 674 ). Meckler said that Comstock's subscription model should not in any way hinder its basic business, rather it is a whole new line of business requiring no new investment other than building a web site.

    While some in the stock photo industry are concerned that the availability of these images through subscriptions at a much lower price than traditional RF, will eventually result in a decline of traditional RF sales and revenue, most RF producers seem to believe that customers who buy subscriptions are a totally separate group of image buyers from those who have been purchasing single RF and RM images. They also believe this segment of the market is significantly under served. Time will tell if this is correct.

    In the Online Images business Jupiter reduced their advertising and selling expenses by about half in the quarter as a result of a significant reduction in the marketing of Comstock images by print catalog. Now they rely more on the synergies of Internet marketing and while there may be future quarters where they do large print promotions such promotions will never be as large as they were previously.

    It is expected that Jupitermedia will announce within a few weeks new product lines within their brands that will offer an "organic and revolutionary" way of selling Rights Mananged images.

    New Online Media Offerings

    In September, Jupitermedia launched TheCreativeForum.com ( www.thecreativeforum.com ), a Web-based community for the creative professional that will allow graphic designers, art directors, commercial photographers and other commercial artists to exchange creative ideas via posting of images and work samples for discussion and critique. Creative professionals need the opportunity to share creative thoughts, to get input on projects and ideas and to discuss their work. TheCreativeForum.com is an online environment established to support the creative needs of commercial artists and to give them the chance to help each other.


    November 18, 2004 (Story 682) - Jupitermedia Corporation has announced that its wholly-owned subsidiary JupiterImages Corporation has acquired all of Hemera Technologies Inc. ( www.hemera.com )
    for approximately U.S. $7.3 million in cash. Hemera Technologies. Hemera is based in Gatineau, Quebec, Canada and sells RF images on CD and DVD as well as by download over the Internet, individually or through subscription, through its Ablestock.com ( www.ablestock.com )
    and ImageExpress.com ( www.imageexpress.com ) Web sites.

    "The acquisition of Hemera's images and business operations solidifies JupiterImage's position as one of the largest organizations in the business of selling royalty free digital images by download or online subscription" stated Alan M. Meckler, Chairman and CEO of Jupitermedia Corporation. "Hemera's collection of over 600,000 wholly owned digitized images, which includes photos, photo objects and clipart, increases our position as the largest owner of wholly owned digitized images in the world. We anticipate significant marketing and business synergies between the Hemera business and image assets and our JupiterImages division as well as our other Jupitermedia properties. We expect that this acquisition will be accretive to our earnings and cash flows," added Meckler.

    Based on the acquisition price I estimate that gross annual revenues of Hemera were in the range of $3.5 to $4 million. The photography and illustration brands they now control -- Comstock, Art Today and Thinkstock and Hemera - should generate in excess of $30 million in 2005. On the other hand, I fully expect them to add significant additional content and acquire additional brands in the coming year.

    Jupitermedia is now unquestionably the leading seller of images through subscription in the world. I believe that close to $20 million of their revenue next year will be generated through subscriptions. The only remaining subscription brand of any size that Jupitermedia does not own is Liquid Library ( www.liquidlibrary.com ).
    This brand is part of the Creatas/Dynamic Graphics group.

  • Copyright © 2005 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 301-251-0720, 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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