July 1999 Selling Stock

Posted on 7/10/1999 by Jim Pickerell | Printable Version | Comments (0)

233

JULY1999 SELLING STOCK

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Volume 9, Number 6


©1999 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

OPEN DOORS

"Sometimes we stare so long at the door that has been closed to us that we fail

to see the many doors that are open." Alexander Graham Bell


Story 232

COMSTOCK FOR SALE


June 23, 1999 - Comstock is for sale. While the company is not named in the

offering being circulated in the financial community by Chase Financial Services,

the description can only fit Comstock. (For the details of this offering see

www.pickphoto.com/sso/stories/st232.htm.

It is also a good bet, which we cannot confirm, that Visual Communications Group

(parent of FPG) is negotiating to acquire Comstock. There were rumors in New

York in mid June that VCG was about to make a major acquisition. Comstock would

certainly qualify.

Some sources have wondered why VCG would be interested in Comstock, but

Comstock's "royalty free" collection would give VCG the instant position in that

market that they have been earnestly seeking. In addition, they would have the

right to take many of the images Comstock has been licensing as "rights

protected" and convert them to "royalty free" because these images are wholly

owned by Comstock.

Another thing VCG and other major image suppliers like Getty and Corbis have

been trying to do is to find ways to hang onto a greater percentage of license

fees, and pay less out to the photographers. Comstock's wholly owned file is a

perfect opportunity to expand this strategy. VCG would keep 100% of any fees

collected from the sales of Comstock images.

The offering states that annual sales have averaged $13.2 million per year for

the last five years. It is our belief that this is only for the wholly owned

material which sources estimate to represent 80% to 85% of the file. Comstock has

some images on which they pay royalties to the photographers. Those images may

not be included in the basic sale of the agency because Comstock can not

guarantee that those photographers will stay with the new agency.

Many in the industry have argued that in recent years Comstock's imagery has

been losing its "cutting edge" and that Comstock is no longer the industry leader

it once was. Even if that is true, it fails to take into account:

  • That they are making sales of $13.2 million per year, the vast majority of

    which are probably for "rights protected" uses. Obviously, there is a demand in

    the commercial market for Comstock imagery.

    It is our belief that this volume is larger than all but four other U.S.

    agencies -- Tony Stone Images, The Stock Market, FPG and The Image Bank. While

    the overall sales of Corbis Images is larger than $13 million the vast majority

    of their sales are editorial and historical. Their penetration into the

    commercial market is very small in terms of the overall percentage of their

    business.

  • That in spite of the efforts by the major agencies to push "cutting edge"

    images, there is still a great demand for classic, clean, cliche images of the

    type that Comstock has a wealth of in their files.

    Because the images are wholly owned the new company can, either sell them for

    less and undercut their competition who has to pay percentages to photographers,

    or match the competitors price and take home a lot more profits.

    VCG would also have an advantage because they could close most, if not all of

    the Comstock offices and transfer the sales to their existing operation. One

    indication that this might be the strategy any buyer will pursue is that

    management level people have recently been let go in Comstock's Berlin office.

    There have been no indications as to who their replacements might be.

    A weakness in the Comstock operation, from the VCG point of view, may be their

    "royalty free" customer's list. Comstock hasn't been in the RF business all that

    long and most industry sources feel their client list for this type of work would

    be weak. While there is overlap between the clients for RP and RF, most

    suppliers indicate that there are also quite a few differences. On the other

    hand, VCG probably has little other option to get a better list so they are

    likely to accept what they can get.

    Other Possible Buyers

    I would also expect Corbis to take a look at this opportunity. I believe they

    could use a much stronger offering in the "commercial" area. Even if Comstock

    has gone down hill quite a bit in the last few years, it could still offer quite

    a bit of improvement to the "commercial" side of Corbis' file. The wholly owned

    aspect could be a plus and access to Comstock's client list could be of real

    value if Corbis were to take full advantage of what is there. Comstock coupled

    with WestLight could put them in a much better position to compete with TSI and

    the other commercially oriented agencies.

    But, Corbis may be so busy patting themselves on the back for their recent Sygma

    acquisition that they won't take time to look at this opportunity.

    Photographers

    As always, the losers will probably be the photographers. There is a big

    question as to what will happen to the Comstock photographers who own that 15% to

    20% of the imagery that is not wholly owned by the agency. Initially, they will

    probably be given the option to have their existing work licensed by the new

    owners, but will those owners accept new work?

    FPG has been cutting back on the number of photographers they represent and it

    will probably be tough for Comstock photographers to find a place in the new

    agency.

    The FPG photographers, on the other hand, have different issues of concern.

    There will be a great temptation to put a lot of wholly owned Comstock images

    into future FPG and Telegraph catalogs meaning fewer slots for existing

    photographers.

    In addition, since David Moffly, Chief Operating Officer of FPG, resigned in

    mid-June there is a question as to who will be managing the FPG operation in the

    future.


    Story 228

    ANNUAL REPORT SALES IN THE FUTURE


    For a view of where sales of images for Annual Reports may be headed take a look at the

    MCI WorldCom 1998 printed Annual Report. There are no pictures.

    The cover has a small text block that directs readers to their on-line annual

    report and lists the following:

      Printing & Paper   

    $ - 794,000   

       Photography & Illustration   

    - 46,800   

      Creative Services   

    -17,351   

      Production   

    - 7,238   

      Copy   

    - 1,317   

    WE JUST SAVED

    $ 866,706

    Visit Us Soon! Thanks for Browsing! www.wcom.com

    Due to increased shareholders MCI/WorldCom mailed more than twice the

    number of printed 1998 annual reports than they sent out a year ago when

    the 1997 report was mailed. Nevertheless, they calculated they saved

    at least $866,706 over what

    it would have cost them to produce the same style of report in 1998 as

    they did in 1997, and previous years.

    The 1997 report had a glossy 16 page editorial section before the financials. In

    1998 that editorial section was dropped and they simply wrapped a plain cover

    around the minimum financials required by the SEC. Additional explanations about

    the company, for those who are interested, can be found on the web site.

    There are pictures on the web site. It is unclear whether the photographers who

    produced those pictures received the same degree of compensation as would

    normally come from an annual report shoot.


    Story 234

    BUSINESS WEEK RAISES RATES


    Business Week has announced a new rate policy effective July 1, 1999 with

    substantial increases in usage rates. This is an interim policy while

    negotiations continue between Business Week and a group of editorial

    photographers. There are two full proposals on the table and it is expected to

    be several weeks before a final policy is approved. The rates below apply to all

    photographers and all work done for BW, not just for the photographers involved

    in the negotiations.The rates are as follows:

      1/4 page or less   

    $ 225   

      (this is up from $175.00 still the official rate at Time Magazine and an increase

    of 29 percent. Further there will be no more spot rate bringing the minimum rate

    from $100 to $225.00)   

      1/3 page   

    $275   

      (new category which will help photographers because prior they only paid an

    increase at 1/2 page size.)   

      1/2 page   

    $325   

      (up from $250.00 for an increase of 30 percent)   

      2/3 page   

    $400   

      (again a new category)   

      3/4 page   

    $500   

      (up from $400.00 for an increase of 25 percent and $100.00 more than Forbes, Time

    and Newsweek.)   

      Full page   

    $600   

      (up from 500 for an increase of 20 percent and again more than all of the

    competition.)

      

    Business Week will also still pay for research fees when they are applicable. In

    addition the day rate was recently increased to $400.00 from $350.00 or roughly

    14 percent and the cover rate was increased to $1500 from $1000.00 or 50%.


    Stories 224 and 225

    EDITORIAL PHOTO FORUM


    Editorial photographers have started talking to one another through an online

    forum that is less than three months old. The goal of this forum is to foster

    communication among editorial photographers with a particular focus on rates and

    rights issues.

    To join the forum go to

    http://www.onelist.com/subscribe/editorialphoto . The

    site is password protected and all applicants must be approved by the list

    managers. More than 550 photographers have signed on so far.

    The forum was established by a group of San Francisco Bay Area photographers who

    stopped shooting for Business Week in the Spring over rights and rates issues.

    These individuals, and others who have joined the Editorial Photographer

    community, have continued to negotiate with Business Week and the early results

    of those negotiations are evident in the Business Week announcement outlined

    above. Negotiations on other issues are continuing.

    Other Publications

    The Business Week issue is only one of many issues discussed on the site. The

    new Time Inc. contract has also generated much discussion. It has been clearly

    documented -- with a number of specific examples -- that Time Inc. publications

    have a multi-tier system of day rates and rights. They are clearly willing to

    negotiate terms that differ from their basic contract depending on their

    perceived need of the individual photographer's work.

    The following are some of the adjustments to the standard contract that various

    photographers seem to have been able to negotiate:

  • A guaranteed number of days per year. One of the problems here is that they

    may cut back on the number of days after the first year. People Magazine

    photographers who were getting guaranteed days two years ago found they were cut

    back to no guarantee in 1999. Also, some photographers who were not offered

    enough assignments to meet their guarantee in 1998 had trouble collecting the

    guarantee.

  • Some adjustments in day rate. This seems rare. The standards are $400 per

    day for no electronic usage and $500 per day if you grant them all electronic

    usage.

  • One-time rights. They like to get as much re-use as possible, but with

    some they will agree to one-time rights.

    Digital use. Even if you agree to digital use you can stipulate that the images

    only be used in the context of the original article. All other uses must be paid

    separately. They try to get unlimited digital use.

  • Reprint rights. One photographer who retained reprint rights with Fortune

    indicated the magazine more than doubled the rate they initially offered him for

    a particular usage - within a two hour time period - just because he rejected the

    first and second rates they offered.

  • Foreign editions. It is possible to negotiate for other than their normal

    pay rates for use in some foreign editions.

  • Length of embargo How long the material will be embargoed.

  • After the fact contracts. Photographers who are presented a contract for a

    specific use can cross out any terms they don't agree to. This happens all the

    time at the stock agencies.

  • Send them your contract. One solution to signing their contract is to send

    them your contract, particularly if they call you for a job before they send you

    a contract to review. Seth Resnick has prepared a "contract" document that he

    uses as a delivery memo whenever he submits work. Consequently, instead of

    signing the magazine's contract the magazine is obligated by the photographer's

    contract. You can find this document in the May archives on the PhotoPro section

    of the "PhotoNews" site at: www.photonews.com.

    So far the detail shared relative to specific experiences with specific

    publications has been phenomenal. This type of information puts every

    photographer in a better position to negotiate with publishers. It also helps

    photographers spot trends when they might have thought their specific experience

    was a unique and isolated instance.

    Highlights of some of the information shared so far include:

  • Reprints can be a big market for many editorial shots, including portraits.

    Seth Resnick gets $1,000 or three times the total space rate whichever is greater

    for up to 5,000 reprints. Higher volumes are negotiated. Many publications offer

    much lower fees for reprints, or pay nothing, but will pay more if challenged.

    Several photographers have reported getting the reprint fee raised through

    negotiation although few achieved the fees Resnick is getting. Forty-three

    percent of the re-use fees Resnick receives are the result of reprints. Reprints

    are advertising, not editorial use.

    Many publications fail to report reprint use unless they are asked. It is

    recommended that photographers call the reprint department after each assignment

    to determine if reprints were requested. Get to know the person in charge of this

    department, not just your picture editor. Establish the principle that you set

    the price for such uses, not the publication. One photographer sends his

    promotional pieces, particularly those someone might want to hang on their wall,

    to the people in the reprint department as a may of cementing a relationship.

  • Photographers have reported that they are earning an average of between 50%

    and 200% of the assignment fee in reuse fees. Obviously, this can vary greatly,

    but it points out the importance of retaining the stock rights to images produced

    on assignment.

  • The importance of presenting the publication with "your written terms".

    Present your contract, don't wait for them to send their contract. Seth Resnick

    and Joseph Pobereskin have supplied sample agreements that they use. We will post

    these on Selling Stock within a couple of weeks.

  • Several photographers have been receiving $500 day rates from TIME, but

    have never been asked to sign the addendum allowing on-line use. They believe

    that because they have not signed their pictures will not be used on-line.

    Moreover, if an on-line use is made they believe they are entitled to additional

    compensation. While technically this may be true their position would be much

    stronger if they had submitted to TIME their own written conditions for doing the

    assignment, instead of working without a written agreement. Such written

    understandings can also be submitted with the work. Courts are likely to decide

    that Time's "standard practices" are operative if there is no written

    understanding, signed or unsigned, from either side. If a photographer routinely

    sends his or her own paperwork to all publications it greatly strengthens the

    bargaining position.

    It has also been reported that there is an unofficial policy at TIME that those

    who don't agree to the extra $100 for web use don't get called for assignments.

  • There is no "industry standard" day rate as many major publications try to

    pretend. Some publications pay more than double what others pay. There are also

    lots of variation on how they calculate the a day, and the rights expected for

    the fee paid. It is important for the photographer to carefully examine what he

    or she needs for the particular job rather than trying to establish a standard

    "editorial day rate."

  • Be careful to retain foreign rights and follow up on use. One photographer

    pointed out that many computer publications have hundreds of foreign editions.

    Getting The Best Fees

    Those who get the best fees tend to not have a standard "day rate" and negotiate

    the "creative fee" very carefully on each job. The publication may have a "day

    rate", but the challenge for the photographer is to work with the picture editor

    to find ways to adjust the publication's standard practices so the photographers

    receives appropriate value on his or her work. Many photo editors are willing to

    work with photographers if the photographers only ask and offer creative

    suggestions for meeting their needs. One photographer said he gets higher fees

    50% of the time when he asks.

    Suggestions various editors have agreed to include:

    • Photographer agrees up front to a fixed fee for the job, regardless of the

      actual shooting time. (When using this technique it is important to have

      calculated the maximum it could possibly take to shoot the job.)

    • When portraits of two people at the same location are required, the

      publication pays for two days even though both people could be shot on the same

      day.

    • When the half day rate is greater than half of the full day rate (i.e. $275

      for half day and $400 for full day) get an agreement that you can bill for two

      half days instead of a full day.

    • Get paid for travel days.

    • Get paid a cover rate.

    • The creative fee is a guarantee against space. (Many photographers seem to

      have given up worrying about space rate, but those who pay attention to this

      issue and get the publication to commit up-front to space fees, tend to earn more

      money.)

    • Get paid extra for assignments that go longer than eight hours. Time has

      paid an extra half day for any part of the first four hours over an 8 hour day

      and a full extra day if the assignment goes more than 12 hours.

    • Get advances for out of town trips.

    By using these techniques some photographers are averaging between $550 and $650

    for an assignment fee for each actual day worked for editorial shooting.

    The important thing to remember is that even when publications have a day rate

    there are still points that can be negotiated and such negotiations can result in

    a larger

    overall fee for the shoot.


    Story 230

    CORBIS ACQUIRES SYGMA


    June 16, 1999 - Corbis has announced its acquisition of Sygma, the world's

    largest news photography agency. This acquisition marks the cornerstone of

    Corbisoe aggressive plans to create a new digital platform for offering real-time

    news and celebrity imagery to publishers and consumers over the Internet. The

    acquisition extends the size of Corbis' image collection to more than 65 million

    images, with more than 2.1 million images online.

    Under the terms of the agreement, Corbis will own and have access to the entire

    Sygma collection of more than 40 million images for an undisclosed amount. Sygma

    will operate as a division of Corbis under the name Corbis Sygma, and will

    maintain its offices in Paris, New York City, and London. Jean-Marc Smadja,

    Eliane Laffont, and Helen Finney will continue to oversee Corbis Sygma operations

    as general managers of the Paris, New York, and London offices, respectively.

    Steve Davis, president of Corbis said, "With our acquisition of Sygma, Corbis

    has amassed a collection of true breadth and depth, adding real-time news imagery

    to our celebrity, contemporary, historical, and fine art imagery. We are excited

    to be on the cutting edge of the industry, using the Internet to bring our many

    different customers the most current and newsworthy photography with ease and

    convenience."

    In the coming months, Corbis will extend this foray into photojournalism by

    announcing a series of partnerships with leading news media and technology

    companies, designed to create the best platform for producing and distributing

    digital photojournalism in the future.

    "The Internet is a perfect platform for selling and distributing current news

    content to the commercial publishing market," said Jean-Marc Smadja, general

    manager, Corbis Sygma Paris. "By combining Sygma's extraordinary collection with

    Corbis' leadership in digital technologies, we will become the leading force in

    the contemporary news marketplace."

    Founded in 1973, Sygma is the largest news photography agency, with more than 40

    million images taken by 200 of the world's leading photojournalists. The agency

    is best known for its in-depth news coverage and high-profile celebrity event

    photography. Its collection is also one of the best archives of news photography

    dating from the 1970s to present, and contains historical photography from the

    early 1800s. Sygma has more than 200 employees in New York, Paris, and London.

    Corbis also has a license agreement with Sipa to handle sales of the Corbis

    archive in France. This agreement runs to the end of 1999. At that point Sygma

    will take over sales of Corbis Images in France. It is unclear at this time

    whether there will be any continuing relationship with Sipa.


    Story 231

    GEOGRAPHIC FOUND GUILTY OF COPYRIGHT INFRINGEMENT


    June 16, 1999 - Judge Joan A. Lenard has found that National Geographic Society

    infringed the copyright of underwater publishers Jerry and Idaz Greenberg when

    they used Jerry's copyrighted images as reference materials for two projects

    without permission or compensation. The case was heard in Federal Court in the

    Southern District of Florida in Miami.

    The case has been referred to Magistrate Judge William C. Turnoff for the

    purposes of holding a settlement conference to determine the amount National

    Geographic will be required to pay to the Greenbergs.

    This is the first time National Geographic has been found guilty of copyright

    infringement of a photographer's work. The case may open the door for legal

    action by other photographers against the Society.

    In a review of the facts of the case it was shown that Walter Cutler, the

    work-for-hire illustrator hired by the Society to produce illustrations for an

    educational GeoPack project, improperly used books produced by the Greenbergs as

    reference for his illustrations.

    On his working drawings Cutler noted the page references referring to the

    photographs he had copied so the Society editors could verify that the

    illustrations were accurate. This clearly laid the responsibility on the Society

    editors because they were fully aware of what had been done and were responsible

    to obtain proper permissions and deal with compensation issues.

    Cutler's illustrations also met the test of "substantial similarity" according

    to Judge Lenard. The Greenbergs had produced overlays from their books that

    clearly showed the illustrations were almost exact matches of the Greenberg's

    photos.

    In challenging the Greenbergs' motion for Summary Judgement on Liability,

    lawyers for National Geographic Society argued that the newly created

    illustration did not violate the Greenbergs' copyright, and "that even if these

    images reflect copyrighted material, this use constitutes "fair use".

    Judge Lenard found that the illustrations "improperly infringed the photographs

    at issue, and that the doctrine of fair use is not applicable to these facts."

    The court took into consideration the four nonexclusive factors to be considered

    when determining whether the fair use doctrine applies and concluded, "that

    neither the GeoPack product nor the Jason Project poster qualify as fair use."

    The four factors are:

    • the purpose and character of the use, including whether such use is of a

      commercial nature or is for nonprofit educational purposes;

    • the nature of the copyrighted work;

    • the amount and substantiality of the portion used in relation to the

      copyrighted work as a whole; and

    • the effect of the use upon the potential market for or value of the

      copyrighted work.

    The courts detailed presentation of the facts related to each of these points

    should be useful to others faced with a "fair use" claim by any organization, and

    particularly National Geographic.

    Counts three and four in the Greenberg's case are not a part of this decision

    and dealt with the use of the Greenbergs copyrighted images in the "108 Years of

    National Geographic on CD-ROM". Earlier in the proceedings lawyers for National

    Geographic argued that the "Tasini" decision in the Southern District of New York

    confirmed their right to make uses in the "108 Years" project without

    compensating photographers in any way. The Greenberg's argued that "Tasini"

    should have no bearing on their case because that decision was being appealed.

    On this point the judge agreed with National Geographic and issued a partial

    summary judgement on the two counts. Thus, the arguments relating to the use of

    the Greenberg's images in the "108 Years" project were never heard. The

    Greenbergs have the option to appeal that decision of the judge.

    Oral arguments for the appeal of the "Tasini" decision have been heard in the

    New York Appeals court and all parties are presently waiting for the judge's

    ruling in that case. The results of that case could affect the Greenbergs

    ultimate decision.


    Story 218

    TSI PRICING STRUCTURES


    May 6, 1999 - Want to know why prices are so low?

    Our stock agency, Stock Connection, and I presume a lot of other stock agencies,

    recently received a copy of a TSI price schedule for future uses of their images

    by Norwegian Cruise Lines. These uses will be in brochures, postcard mailers and

    external newsletters sent to customers.

    Norwegian is telling agencies to either match or beat these prices if they want

    their images considered for future uses. They say they won't consider images from

    any agency that doesn't supply a price schedule in advance. A smart strategy by

    Norwegian.

    The list below is the schedule of rates TSI provided. For comparison purposes I

    have included the rates listed in Negotiating Stock Photo Prices which are the

    base rates used by Stock Connection. NSPP recommends that the 1/4 page or less

    should be charged at the 1/4 page rate so it is the same as the 1/8 page rate.

    All these uses are for a one-time mailing in the USA only.

    Brochures

        

    TSI Rates  

    NSPP Rates  

      Brochures based on 100,000 print run  

        

        

      Inside 1/8 page   

    $425  

    $475  

      Inside 1/4 page  

    $440  

    $475  

      Inside 1/2 page  

    $530  

    $595

      Inside full

    $560

    $830

      Inside double page

    $635

    $1450

      

      

      

      Cover 1/8 page

    $660

    $640

      Cover 1/4 page

    $695

    $640

      Cover 1/2 page

    $740

    $805

      Cover full

    $760

    $1185

      Cover wrap

    $920

    $1778

      

      

      

      

      

      

    Postcards

      

    TSI Rates

    NSPP Rates

      Postcard Mailer Rated based on 20,000 print run

      

      

      1/8 front

    $400

    $480

      1/4 front

    $450

    $480

      1/2 front

    $490

    $598

      3/4 front

    $530

    $720

      full front

    $610

    $840

    External Newsletter

    Rates based on 400,000 print run

    (This newsletter will be sent to customers.) The NSPP rates are based on

    an external newsletter.

      

    TSI Rates

    NSPP Rates

      External Newsletter

      

      

      Inside 1/8 page

    $410

    $610

      Inside 1/4 page

    $450

    $610

      Inside 1/2 page

    $490

    $760

      Inside full

    $570

    $1065

      Inside double page

    $660

    $1704

      

      

      

      Cover 1/8 page

    $635

    $823

      Cover 1/4 page

    $675

    $823

      Cover 1/2 page

    $715

    $1026

      Cover full

    $755

    $1525

      Cover wrap

    $945

    $2290

    These rates were first agreed to by TSI on August 18, 1997. We contacted TSI in

    an effort to try to confirm that this is still their policy, but they never

    responded.

    It is interesting to note that TSI reports to their photographers the type of

    use for every license, but not size of use. Thus, when photographers see a small

    fee they have a tendency to believe that the use was for 1/8 or 1/4 page, when in

    fact it may have been used much larger.


    Story 224

    TIME WARNER PROFITS


    A couple tidbits to ponder courtesy of Seth Resnick. The current price of

    Time/Warner stock is around 71. In October 1998, just 7 months ago the price was

    36 5/8. The current market capitalization is in excess of $80.932 billion. For

    the fiscal year ending 12/98, revenues rose 10% to $14.58 billion. For the three

    months ending 3/31/99, revenues were $3.266 billion and after tax earnings were

    $1.38 billion.


    Story 222

    ART.COM


    Getty In Consumer Market

    May 12, 1999 - Getty Images, Inc. has announced the acquisition of Art.com, a

    leading provider of framed and unframed art and art-related products on the

    Internet.

    The Chicago-based company operates in the approximately $9 billion global

    consumer art market. This should be compared in size with the roughly $1.25

    billion worldwide business-to-business stock photography market.

    This acquisition marks the expansion of Getty Images' current online business

    into the much larger consumer art market. Gettys hopes this move will

    significantly increase their customer base and market opportunity. It will also

    leverage Getty Images' extensive collection, consisting of more than 30 million

    images, by making it available to the consumer marketplace through Art.com.

    Art.com has more than 100,000 images online, including works by artists such as

    Monet, van Gogh and Picasso, and photographers such as Herb Ritts and Robert

    Mapplethorpe and will operate as a wholly owned subsidiary of Getty Images.

    Art.com will form the foundation of the consumer division of Getty Images.

    The company's successful www.art.com web site generated more than 400,000

    average user sessions per month in the first quarter of 1999. Sales orders have

    increased by more than 40 percent per month since January 1999. Art.com has

    major merchant partnerships with almost 7,000 affiliate web sites, as well as

    with Yahoo! and America Online.

    Under the terms of the agreement, Art.com shareholders will receive 4.51 million

    newly-issued shares of Getty Images common stock. Under certain predetermined

    conditions, the shareholders may receive in the future up to an additional $84

    million of consideration, consisting of shares and cash, depending upon the value

    of Getty Images stock at the time of the payment. (Bloomberg News estimated the

    package could total $202 million.)

    The www.art.com web site features proprietary technology that allows customers

    to visualize more than one billion custom matting and framing combinations for

    their selected print on-screen before purchasing.


    Story 229

    "ARTISTS CHOICE" AT EYEWIRE


    June 16, 1999 - EyeWire, probably the third largest seller of "Royalty Free"

    photos in North America, has begun offering "Rights Protected" contracts to

    photographers in a move to develop a separate division of their online business.

    EyeWire hopes to eventually work with 150 to 200 of the world's leading

    photographers.

    With this move they expect to be able to supply a full range of photo services

    to on-line customers. Photographers who participate in the RP division will be

    given the option to supply images for RF, but that will not be a requirement.

    Images will not be licensed as RF without specific permission from the

    photographer.

    In March, EyeWire hired Charles Mauzy, formerly of Corbis, to establish a new

    product and business development office in Seattle. They moved quickly to

    develop a rights protected division and are following in the footsteps of other

    major photo suppliers who offer both "Royalty Free" and "Rights Protected" images

    to their customers.

    They expect a soft launch of the RP section of their site in late fall. Drina

    Lazar, VP of Content Development at EyeWire said, "Our assumption is that we can

    go on-line with a tiny, tiny little file. There is no barrier to us putting

    images on-line since we are already putting all our RF material on-line. All we

    need is some type of pricing mechanism (for Rights Protected)."

    Artist Choice

    Probably the most unique feature of this contract is the "Artist Choice"

    concept. A photographer can designate, at the time of submission, up to ten

    images per year as "Artist Choice" and will receive royalties of 70% on the

    licensing of these images. The photographer receives 50% on the licensing of all

    other images.

    Mauzy pointed out that initially, in addition to making the images available

    on-line, they will probably promote many of the "Artist Choice" images in their

    print catalog (64 page brochure) that is mailed monthly to approximately 750,000

    buyers.

    At first glance the chance to get 70% would seem to be an irresistible draw and

    cause many to want to pull images out of other major agencies. However, based on

    my thirty five years of selling stock images I have found that where the image is

    has a lot more to do with the volume of sales it generates than whether it is a

    "great image." I have always had dupes of most of my images with many agencies.

    My experience has shown that best sellers at one agency do not necessarily sell

    well at a different agency.

    Buyers tend to develop preferred resources for locating pictures and this varies

    from buyer to buyer. They usually choose the best image they can "easily" find,

    not necessarily the best image that can be found anywhere. An image that does

    well at Corbis, for example, will not necessarily do well at EyeWire. The buyer

    who uses Corbis may pick something else from the Corbis file rather than going to

    EyeWire. On the other hand if a photographer could have the same image, of

    different variations from the same take at more than one on-line site he or she

    might do better.

    The problem with putting newly created, untested images into "Artist Choice" is

    that it is usually a crap shoot trying to pick the images that will turn out to

    be best sellers. Photographers tend to think their most recent production will be

    a winner. Some may feel strongly about images produced in January and put them in

    "Artists Choice" only to discover that they produce even more marketable images

    before the end of the year. In all likelihood many of the images picked from

    future productions for "Artist Choice" will turn out to be poor sellers. On the

    other hand the print catalog promotion of these images might drive the volume of

    sales and turn catalog images into best sellers.

    One thing that does not seem to be an option with "Artists Choice" is to convert

    an image from "EyeWire Selects" to "Artist Choice" a year or so after an image

    has been working in the EyeWire file. At that point the photographer would have

    some idea as to whether the image was likely to be a best seller at EyeWire.

    Ms. Lazar indicated that they hope to get feedback from the photographers and

    depending on photographer reactions modifications might be made in certain

    provisions. One suggestion I would make is that photographers might want to try

    to negotiate a higher number of "Artist Choice" images than ten. Ten is a very

    arbitrary number.

    Percentage Of What?

    An important issue to be understood is exactly how royalties will be calculated.

    When EyeWire sells directly to End Users it is clear what the royalty percentage

    will be, but when sales are made by "distributors, agents, or sub-agents," it is

    unclear what percentage of the gross fee collected will eventually be paid to the

    photographer. EyeWire has not explained how they will operate their "network" and

    the percentage of the total sales that are likely to be made by other sellers

    rather than licensed directly.

    If some other "agent" makes the sale what percentage will that agent take off

    the top -- 30%, 40%, 50% -- before the remaining monies are passed on to EyeWire?

    One of the difficulties with an organization that is starting a new line of

    business is that things like this have yet to be defined.

    EyeWire uses SuperStock as a resource for many of their RF images and they would

    seem a likely resource for handling negotiated sales. Ms. Lazar said they have

    not had discussions with SuperStock or any other sales agent in the U.S. about

    handling negotiated sales for images on the EyeWire web site. "Our intention is

    to focus on the web which is a direct channel and E-commerce." (This might imply

    a lot of fixed price selling and very little negotiation.)

    She acknowledged that the terms in the "Royalty and Payment Schedule" of the

    contract leave open the option to sell through such agents, but, she said, "we

    haven't gone down the initial road of trying to sign people up, or looking at

    this possibility."

    It is understandable that EyeWire may not know, at this point, what kind of

    deals they will cut with distributors and sub-agents in the future. For this

    reason one photographer suggests that it is necessary to add a clause that

    establishes a floor, or minimum percentage of the "gross sale" price, that the

    photographer will receive on every sale.This photographer believes that floor

    should be in the range of 30% to 35%.

    Pricing Usages

    One thing not mentioned in the contract, but very important to understand, is

    their pricing strategy. Ms. Lazar said, "Given the web model it would have to be

    a lot of fixed pricing, but we are feeling our way through this with input from

    key suppliers."

    It is important for photographers to understand what these pricing schedules

    might be particularly in light of the fact that the company is coming from a

    "Royalty Free" philosophy. EyeWire's sales staff works from fixed price

    schedules. Photographers should want to know who will be training the sales staff

    in negotiating techniques and what experience that person brings to the table.

    Mauzy clearly understands that there are many uses that need to be negotiated,

    but the key to success will lie in the person charged with providing the day to

    day sales training in Calgary.

    The percentage of fixed price sales relative to negotiated sales is also

    important. For purposes of comparison, in the Picture Network International model

    the low end, fixed price sales make up about 70% of the volume, but probably

    represent less than 30% of the gross revenue.

    Exclusives

    EyeWire wants world-wide exclusive rights to selected images plus similars. The

    similars issue is a major problem for many photographers because it impossible to

    maximize sales for much of their production, particularly when dealing with a

    company without a major track record. EyeWire's definition of Similars, "means

    any Contributor image (including a duplicate or composite) of any image whose

    principal elements are depicted in a way that, when compared side by side to the

    Contributor's images, would cause an End User to believe they are substantially

    the same." For many photographers this is too rigid.

    The contract goes on to say, "Exclusive means that, commencing on the Effective

    Date ... Contributor agrees not to provide any Content, including composite

    works, derivative works or Similars, to any third party on any basis whatsoever,

    except for the Contributor's personal promotional purposes where no rights are

    granted." At the very least photographers can't sell similars themselves, and

    with the words "any content" and "any third party" it may prohibit them from

    making any direct sales of any or their work.

    This is probably not what was intended and it will probably be changed for those

    who request a change, but it points out the dangers of signing a lengthy contract

    like this without very careful examination.

    The exclusive aspect of this contract will be a major stumbling block for many

    photographers. Some feel it would be foolish to risk their best images on this

    type of deal until there is some demonstrated track record. If EyeWire had a

    large "rights protected" file and demonstrated sales of those images, like TSI,

    The Stock Market, TIB or FPG then a world-wide exclusive might make sense.

    Mauzy indicated that they might be willing to negotiate on the "exclusive" issue

    in a few special cases, but both he and Ms. Lazar emphasized, that they needed

    exclusives in order to be able to offer rights controlled sales.

    My suggestion to those interested in working with EyeWire's would be to push for

    a non-exclusive agreement for the first couple years until the volume of "rights

    protected" sales from this operation can be demonstrated. The fact that EyeWire

    is successful at selling RF is no guarantee they will be able to build a

    successful RP model.

    Photographers should also be cautioned that a simple changing of the words

    "Exclusive Rights" to "Non-Exclusive Rights" in the Grant of Rights section is

    not enough. The word "exclusive" is sprinkled throughout this contract and

    photographers need to deal with every instance very carefully to make sure they

    are not giving away more than intended.

    Some photographers believe it is reasonable to give an agency world-wide

    exclusives on those images that are actually placed in a print catalog. I am not

    convinced that makes sense, particularly with a start up operation. Considering

    the oversupply of print catalogs in the marketplace, such catalogs may tend to do

    more to promote the general file of the agency than sell specific catalog images.

    This may be particularly true for the "throw away" catalog that is EyeWire's

    prime marketing vehicle. Buyers do not store these on the shelf like they do a

    thick print catalog. This method of pushing individual images may work, but as

    yet it is untested. Keep some options open.

    If EyeWire has a client who wants to license exclusive rights to a particular

    image make them come back to you and get clearance. These situations happen so

    infrequently that this is no great burden and when they do happen the buyer

    almost never needs an instantaneous decision.

    EyeWire also wants the exclusive right to: "alter or modify the Content in any

    way EyeWire sees fit, including, but not limited to, create derivative works,

    composite works ... at EyeWire's sole or exclusive discretion." This is a deal

    breaker for many photographers unless they are given more say over the degree of

    alteration and compensation for composites is clearly defined.

    Online Analysis

    In our online article we pointed out a number of other points in the

    contract that photographers should examine closely and carefully consider before

    agreeing to place images on the EyeWire site. Newsletter subscribers can find

    this information at

    www.pickphoto.com/sso/stories/st229.htm . If you are not

    online and would like to see this information contact us and we will mail you

    copy. Non-subscribers to Selling Stock can get a copy of this story and a sample

    issue of the newsletter for $10.00.


  • Copyright © 1999 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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