July 2001 Selling Stock

Posted on 7/10/2001 by Jim Pickerell | Printable Version | Comments (0)

415

JULY 2001 SELLING STOCK




Volume 11, Number 6



©2001 Jim Pickerell - SELLING STOCK is written and
published by Jim
Pickerell six times a year. The annual subscription rate is $120.00 to have the printed
version mailed to you. The on-line version is $100.00 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 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


"We can't see what is ahead of us by looking twice as hard at what is behind us."


Kent Miles


Story 413

AD SALES DOWN SIZE =5>



June 22, 2001 - Leading forecasters have reduced their estimates for
advertising spending for the second half of 2001. John Perriss, chairman and chief executive at
Zenith Media in London expects ad spending in the major media, including television, newspapers,
radio, magazines, billboards and the Internet to decline 2 percent in 2001 from the 2000 level.


Advertising spending in 2000 was $235,939,000,000 in the U.S. according to Salomon Smith Barney.
This was up about 9.1% from the spending in 1999. First Quarter 2001 estimates are that spending
declined about 5.2% from the 4th Quarter. It is also expected that 2nd Quarter will be down
another 6% below the 1st Quarter.


Magazine advertising in 2000 was about $11,770,000,000 and direct mail spending was
$44,929,000,000. These two areas which are the biggest advertising users of still photography
represent about 24% of total monies spent on advertising placement in 2000.


I estimate that about $370,000,000 was spent in the U.S. in 2000 on stock photography used in
print advertising and direct mail. This is about 8/10ths of 1% of the money spent on ad placement.


Lauren Rich Fine, who follows the advertising industry for Merrill Lynch said there are no signs
at this point that there will be any improvement in the second half of 2001 compared with the
first half. She is forecasting gains in American ad spending in 2002 with a 5.1 percent increase
compared with 2001.


Story 414

TASINI WINS SIZE =5>




June 26, 2001 - The Supreme Court ruled in favor of Jonathan Tasini in his
case against The New York Times and other publishers on the question of whether creators have the
right to control the use of their copyrighted works.


The court ruled 7-2 that a compilation in an electronic database is different from other types of
archival or library storage of material that once appeared in print. The copyright laws require
big media companies such as The New York Times to get permission from free-lancers before posting
their work in digital databases.


Large publishers argued that a ruling for the authors would have "devastating" consequences for
complete access to the historical record. "Historians, scholars and the public lose because of the
holes in history created by the removal of these articles from electronic issues of newspapers
such as the Times," Arthur Sulzberger Jr., chairman of New York Times Co., said in a written
statement.


The New York Times claims that only 8% of the articles published between 1980 and 1995 were
produced by free-lancers, but this totals about 115,000 articles by 27,000 writers. Many of these
are features from the travel, book review and magazine sections. In 1995 the Times amended their
contracts to require all contributors to permit electronic usage of any material the newspaper
purchased and used.


Justice Ruth Bader Ginsburg wrote the majority opinion for the Court and suggested, "The parties
may enter into an agreement allowing continued electronic reproduction of the Author's works;
they, and if necessary the courts and Congress, may draw on numerous models for distributing
copyrighted works and remunerating authors for their distribution. ...speculation about future
harms is no basis for this Court to shrink authorial rights Congress established in 201(c)" (of
the Copyright Act).


However, the Times seems opposed to trying to work out some reasonable method of compensating
authors for additional uses that might be made of these articles in the future. Instead it intends
to delete from the New York Times newspaper's electronic archive all free-lance material covered
by the case.


Other defendant include Time Inc., which said it will start deleting articles on a case-by-case
basis from the Time and Fortune databases, and The Tribune Company, parent of The Chicago Tribune,
The Los Angeles Times and Newsday, which is assessing the decision's impact.


None of the defendants seems inclined to try to develop a system that would return a portion of
the revenue collected to the copyright owners.


Determining Damages


The Supreme Court sent the case back to the Federal District Court in Manhattan to work out
details of a remedy for the violation. According to lawyers involved in the case, there are still
a number of unresolved questions that were not part of the Supreme Court case and they may take
months or years to resolve. It is worth noting that this case was filed in 1993 and has been
working its way through the legal system since that time.


The National Writers Union has set up a "publication rights clearinghouse" where writers can
register their work and publishers can track copyright ownership and payment obligations. This
system delivers payment based on actual usage and a few publishers are using this system to
compensate free-lancers.


Catherine Mathis, a spokeswoman for The New York Times said the paper would not negotiate with the
union because "it does not speak for all free-lancers." (The NWU has 7,000 members.) Instead, the
Times intends to lobby Congress to amend the copyright statutes.


A key question in determining who will be able to collect damages as a result of a final
settlement, and thus the overall limits of damages, is how to interpret the three year statue of
limitations for copyright law. Publishers are likely to argue that the three-year period begins
when the article is put into the database, meaning most infringements have expired. Free-lancers
will likely claim a fresh infringement occurs every time a piece is downloaded. However, even if
this argument were to be accepted their is a likelihood that many items in the database have never
been downloaded. Any claimant who has not already filed a suit may be prohibited from doing so.


Implications For The Future


In recent years The New York Times and other publication have been modifying their working
agreements with free-lancers to allow the publications to use material originally produced for
print purposes in all electronic formats. Most have been paying little or nothing extra for these
rights.


If creators agree to such terms before producing the initial work, or the initial sale, then the
Court's decision does nothing to provide them additional protection or compensation. Photographers
who want to protect their rights must insist on having a formal written agreement with the
publisher before any work begins.


This decision, is unlikely to bring additional compensation for past work to many photographers.
It will not push publishers to pay higher rates, or to pay more for additional uses. Individual
sellers will still need to negotiate hard, on a case by case basis, if they expect to get higher
fees. They will also need to be prepared to say NO to bad deals.


Revisions


The case turned on whether electronic reproduction of a newspaper or periodical constitutes a
revision of the original print edition. Under copyright law, publishers do not need the author's
permission to produce a revised version of the original edition.


The publishers had argued that their collective work copyright accorded them the right to
reproduce the separate articles under section 201(c) of the Copyright Act. The Court found that
the publishers were not protected "because the databases reproduce and distribute articles
standing alone and not in context."


"Like the Court of Appeals, we conclude that the 201(c) privilege does not override the Authors'
copyrights, for the Databases do not reproduce and distribute the Articles as part of a collective
work privileged by 201(c)," wrote Justice Ginsburg.


National Geographic


In the majority decision Justice Ginsburg drew a distinction between a microfilm roll and a
database, both of which combine multiple editions. She pointed out that with microfilm "the user
first encounters the article in context," while in a database the individual articles are
"disconnected from their original context."


The court may soon have a chance to expand on the role of context because National Geographic has
announced that it would soon appeal to the Supreme Court the Atlanta Appeals Court ruling in the
Jerry Greenberg case. That case involves the publication of a 30-disc CD-ROM set entitled "108
Years of National Geographic on CD-ROM." (See Story 389 at www.pickphoto.com/sso.)


In this instance Geographic reproduced every page of every issue of the magazine, but the appeals
court still determined it was a new work rather than a revision. It will be at least fall before
we know whether the Supreme Court will agree to hear the case.


Currently the Greenberg case has been remanded to the District Court in Miami. If the Supreme
Court refuses to hear Geographic's appeal, then the Miami court has been instructed to hold
hearings and provide "injunctive relief" for Greenberg. The appeals panel of judges instructed
Judge Lenard in Miami "to consider alternatives, such as a mandatory license fees, in lieu of
foreclosing the public's computer-aided access to this educational work."


While Geographic may be forced to pay damages in those instances where suits have been filed, only
a handful of photographers have filed suits at this time. The statute of limitations may have
expired for all the rest. For more background on the Tasini case and how it has progressed see
Stories 72, 82, 88, 107, 131, 354, and 388.


Ziff Davis' Answer


Ziff Davis was not part of the Supreme Court case, but since the decision the following clause has
started appearing in Ziff Davis contracts. Look for more publishers to follow suit in an attempt
to protect themselves. Get signed contracts before doing work and read contracts carefully.


"As additional consideration to Ziff Davis for entering into this Agreement, I hereby grant to
Ziff Davis an irrevocable, non-exclusive license to publish in all forms and media, including
microfilm and electronic databases, all photographs taken by me and published by Ziff Davis or its
predecessors prior to the date of this agreement."


Story 413

NY TIMES RIGHTS GRAB SIZE =5>




Attempts Unauthorized Sale of Kennedy Image


June 22, 2001 - Months before the above decision, the New York Times was
claiming all-rights to anything published in their newspaper, regardless of what the invoice said
or any one-time use agreements the photographer might have had with the picture editor.


Recently, photographer George S. Zimbel caught the Times trying to sell a print of Jacqueline and
John Kennedy that he supplied to the Times in 1960 for one-time use. The print had been held in
the Time's files since then.
Recently, the Times decided, without any authorization from Zimbel, to put the print on sale at a
Paris Photo Gallery for $4,000.


Once caught, the Times did not admit they had made a mistake, but tried to justify themselves. A
New York Times lawyer engaged in a three month back and forth letter campaign with Zimbel before
finally conceding that the print belong to Zimbel, not the Times. The whole situation is
chronicled word-for-word in the Columbia Journalism Review at www.cjr.org/year/01/3/photo.asp.


Any photographer reading this piece is likely to have grave reservations about ever making any of
their photos available to the New York Times for licensing. It is not worth the grief.


Story 402 AND 412

PICTOR INC. BANKRUPT IN US SIZE =5>



June 22, 2001 - On May 3rd Pictor International, Inc., a subsidiary of
Pictor International, Ltd. filed Chapter 11 bankruptcy in the District of Columbia. The company
listed total assets of $635,000 and debts of
$1,278,341.


As of May 5th the offices in Los Angeles, Atlanta and Washington, DC were closed and all
operations centralized in New York. They currently have a staff of 6 full-time people and 2
part-timers.


The London headquarters announced Pictor had achieved 23% revenue growth across its European
markets in 2000. In the future it would concentrate its business on its UK/European offices and an
international network of 38 agents. Pictor's European offices are located in London, Paris, and
Munich.


"Unlike some of our competitors we have achieved strong sales growth in all our European markets
over the last 12 months, and we see continued very strong potential", says Jonathan Gibson who is
Pictor managing director. "As such it makes sense to concentrate our efforts in these markets,
where by comparison the US market has been sluggish".


Pictor recently released its latest rights-protected catalog "Imagine" which showcases a broad
range of contemporary and conceptual images, and the company is poised to launch its all-new web
site over the next few weeks.


Creditors Meeting


On June 21st a creditors meeting was conducted by the U.S. Trustee (of the bankruptcy court) to
further examine the Pictor International Inc. Chapter 11 bankruptcy filing, and to give creditors
a chance to ask questions.


Their assets dropped from the $635,000 reported on May 3rd to $475,112.45. Debts rose from
$1,278,341.54 to $1,742,800.29. They said that $416,088.56 of these debts were monies owed
photographers.


The amounts owed photographers were itemized and included $51,292.53 owed to Robert Llewellyn and
$48,660 owed to Allan Laidman. There are 10 other photographers owed between $5,000 and $15,000,
13 owed between $3,000 and $5,000, 23 owed between $2,000 and $3,000 and 43 owed between $1,000
and $2,000.


At the time of filing Pictor had $150 cash on hand and $180,000 in accounts receivable for
pictures licensed. Some of these accounts receivable go back as far as two years. Between May 3rd
and June 21st about $82,000 of these receivables were collected and added to the cash account.
Other assets include a Mitsubishi Eclipse valued at $6,259.70, and furniture, fixtures, and
computer equipment valued at $73,231.75. This value was determined by calculating costs minus
depreciation so there is no assurance these assets can be sold for anywhere near their estimated
value.


Finally, $194,127.70 of the assets are for "Transparencies -- images placed with Debtor pursuant
to executory contracts with photographers (subject to, and not net of, cost of cure or contract
defaults with photographers whose images have been placed with Debtor), net of depreciation."
Pictor says these are all images which they wholly own and do not include any of the images
contract photographers have submitted for the purpose of licensing.


Claims


The Bank of New York has a secured claim for $104,230 and will be paid first from any assets.
Various taxing authorities hold unsecured priority claims for a total of $173,268. After the Bank
of New York they will be paid before any monies are paid to the "unsecured non-priority" creditors
which includes the photographers.


Included in the "unsecured non-priority creditors" with the photographers are all those who are
owed for rent, utilities, legal, stationary supplies, catalog distribution, Communications Arts
ads, etc. Also included in this category is an inter-company loan for $786,000. Pictor indicated
that the loan debt might be subordinated in some way when they file their plan for reorganization
which should occur within about 120 days. The total for this category is $1,465,301.29, but look
for that figure to go up.


If Pictor were to go into liquidation (Chapter 7), after paying off all the monies owed to those
in categories one and two, any monies left would be divided proportionally among the
"non-priority" creditors based on the amount each was owed.


According to Marie Christine Tarrant, Chief Financial Officer of Pictor, at one time Pictor Inc.
(U.S.) had average gross sales of about $200,000 per month, but in the last year that figure has
dropped to about $85,000 per month which would be a little over $1 million on an annual basis. In
May 2001, the first month that Pictor operated as a "Debtor in Possession" gross sales were
$54,800.


Who Is Owed What?


Earlier I mentioned that Pictor says their debt to photographer is $416,088.56. When I totaled the
individual items they supplied in court documents the debts to photographers came to $474,366.54.
Ms. Tarrant could not explain this discrepancy. The amounts owed photographers do not include any
of the monies from sales made by PictureQuest as that contract is with the Ltd. company, not
Pictor Inc. Presumably photographers will be paid in total by the Ltd. company for sales made by
PictureQuest, however Ms. Tarrant could not provide an absolute answer on this point.


It is important to understand the structure of the company. Pictor International Ltd. is a holding
company headquartered in the UK and it handles sales in the UK. It wholly owns four separate
subsidiary companies in Germany, France, Spain and Pictor International Inc. in the U.S. The only
company affected by the bankruptcy is the U.S. company. A critical factor in how photographers
will be paid has to do with whether their contract is with the U.S. company or with the UK limited
company.


A number of photographers included in the $474 thousand have contracts with the Ltd. company. They
probably will be paid directly by Ltd. and the total owed to Inc. creditors will be reduced
accordingly. Ms. Tarrant had no idea what the total might be but acknowledged that this was
something they needed to determine.


he $474,366.54 does include all sales made internationally through the end of April 2001 as well
as sales made in the U.S. Photographers are entitled to their full commissions on sales made from
May 1, 2001 onward, once money is collected. In the past Pictor reported sales one month after
they were booked and (in theory) paid 90 days later. In the reorganized company Ms. Tarrant is
considering only reporting sales when they have actually been collected and paying at that time.


Where Are The Transparencies?


One of the key questions for photographers is, "Where are my transparencies."


The New York office has a small space and were unable to accommodate all the files that were in
the Washington office. All 35mm images have been put in two non-air conditioned storage warehouses
in the DC area. No one is searching through any of those images to fulfill requests. The only
images that were moved to New York are large format images -- 2 1/4 x 2 1/4 and larger. There are
approximately 15 file cabinets of images in New York.


The 35mm images can not be returned to the photographers until the bankruptcy is settled. It is
Pictor's hope that they can sell the agency and the new owner will want to market those images.
Consequently, they want to keep them as they are. It should also be recognized that with their
greatly reduced staff they don't have the personnel to do file research, or break up the file and
return the images to photographers, anyway.


Reorganization Plan


Pictor is considering three options for reorganizing the company. The eventual plan will be
presented to the creditors for their approval in approximately 120 days. The options being
considered are:


  • To sell the company. Pictor says they are in the very beginning discussions with a potential
    buyer.


  • To find an existing U.S. stock agent who is willing to take over management of the U.S.
    business for Pictor Ltd. This would give that agent access to an international sales network. They
    are talking with at least one agent in this regard.


  • To continue to operate the company themselves.

Any agency interested in buying the U.S. division of Pictor, or in handling U.S. representation of
Pictor's files should contact the London headquarters.


Creditor Committee


A creditor committee has been established and all creditors will be getting notification shortly
about how that operates. The Committee has the right to examine the debtor's officers and managers
under oath, and to review "the debtor's ledgers, accounting or tax approaches, salaries and
benefits, and its general business practices." The Committee has the right to be informed about
the debtor's plans and progress toward reorganization and may participate in formulating the
debtor's plan, or its own plan.


The Committee may employ attorneys, accountants or other professionals to assist and advise and
the fees and expenses may be paid from the general funds generated by the debtor's business. Many
of the functions of the committee can be performed by its own members.


The first acts of the Creditor's Committee will be to (1) elect a Chairman who will be the
principle spokesperson for the committee, (2) consider hiring an attorney to represent the
creditors, and (3) look into the image storage problem and secure environmentally safe image
storage.


May 2001 Operations


Since May 1, 2001 Pictor Inc. has been operating as a "Debtor in Possession". Their first monthly
report shows gross sales of $54,800 and expenses of $132,427 for a net loss of $77,627. Employee
costs alone were $71,175. Assuming employee costs and leases remain the same Pictor would need to
have gross monthly sales upward of $170,000 to be able to pay the photographers their royalties
and break even.

Bankruptcy Clause Unenforceable


One thing photographers learned is that the bankruptcy clause in the Pictor contract is
unenforceable according to U.S. bankruptcy law. The clause says:

    "If the Agency is finally adjudicated as bankrupt, or if a receiver is appointed, or if an
    assignment is made for the benefit of creditors, Photographer may by a notice in writing revoke
    Agency's authorization under this Agreement. Upon such termination, all business activity with
    respect to the Images shall immediately cease and Agency will promptly retrieve and deliver to
    Photographer all Images as required under Paragraph 8 above."

This is standard language for most contracts, but according to the bankruptcy lawyers, once a
company files Chapter 11 they can hold onto all images until a reorganization plan has been
presented to creditors. At that point each creditor can accept or reject the plan. If a creditor
rejects the plan they can terminate their contract. How quickly they get their images back is
another matter because Pictor no longer has the staff to sort through the file. It is likely that
some other provision would have to be made for sorting and returning images. Creditor who reject
the plan will receive no payment for past monies owed. If the creditor accepts the plan then their
existing contract continues in force.

Photographers with all agencies should examine their contracts and recognize their risks if one of
their U.S. stock agencies declares bankruptcy.


Story 406 AND 408

INDEX GETS MORE CAPITALSIZE =5>


May 10, 2001 - Index Stock Imagery, Inc. (www.indexstock.com), has
closed the last $4.5 million of its $20 million mezzanine funding round.

"We started a transition six months ago from extremely rapid growth and a high cash burn to rapid
growth combined with profitability," says Index CEO, Bahar Gidwani. "With the continued support of
the investors, we are on track for reaching profitability by the end of 2001."

Sales have grown strongly in its Index Stock product lines and are ahead of plan for the 2001
fiscal year. "Our customers in the advertising, design, and creative community do not seem to have
been affected by the recent slowdown in the economy," said Mr. Gidwani.

Index Reduces Photographer Percentage To 40%

In early June Index Stock Imagery sent a letter to their photographers asking that they accept a
reduced percentage of sales from 50% to 40% of net revenues collected on Rights Protected sales.

In exchange Index is offering several incentives which are not totally offsetting, but reduce the
effect of the loss of percentage.

  • In the future there will be no catalog fees. Print catalogs only represent about 30% of the
    total company sales, down from almost 80% of sales when the current management acquired the
    company several years ago. Online sales are not dominant and over 90% of the images are delivered
    digitally.

    In the past about 5% of the total monies owed photographers have been deducted for catalog fees.
    Thus, on average, this would have made the photographer's net about 45% of gross revenue
    collected.

  • Index will now pay monthly instead of quarterly which should aid the photographer's cash
    flow.

    Photographers are not the only ones being asked to take a cut. In the past few months Index cut
    their staff by 50% and overall operating costs by almost 50%. All staff have taken pay cuts and
    bonuses have been deferred for four months.

  • Index is also trying to re-adjust the percentages with foreign agents in those cases where
    Index is supplying the agent with a digital database and there is no need for the agent to store
    film or to mail expensive print catalogs as a means of promotion. Index has one deal with an agent
    who has agreed to take 30% instead of the traditional 40%. In such instances, under the new 60%
    for the home agency policy, the photographer would end up getting 28% of the gross sale instead of
    the traditional 30%.

    Unfortunately, many of the agencies attending the recent CEPIC International Congress seemed to
    dislike the idea of percentage cuts as much as photographers. But, at least Index is trying to cut
    costs on all fronts.

    Index is also asking the photographers to let them consider putting some of their images into RF.
    Currently, Index has about 5,000 images in RF. They have about 600,000 Rights Protected images
    online, but only about 100,000 have ever been licensed. They intend to go through their entire
    database and determine if it would be better to license some of these non-selling images as
    Royalty Free. At that point they will contact each photographer and seek approval for specific
    images. No images will be put into RF without the photographer's approval.

    The photographers will receive 20% of RF sales which seems to have become an industry standard. In
    this process they will probably remove and return some images from the database when they believe
    the images are outdated, or redundant to better images in the file.

    Through their new brand, Webspice, Index plans to offer a low rez photo subscription product
    similar to Gettyworks.com and Corbis' BizPresenter.com that will be aimed at power point users.
    Initially they expect to offer a subscription to about 5,000 images for an annual fee of $29.95
    for personal use and $199.99 for a Premium Level. Users will receive a maximum file size of 200K
    for this fee. Photographers will be paid a proportional share of the total subscription fees based
    on the photographer's share of the total images in the "pool".

    Falling Percentages


    While no one likes to see their income drop, the reality in the current market is that costs for
    everyone are going up and revenue is dropping. This is not a case of the agency being greedy, but
    a financial imperative. Almost $30 million in venture capital has been invested in Index Stock
    Imagery and at some point those venture capitalists want to see a return on their investment, just
    like photographers want to see a return on the images they have produced.


    Index believes they can make the company profitable by the end of 2001. If they can't, and the
    VC's refuse to put in more money, then Index might be forced to close it's doors. This won't be
    good for anyone, including the photographers. 50% of no sales is $0.00.

    Index said that if photographers are unwilling to accept the new terms, they will return the
    photographer's images. Holding out for a higher percentage is unlikely to force Index to change
    their policies. Photographers should recognize that Index has many more photographers than they
    need and can afford to lose a lot of them.

    Probably the best option for the photographers is to accept the new terms in order to keep the
    images already in the file working. When it comes to new productions photographers should explore
    ways of cutting their production costs. If that is not possible -- and even if it is -- the
    photographer should also look for other ways to earn revenue such as assignment photography or
    something else.


    Story 411

    SUB-AGENT SHAKE UPSIZE =5>


    June 15, 2001 - The industry consolidation is beginning to present some major
    problems for sub-agencies that have represented catalogs for some of the major brands. Many agents
    that earn a large share of their revenue from licensing rights to images produced by major
    agencies are becoming increasingly nervous about their future.

    In the past an agent in one of the smaller markets might have represented catalogs from several of
    the major brands like Stone, FPG, VCG, SuperStock, Masterfile and Zefa as well as catalogs from a
    lot of smaller agencies.

    As part of Getty's consolidation of brands they seem to be trying to accomplish four things:

    Insure that all their brands are handled by the same agent in a particular territory,

  • Insure that the sub-agency is not representing catalogs of competing brands. The theory here
    is that if a company representing Getty also represents Image State, SuperStock or Masterfile then
    customers might buy an image from a competitor rather than one of Getty's,

  • Insure that the sub-agency will promote the Getty brand rather than their own brand, and

  • As soon as possible, based on existing contractual relationships, bring all selling in-house
    and directly under the control of Getty.

    Some sub-agencies have tried to point out that when they can offer material from several companies
    it enriches their offering to their customers and keeps the customers coming back. In addition,
    representing many catalogs enables the sub-agent to do a larger volume of business and, as a
    consequence, provide a better and more comprehensive service to their customers. So far these
    arguments don't seem to be winning many points.

    Getty is not the only company doing this. Other major suppliers such as (Corbis, Sheldon
    Marshall's Image State, Zefa, AGE, Masterfile, SuperStock, etc.) are engaged in the same strategy,
    depending on the leverage they have.

    This has meant that certain agencies that have worked hard to represent a particular supplier are
    now suddenly being told, "You can't represent any of our new work in the future."

    In some cases the sub-agency has been allowed to represent one book per year from a competing
    agency, but not everything the agency produces. They also may be required to implement certain
    marketing strategies and meet certain sales targets or they will lose the right to represent the
    work of the major agency.

    In some countries one agency might have been representing Stone catalogs, another FPG catalogs,
    and a third VCG. Most of these agreements were for long time periods on a catalog by catalog
    basis. Now, as Getty moves to consolidate all these products under one seller two of these
    agencies are going to lose out.

    In some cases an agent representing certain Getty brand catalogs, must get prior clearance before
    they can represent catalogs from a long list of other brands. In 2000, one agent with this type of
    contract made the mistake of not checking the list carefully enough before signing a contract with
    a new supplier.

    The minute Getty heard about the new contract, they immediately cancelled their contract with the
    sub-agent on grounds of material breach. In an effort to correct his mistake the sub-agent
    immediately cancelled his contract with the new supplier. No images had been licensed, no catalogs
    had been distributed and there had been no advertising promoting the new relationship. Despite
    this good faith effort by the sub-agent to correct the error, Getty proceeded with the
    termination.

    The good news for the sub-agent is that despite the loss of the right to represent images from
    Getty, sales for his company have been steadily increasing since the termination. It appears that
    this agent's customers have more loyalty him than to the big name brand. The fact that this agent
    is no longer representing a Getty brand has also benefited the other independent agencies and
    photographers the agent represents.

    When Getty acquired International Photographic Library (IPL) in Australia last summer, among the
    catalogs that IPL represented were several from SuperStock. Getty immediately cancelled their
    agreement with SuperStock and stopped representing the SuperStock catalogs that were already in
    the hands of IPL customers. SuperStock had to scramble to find someone else to represent their
    work in Australia.

    Through all of this, customers are left wondering who represents what. They have a catalog on
    their shelf that says the images are represented by a certain agency, but when they call that
    agency they are shunted off somewhere else with a new telephone number and a new sales person.
    Will customers keep using that catalog, or will they turn to one of the hundred's of others that
    are sitting on their shelf?

    It is understandable that Getty wants to restrict competition for their products, but this
    approach may end up costing Getty sales.

    One of the reasons so many catalog suppliers have tended to gravitate toward certain agencies
    within a particular country or market is that there are often one or two agencies that are
    head-and-shoulders above everyone else in terms of reputation among the customers. The big
    question is whether the buyers have more loyalty to the local brand and the local people servicing
    their account, than to the big international brand that, in theory, has the hottest images. The
    answer to this questions is likely to be sorted out in the near future as the big brands
    consolidate their position.

    Difficult Choices


    Sub-agencies that have represented catalogs from several companies up to now have some difficult
    choices. The catalogs of any single supplier are unlikely to generate enough revenue to sustain
    their operation at its current level of sales. To lose any one of the majors may cause an
    immediate and substantial drop in the sub-agent's revenues.

    However, choosing to ally themselves with one major supplier also has risks. One day that supplier
    may say, "We've decided we want to have our own wholly-owned office in this country. Goodby!"

    After the majors get finished fighting over the top agencies within each country, others will set
    up operations to represent many of the other smaller agencies that want to market images within
    that country. This may lead to a downsizing of companies that have been the leading sellers in
    some markets, but it may strengthen companies that choose to represent multiple catalogs and
    images from companies that do not require exclusive contracts.

    Many sub-agents may be forced to put more effort into building direct relationships with
    photographers, and smaller agencies. Given the number of major stock photographers currently
    unhappy with Getty and Corbis, now is certainly a good time to be recruiting new image providers.
    In addition, the digital environment is likely to make it a lot easier to manage this new content
    and quickly build a new file than it has been in the past.


  • Copyright © 2001 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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