169 JONATHAN KLEIN INTERVIEW
September 4, 1998
In early August Tony Stone Images distributed a new contract to over
1000 of the photographers they represent in an effort to revise their
current contracts with specific considerations for on-line marketing.
One of the key contract issues that concerns photographers is the
reduction of the photographer's percentage from 50% to 40% on sales
within the photographers home territory. However, there are many other
issues in this ll page contract plus attachments that have also been
the subject of widespread concern among TSI photographers. Jonathan
Klein, Chief Executive Officer of Getty Images, the parent of TSI deals
with a number of these issues in this long interview.
This contract is important to every photographer because it is likely
to set industry precedents. Other major agencies are likely to follow
The following are my questions and his answers.
Pickerell - In the last sentence in your letter to photographers
and in your press release you say, "We have worked closely with the
Photographer Advisory Groups in North America and Europe, (consultative
photographer panels), to develop your new contract. We are pleased
that both PAG's have endorsed the contract." Many photographer
interpreted this to mean that the PAG members had signed and thought
this was a good agreement. In fact some PAG members have still not
signed the agreement, and appear to have serious reservations about
certain clauses in it. What does "endorsed" mean to you?
Klein - By "endorsed" we mean that the majority of PAG members
have given their approval to the contract and agree that its terms are
sufficiently favourable to warrant sending it out to the TSI
photographers. It is worth stressing that the press releases which
accompanied the distribution of the contract were approved by all the
PAG members prior to being distributed.
You state that some have not signed and "appear to have serious
reservations". This is hardly surprising with any contract. It is
inevitable that not everyone is going to be completely satisfied with
every provision of the agreement. We feel that we have presented a
fair deal and whilst it is not all that the PAG members wanted, it is
also not everything that we would have wanted. The purpose of the
consultation with the PAG was to get to an agreement that, overall, was
fair and reasonable to both parties and, thus, would be acceptable to
the vast majority of TSI photographers. We have achieved our
objective, as have the PAGs.
Pickerell - In the second sentence of the press release it says:
"...the new Tony Stone Images' contract also guarantees a reduction in
payment lead time to photographers as well as a commitment by the
agency to assume bad debt risk." Clause 3.8 of the contract says you
will deduct amounts equal to those previously paid to the contributors
for bad debts. That doesn't seem to me that you are assuming any bad
debt risk. Will you please explain?
Klein - Section 3.8 deals with extraordinary losses, as opposed
to average or normal bad debt. TSI will absorb the bad debt that
occurs when a licensee fails to pay in the ordinary course of business.
The key language is at the beginning of Section 3.2 where we state
that "...TSI will pay the amount due with respect to licenses invoiced
or otherwise charged by the TSI Group..." (emphasis added). Under this
Section, we are saying that we aren't going to wait to be paid by our
licensee before we pay our photographer. If a licensee fails to pay TSI
in the end, we will absorb that cost - there is no language in Sections
3.2(a) or (b) which allows us to deduct ordinary bad debt. There is no
other company in the industry who has adopted this approach: an
approach which is clearly more beneficial to photographers than the
existing arrangements with TSI and far more beneficial to photographers
than those of any other agency.
However, we alone cannot bear a larger loss such as would occur if a
licensee went bankrupt and failed to pay TSI for numerous licenses. In
other words a major default by a licensee outside the ordinary course
It is worth noting that if we invoked Section 3.8, the photographer is
in no worse a position than s/he would have been under the old
agreement. And, as under the old agreement, we continue to withhold no
more than 50% of the payment that the photographer would have been due
for any particular period. This ensures that the photographer will not
at any time be paid nothing for a particular payment period.
Additionally, most non-North American photographers did not have this
50% provision in their previous agreement, so this is a new benefit to
It strikes me as very odd that we are making significant improvements
to the arrangements in relation to bad debt "entirely to the benefit
of the photographer and unprecedented in our industry" yet you suggest
that we are not "assuming any bad debt risk". I trust that this
clarifies the situation.
Pickerell - There seems to be a lot of confusion around the
issue of "Image Exclusive" contracts which are dealt with in Clause 2.4
of the main contract and Exhibit 2.4. You require that photographers
submit all images to TSI before they can submit them to anyone else,
but at the same time you tell photographers that you want them to edit
tightly and not submit all images. Which is it?
Some art director are telling photographer not to worry about that
clause and edit tightly, but then the photographer would be in
violation of the contract.
Some AD's have said that the only thing you are really worried about
are the shoots where the art director comes up with an idea for the
photographer. If that's the case why is that not spelled out in the
Adjusting the Exhibit 2.4 clause alone won't really solve the problem
because the main 2.4 clause in the body of the contract would override
it for anyone seeing an image exclusive contract.
The main question is, for those photographers who currently have image
exclusive contracts and wish to maintain image exclusive contracts
would you accept the following language, or a variation of it? If not,
will you please explain why it is not acceptable?
2.4 MEANING OF EXCLUSIVE:
The term "exclusive license" used in
Subsection 2.1 (Grant of License) means that beginning on the
Commencement Date and continuing for the period determined in Section 7
(Duration and Termination), Contributor agrees not to supply any images
shown to TSI (or their similars, including copies and duplicates) to
any other stock agency, prior to rejection of the image by TSI.
Contributor will retain the right to show images to potential customers
for personal promotional purposes where no use rights are granted even
if these images have been previously shown to or accepted for marketing
Exhibit 2.4 Provisions Relating To Exclusivity
IMAGE EXCLUSIVE - TSI PRIORITY.
In addition to the covenants in Subsection 2.4 (Meaning of Exclusive)
of this Agreement, Contributor agrees that, TSI will have first refusal
rights of all images (including similars, copies and duplicates)
submitted to it.
The photographer is free to submit images rejected by TSI to other
agencies, so long as no "similars" were selected by TSI. In light of
the fact that the photographer is required to tightly edit submissions
for TSI and not submit every image created for TSI's consideration, the
photographer is free, at any time, to submit images not shown to TSI to
other stock agencies, so long as they are not "similars" to images
selected by TSI.
Images that are created as a result of a TSI art director initiating an
idea and presenting it to the contributor may not be submitted to other
agencies, even if the execution of the idea is eventually rejected for
marketing by TSI. However, if the contributor brings an idea for an
images to the art director, and the AD works with the contributor to
refine the idea, but TSI chooses not to market the image the
contributor is then free to attempt to market the image through another
TSI agrees that any accepted image must be aggressively marketed and
that an image will not be "accepted" for the primary purpose of keeping
it out of the hands of a competitor.
Klein - I cannot negotiate an agreement in public nor can I
comment on proposed changes to the contract in public.
While we made every effort to anticipate the areas where photographers
may see the agreement as being unclear, it is impossible that we could
identify every such area. The exclusivity provision has been
identified as an area in which a small number of photographers feel
additional clarification is needed. To address their concerns, we have
drafted a letter which explains our intent in more detail and the
response to this solution thus far has been favourable. In order to
assist in this regard, I am happy to provide you with the text of the
"We understand that you have concerns regarding the scope of the
exclusivity provision, "Image Exclusive Version - TSI Priority", stated
in Exhibit 2.4 of the new Tony Stone Images Contributor Agreement. We
hope that this letter will serve to clarify our intent but if you have
further questions or concerns please feel free to contact us.
"The provision in Exhibit 2.4 is designed to enable TSI to protect its
investment in you as a photographer. As you know, the Creative
Department will often supply you with confidential information based on
such items as: market research, statistical information, sales
analysis and general art direction and guidance. We supply this sort
of information to enable you as our photographer to provide us with the
most relevant and profitable imagery possible, so that we may both
benefit from our collective efforts.
"In order for TSI to benefit from supplying you with the above sorts of
information and guidance, we need to be the first agency to have the
opportunity to select the images which were created from that
information and guidance. Should you work with other agencies and
receive similar information and guidance from them, we do not expect
that you would then give TSI the first look at those images. We are
only concerned about the images you create with the benefit of TSI
"Additionally, the provision in Exhibit 2.4 is not intended to govern
anything except analog or digital still imagery or inhibit the
development of your business. We only intend to protect the investment
TSI makes in you as a photographer by supplying you with information
"We hope that the above clarifies this issue."
Pickerell - Clause 2.4 in the main contract defines "exclusive"
as "beginning on the commencement date and continuing for the period
determined in Section 7, Contributor agrees not to supply any
Contributor Image...to any third party on any basis whatsoever..." This
makes the contract a photographer exclusive contract irrespective of
what is said in Exhibit 2.4. Will you change that provision?
Klein - This is not correct as Section 2.4 works in conjunction
with Exhibit 2.4. The Section does not override the Exhibit in any
manner, but rather is limited by the terms of the Exhibit.
Pickerell - Is there a charge to the photographer for putting
images on-line? If not, why is there nothing in the contract that says
contributors will not be charged fees on top of giving up 10% of sales?
Klein - Section 3.6 states that the photographer will not be
charged for any costs of putting the images online. ("Publishing Costs
will not include the costs of maintaining or creating any Online
System, including any Online catalog or database..."). In other words,
the contract makes clear that there is no charge for putting the images
online. As you are aware, there is also no charge by TSI for duping.
Other agencies charge for both duping and for scanning, storage of the
digital files etc. Yet another situation where TSI contributors are
being given a more favourable deal than photographers get from many of
Pickerell - Approximately, how many photographers have been
offered contracts? We know that there were 800 different photographers
in the Twist catalog and the America! disc alone. We know of a lot of
others that didn't make either product. I would estimate that there
are at least 1000 photographers with images in current products.
Klein - Your estimate is correct.
Pickerell - Were all photographers with images in current
products offered contracts?
Klein - Most. If photographers have not submitted in a long
period of time and don't have any pictures in DMC or core collection
and haven't had for some period of time we figured this was a good
opportunity for us to focus resources on productive photographers
rather than offering contracts to inactive photographers.
Pickerell - How many images do you expect to have on-line in
Klein - The entire Dupe Master Collection (core collection) of
Tony Stone Images will soon be online. The exact number that will be
online in October will obviously depend on how many contracts are
returned prior to launch on October 1.
Pickerell - In what percentage of the sales is TSI's share of
the gross sale 70%. I estimate that you get 50% on about 45% of the
sales, 70% on another 40% of the sales through your wholly owned
offices, and in no more than 15% of the sales do you only get 30%. Are
these figures in the ballpark?
Klein - There is a great deal of public information on the sales
of TSI due to the fact that it is a major subsidiary of a publicly
traded company. You are, therefore, aware that the majority of TSIoes
sales are from wholly owned offices. We have also publicly stated that
we are currently paying about 38% of TSI sales to photographers and
this is based on the analogue deal of 50% for an in-territory sale and
30% for an out of territory sale. This deal for analogue sales remains
Pickerell - The way I calculate it, when there is a substantial
shift from film delivery to on-line delivery-and if gross sales were to
stay flat-at 40% instead of 50% TSI would have a $3 million plus
windfall as their additional share of gross receipt. The
photographer's share of gross receipts will drop from 38% or 39% to
TSI is getting this extra share in spite of the fact that you will save
money on duping costs and print catalog costs. What's the
Klein - Firstly, your numbers completely exclude the negative
impact on TSI of assuming the bad debt risk in the future and also the
impact of the lump sum payment to photographers who sign by September
15. The numbers are substantial, especially in relation to the latter
item which effectively pays for historic sales now, irrespective of
whether we have received the money from the customer. These numbers
need to be factored into any "benefit".
Secondly, you conveniently forget the cost of web-commerce enabling TSI
oe capital investment, marketing, sales support teams, technical support
teams, training of existing employees etc. These costs are huge and
need to be taken into account in any "benefit calculation"
Thirdly, we won't necessarily save money on duping costs since we plan
to continue to be aggressive in developing the analogue business as it
will be many years before even the majority of our business is digital.
So, we need to continue to invest in both the analogue and the digital
model. In other words, we are "double investing" for some time.
Fourthly, why should print catalogue costs reduce? Catalogues will
remain a key driver for the digital business. PhotoDisc oe an entirely
digital business, also owned by Getty oe invests at least as much in
printed marketing material as Tony Stone Images.
Fifthly, we will still incur substantial costs in maintaining and
improving the website through its design and the hardware and software
necessary to keep it at the forefront of digital technology.
Pickerell - What percentage of on-line sales do you anticipate
will be made from a fixed schedule where no negotiating intervention
will be required, and what percentage will require negotiation?
Klein - I do not know. Ask me again in six monthsoe time;
although I may not wish to share this information with the competition.
Pickerell - As I understand clause 5.2 in the contract, if a
contributor gets a model release and delivers it to TSI, and TSI later
licenses rights to some user in such a way that it violates the
release, or the law is changed or interpreted in some way that makes
the release inadequate the contributor is responsible for 50% of any
settlement TSI makes.
Since the contributor had zero control over how this sale was made
shouldn't TSI be solely responsible for who they license an image to.
Isn't that part or what the contributor is paying the agency to do on
his or her behalf?
Klein - Section 5.2 does not address the issue of TSI licensing
an image in a way that violates the terms of a release that complies
with the TSI release guidelines and has been disclosed to TSI. If TSI
licenses an image in that way, that is not the photographer's
responsibility - TSI will bear any ramifications alone since the
photographer did not breach any representation or warranty. I hope that
this clarifies the position in relation to 5.2
The second matter relates to a change in the law. If the law changes
and makes a previously valid release invalid, we feel it is only fair
that TSI and the photographer bear the loss equally since neither party
could have foreseen such a development.
Pickerell - The same thing is true even if the photographer
marks "no release" on the image and TSI licenses it as if the image
were "released." Why is the photographer responsible for TSI's error?
Klein - It is TSI's view that both parties should bear the
responsibility for providing an unreleased image to the marketplace.
If a photographer sends it in knowing it isn't released, they should
bear the risk equally with TSI. If a photographer doesn't want to be
liable for unreleased images, they should send in only released
imagery. It is entirely up to the photographer to decide whether to
submit unreleased imagery; if he/she is not comfortable with the
sharing of the potential liability, the image should not be submitted
and thus the issue does not arise. It is worth stressing that this
continues current practice where both parties assess the risk of
licensing unreleased imagery. If either party concurs that the risk is
too high then the image is rejected.
Pickerell - It is my understanding that the new model release
clause would be operative for all existing images in the file, not just
ones created after the signing of this contract. Thus, if any of those
old "No Release" images are used in the future in a way that requires a
release the photographer is 50% liable. Is that true?
Klein - I really don't know. That is a question which our legal
department would be better able to answer than myself.
Pickerell - Clause 5.1 - "If contributor breaches any
representation, warranty or covenant in this Agreement and, as a
result, a TSI Group member withdraws from circulation as Duplicates, or
is otherwise precluded from licensing, any Contributor image, TSI will
be entitled to deduct from sums due to Contributor the resulting costs
and loss profits suffered by the TSI Group in an amount not to exceed
US$6,000 per Contributor image." Where did this number come from? Why
such a high number? Can you give me an example, a specific situation,
where this rule would come into play?
Klein - Under the old agreement, TSI could have deducted any and
all sums it suffered as a loss or damages due to the photographer's
breach of a warranty and TSI's having to subsequently remove an image
from circulation. There was no cap on this amount. As a result, once
again , the new agreement is more favourable to the photographer. In
the new agreement, we are not specifying an additional way that we can
obtain money from a photographer, rather we are placing a cap on the
amount which can be retrieved in this particular situation.
You have asked for an example - where an image was submitted with a
release, but the release turned out to be that for a completely
different image and thus the image in question was not released. The
model could sue and force TSI to retrieve all the dupes of the image
from around the world. TSI would incur costs in doing so.
Additionally, if the image was featured in a catalogue, TSI would lose
money due to the space in the catalogue being taken by an unlicensable
image. We could determine the amount of profits lost and be reimbursed
by the photographer.
Pickerell - Under 2.3 - License Limitations. You have included
two different limitations. In one, no TSI office can not offer RF
licensing without prior consent of the contributor. In the second it
looks like Getty Images could license images for RF purposes without
prior written consent of the contributor. This says TSI can give
licensing rights to Getty Images without the contributors consent and
does not define or place any limits on Getty Images use of the images
so received. Is this true?
Klein - No. No "TSI Group" member, the definition of which
includes Getty as the parent of TSI (see Section 10), will license via
the royalty free method without the photographer's permission. This
could not be clearer.
Pickerell - To me this clause doesn't seem to deal with
promotional use, but the lawyers for some photographers have
interpreted it in that way. Can the language be clarified if you
receive specific requests from photographers?
Klein - No photographer to date has stated any confusion
regarding this Section therefore it has been unnecessary for TSI to
determine whether clarification should be given. If photographers
raise the issue directly with us, we will, of course, be only to
pleased to provide clarification.
Pickerell - Clause 2.5 - This gives TSI the right to set any
terms it wants for images it gives to Getty Images. It lets TSI give
the right of licensing your images to Getty Images. It does not define
under what terms, how much TSI gets back, or for how long?
Klein - The intent of this Section is to allow TSI, as opposed
to the photographer, to set the licensing rates. This freedom is
needed in order to stay competitive in the ever-changing stock
photography industry. The Section is not intended to provide a
loophole for low-cost licensing directly to Getty.
Pickerell - Under return of originals,(clause 7.6) it appears
that TSI can claim that any number were lost of damaged (clause 6.1)
and thus not be liable in any way for their return, or to compensate
the photographer in any way for their loss. Is this true?
Klein - We have no intent of claiming images were lost or
damaged if that is not the case. As you know, no matter how careful an
agency is, some small number of images may not be accounted for when,
years after submitting them, a photographer requests that they be
As it is economically impractical for TSI (or any agency) to insure the
millions of images in its collection, we have provided the photographer
with an affordable means of obtaining their own insurance which will
cover lost images (as well as a host of other occurrences which are
common in the photography field). See Exhibit 6.1.
Pickerell - Clause 8.1 - The confidentiality clause is defined
too broadly. It would be illegal for contributors to discuss their
experiences with one another, or to advise other photographers who are
considering affiliation with TSI. Will you consider adjusting this if
requested by a particular Contributor?
Klein - We will deal with this directly with the individual
photographer if requested to do so.
Pickerell - Many photographers seem to be taking their time
about getting the facts and reviewing the details of the contract.
They seem to be in no rush to meet the 15th deadline. They figure that
whenever they work out a contract that suits them, then their images
will go up on line and if they miss a few months it is no big deal.
Does that attitude concern you?
Klein - It doesn't particularly concern me. I can't understand
the logic for it because there are two incentives for them to settle
their contractual arrangement by the 15th of September. First
incentive is, that when we launch the web site at the beginning of
October we will be doing it with something of a splash. We will be
spending money. We will be taking out ads. We will be sending out
leaflets and flyers. We have a new advertising agency in North America
to assist us with that campaign, and we think that in the first few
weeks there will be a lot of visits to that site and that is going to
be a great showcase for their images. So the first reason to settle by
the 15th is to get their images up there at the time of the launch.
The second incentive is that we are making a lump sum payment of
outstanding amounts for those photographers who sign by the 15th of
September. Now that lump sum payment covers all their sales advices
since the beginning of 1996 under which they still have not been paid.
That for some of the biggest shooters is a significant amount of money.
That deal applies to those who sign before the 15th and we are under
no legal obligation to give that deal to anybody beyond that time and
therefore we will be withdrawing it after the 15th.
I see two very strong incentives for people to sign by September 15th.
If they choose not to that is entirely up to them. I would say that
given those incentives it makes sense for them, if they are going to
sign at all, to sign by September 15th.
Pickerell - If they don't sign at all and decide to live with
their existing contract for the life of the contract will that contract
be honored for as long as it is in force?
Klein - The contract will, of course, be honored for its life.
However, the contract does not require us to provide on-line
distribution and there are no arrangements in the existing contract for
on-line distribution or the split of revenue on on-line distribution
and therefore we will continue to market those people's products under
the terms of that contract in an analog environment. But those
people's imagery will not be on the web site. They will be depriving
themselves, for those images, as well as images submitted thereafter,
of an on-line market.
Pickerell - We've talked to some of the photographer who have
signed that didn't even bother to read the contract. They trusted
that if all the PAG members liked it, it was good for them. They have
no idea what is in it. But, they are going to continue to operate
based on their understanding of their old contracts because they don't
realize that there is much change. Does that concern you?
Klein - I like to think that people who enter into contractual
arrangements are aware of what their arrangements entail. Through
discussions over the last six months with the PAG in both Europe and
North America it has become quite clear that there are a number of
misconceptions around the old contract. The best example of that is
that there are still photographers, not just with Tony Stone, but with
other agencies as well, who think that they get 50% of the sale. The
fact that they get 50% of what their agency receives as opposed to 50%
of what the customer actually pays has been in their old contacts for
30 years. Not withstanding that there has been and still remains a
belief that they get 50% full stop. I think the reality of the
situation is what really matters, not the perception, and the reality
is that those who have signed new contracts are bound by those
contracts, as are we irrespective of whether they spent two minutes on
the contract or spent six months with lawyers reviewing the contract.
Pickerell - Have you considered what happens if photographers
sign simply to protect their existing file, but stop producing because
they feel now that the percentages are such that they feel it is no
longer economic for them to produce?
Klein - We have considered that, and we believe that the vast
majority of our photographers, both in number, and in the percentage of
revenues of Tony Stone will both sign and continue to produce
enthusiastically. There will be some who will not sign and there will
be some in the category that your question covers. There will also be
some who will sign, but not produce as much as they have in the past.
We are prepared for those eventualities, but we don't see it as a
We also believe that as a result of this contract, other agencies who
bring their business on-line will need to think very carefully about
what sort of deals they offer to their photographer, not just in terms
of commission, but in terms of all aspects of the relationship in an
on-line environment. It will be very interesting to see over the next
year of so what becomes the industry norm for relationships in an
Also, we need to bear in mind that there are going to be very few
companies who will have a full web commerce capability for their
photographers. That is also a consideration in terms of what these
photographers will do, or who they will submit their images to and with
Pickerell - If photographers want to propose contractual
changes, or have other legal questions should they go through their
editors or is there someone else that they should be sending such
proposed revisions to?
Klein - All the legal issues go first to the director of
photography in the office to which the photographer is contracted and
then the director of photography refers it to the legal department and
gets out of the loop. We have four in-house lawyers working full time
who are dealing with this issue.
Suggested Strategy For Photographers
After talking to a number of TSI photographers, spending time analyzing
the contract and this interview I have the following suggestions for
Tony Stone Images photographers.
1 - Do not sign the contract without having a lawyer review it.
2- If you can't afford to hire your own lawyer, join one of the groups
of TSI photographers that has hired legal counsel to represent them in
negotiations with TSI.
3 - Put the changes you want in writing and submit them to the director
of photography at the office to which you are contracted. Your
comments will be referred to the TSI legal department. Don't waste
your time trying to negotiate with your editor.
4 - Don't worry about the September 15th deadline. Take your time, if
necessary, and get an agreement you can live with.
5 - But, if you can have your suggested changes in by September 15th
you will probably be in a stronger negotiating position.
6 - The 40% is not the worst clause in the contract. There are many
other clauses that could potentially do more damage to your ability to
earn future income from stock.
7 - Sign up for the TSI photographers forum and review the messages
being posted there. To get a password send an e-mail to:
8 - Pass this information on to your friends who are TSI photographers.