Jonathan Klein was recently interviewed by Dan Sabbagh of London-based TimesOnline, Klein revealed that Hellman & Friedman will own Getty Images for longer than the investment company’s typical period of three-and-a-half years. Klein told Sabbagh: “Hellman tells me that their average investment is for three-and-a-half years, but in a recession it could take longer. We’ll sell it or float it, and it depends on the strategies of various media companies, and whether they see imaging as an interesting business”.
After spending more than 13 years acquiring some 100 agencies and libraries and consolidating what was once a massively fragmented industry, Getty Images itself was acquired by private equity firm Hellman & Friedman in July 2008 for $2.1 billion. As a result of taking the company private, Klein earned $53 million, Mark Getty $38 million and the Getty family trust $281.3 million. According to Sabbagh’s research, some of that money was reinvested for a 25% stake in the private company.
Klein said, “Profits peaked in the two years before we went private.” He attributed this not to the Internet and the availability of millions of cheap photos through Web sites such as Flickr (and, of course, the Getty-owned iStockphoto), but rather to the problems facing advertisers and traditional media: “Print began to suffer. It is the best market for us, we get the highest price per picture, and so revenues began to decline.” Rights-managed sales used to average about $550 per image licensed, but the average is probably much lower today.
Getty’s 2007 were $857 million, with net profits of $125 million. Klein acknowledged to Sabbagh that “this year, sales will certainly be down—find me a media company where sales are up.” He also said that, as a result of cost-cutting, “profits will be in line with last year.” However, with $1 billion of debt taken on since the acquisition—only three times underlying earnings Klein says—net profits will be down.
With regard to iStockphoto, Klein revealed that, “In December 2005, before we bought the company… the site did $600,000 of business. Yesterday (October 15, 2009), it did $850,000 in one day.”
In discussing the editorial side of Getty, Klein said, “In 2000 we employed 25 photographers, now we employ 125, and I don’t know that newspapers will have increased their staffs during that time. We are photographer friends, but not photographer cuddly,” Profit margins from this side of the Getty business are 35%.