March 1999 Selling Stock

Posted on 3/10/1999 by Jim Pickerell | Printable Version | Comments (0)

206

MARCH 1999 SELLING STOCK

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Volume 9, Number 4


©1998 Jim Pickerell - SELLING STOCK is written and

published by Jim

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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

Trend Watch's global survey finds there are 488,000+ creatives including: ad

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Story 186

ASMP CANCELS TEXAS SEMINAR


February 24, 1999 - The ASMP executive committee of the national board has

cancelled a stock photography seminar, planned by the Dallas chapter, because

the planned meetings "are inconsistent with ASMP's policy, goals and code of

ethics."

Scheduled to be on the panel were Allen Russell, president of PACA, Les Riess,

president of ASMP, a representative from The Image Bank, Rick Becker-Leckrone

from Corbis, Kasz Maciag from PhotoDisc and Drina Lazar from EyeWire.

According to Les Riess, president of ASMP, "ASMP has long been formally and

completely opposed to clip art (May 1992) for the reason that clip art is

fundamentally damaging to the long term interests of photographers. In addition,

ASMP is currently embarked upon a campaign to reverse the diminishing financial

return and rights that photographers have been receiving from most stock

agencies."

"Against this background, the March program would have given approximately a

half-dozen clip art companies, stock agencies selling clip art, and stock

agencies in the vanguard of decreasing photographers' income and rights, a

platform from which they could make a sales pitch to ASMP members. Because of

the large number of clip art and stock agencies on the panel, combined with the

short amount of time allotted to each speaker, there was no practical way in

which ASMP's position in opposition to these entities could effectively have

been presented."

"We are at the threshold of implementing a plan to take a series of aggressive

actions to reverse declining revenues and rights of photographers in a number of

fields, specifically including stock photography, and we will not be able to

accomplish that without making some people and industry segments unhappy."

The meeting was originally scheduled to have a second day where photographers

could schedule private consultations with the various speakers. Riess said,

"ASMP is not going to make a venue available for people not working in the best

interests of photographers."

This program was modeled to a degree after a program produced in San Francisco

in January called "Future Stock 2000." The speakers in San Francisco were Dick

Weisgrau; Lynn Martin from The Image Bank; Patrick Donohoue from TSI and Rick

Becker-Leckrone from Corbis. Evidently, after that program, ASMP decided that

their message relative to stock was not being presented strongly enough.

ASMP's current goals to influence Stock Photography are as follows:

"To protect photographers' interests by working for:

  • a reversal of the trend toward diminished compensation to photographers due

    to a decreased share of licensing fees paid to photographers and/or increased

    charges made back to photographers from those fees,

  • recognition that a stock agency is obligated to serve the photographers it

    represents faithfully under the traditional principles of agency, which do not

    allow an agent to serve its own interests at the expense of those it represents,

  • compliance by stock agents with the ASMP/PACA Joint Statement of 1992 which

    was intended to ensure that agencies recognize and provide for the minimum

    rights of photographers who they represent."

    ASMP/PACA Joint Statement

    The ASMP/PACA Joint Statement encouraged photographers and agencies to

    incorporate the following minimum standards for fair treatment of photographers:

  • that the agency not use the photographer's royalty share of collections as

    operating funds,

  • that the photographer should have the contractual right to audit all agency

    records which pertain to the reproduction fees for his or her work,

  • that the agency provide reasonable details regarding client usage and

    licensing terms of the photographers's images, such as indemnification of the

    end user of the image, the duration of use, geographic limits, reproduction

    size, identification and description of the image, the press run or circulation,

    and the number of insertions or uses of the image,

  • that agency contracts shall contain renewal and termination terms which are

    the same for both parties and that automatic renewals are discouraged,

  • and that photographers be given the right to establish the level of debt the

    agency can incur on their behalf, and that images may not be held as collateral

    for such debt after termination.

    Selling Stock Editorial Position

    Before leaving this topic, I need to say a little about Selling Stock's

    editorial position. ASMP's goals are admirable. However, sometimes it is

    necessary to temper admirable goals with a dose of reality.

    Back in 1992 many of us were opposed to "clip" photography. Seven years later

    our industry has changed dramatically and photographers need to understand

    current realities, not be locked into out dated policies and modes of thinking.

    In 1999 we must recognize that approximately 15% of the total gross sales

    worldwide of stock photography are "royalty free" images. This percentage will

    continue to rise before there is some balance between RF and RP. RF is here to

    stay. RF has a share of the stock photo market and some photographers will

    produce RF pictures in the future.

    A few photographers are making very good money producing RF images. We have

    reported on some of these in an extensive story on PhotoDisc last summer. Story

    139. RF is certainly not the marketing solution for every stock photographer or

    for every type of imagery, but RF is having an impact on the business that

    photographers would be foolish to ignore. Clients are happy to use RF for many

    of their projects. We believe it is important for photographers to assess, in

    light of their own situations, both RF and RP (rights protected) marketing.

    Virtually all the major marketers of stock images are involved in RF in one

    form or another. This includes: Getty Images, The Image Bank, Corbis, Comstock,

    Index Stock Images, VCG (who say they will be starting an RF division in 1999),

    PNI, etc. To reject an agency simply because they have an RF division, or

    because they have undesirable policies in their standard contract severely

    limits your chances of selling stock -- period.

    The important thing is to learn how to identify the best offer and negotiate

    the best deal for your particular situation. Photographers who want to license

    rights to their images need to figure out how they can co-exist with RF, not

    waste energies and resources trying to eliminate it.

    Photographers need information. They need a better understanding of why art

    directors use RF. They need to understand the strengths and weaknesses of RF.

    They need to watch the development of this segment of the industry as closely as

    they watch the development of the rights protected segment. They need to be

    constantly re-assessing their options. To help in this, Selling Stock will

    continue to provide in depth reporting on both the RF and the RP segments of the

    stock photo industry.


    Story 204

    GETTY E-COMMERCE SUCCESS


    February 9, 1999 - Getty Images, Inc. has reported earning for the fourth

    quarter of 1998 at $50.1 million. This was 96 percent over the fourth quarter of

    1997. Total 1998 sales were $185.1 million.

    Electronic commerce sales, in the quarter, reached more than 15 percent of

    total sales. Digital sales (including CD-ROM sales) in the quarter were $18

    million, representing 36 percent of total sales. Digital sales for the year were

    $59 million, representing 32 percent of total sales.

    In the fourth quarter, Getty's largest brands, PhotoDisc and Tony Stone Images,

    performed well and showed particular strength in electronic commerce. The

    electronic commerce sales of PhotoDisc, acquired in February 1998, increased by

    92 percent in the fourth quarter over the equivalent quarter of 1997 and

    e-commerce sales accounted for 47 percent of total sales in North America.

    In the fourth quarter, more than 15 percent of total sales, or about $7.5

    million, were e-commerce sales. TSI full e-commerce site launched in October

    1998 has exceeded the company's expectations. Over five percent of TSI's North

    American sales were generated online by the end of December 1998 and, of these,

    25 percent were new customers.

    This initial success for Tony Stone Images continued into January 1999 when

    e-commerce sales in North America represented over 10 percent of total sales.

    Sales on http://www.tonystone.com, in January 1999 alone, equaled total

    e-commerce sales for Tony Stone Images in the whole of the fourth quarter of

    1998.

    It should be noted that "full electronic commerce" does not necessarily mean

    payment by fixed fee by credit card and on-line delivery. While the sites offer

    this capability, it is believed that in a significant percentage of cases the

    TSI fee was negotiated and that delivery was by some other means other than

    direct on-line delivery. When questioned on this point sources were unable to

    provide clarification.

    E-commerce sales at PhotoDisc in the fourth quarter of 1998 represented 37

    percent of total sales for that brand. In January 1999, PhotoDisc's e-commerce

    sales represented 40 percent of total sales.

    Electronic commerce sales at PhotoDisc, as a percentage of total sales, grew

    from 19 percent at the end of 1997 to 35 percent at the end of 1998. Getty

    believes that it is possible for the company as a whole, over the medium term,

    to reflect the margins achieved at PhotoDisc.

    PhotoDisc's e-commerce sales for the full year increased by 156 percent, over

    1997, to $20 million. In October 1998 alone, $2.3 million was generated on

    http://www.photodisc.com. Getty launched a new PhotoDisc web site in February

    1999 that contains greater functionality and improvements in customer service,

    including the addition of account self-maintenance and monitoring abilities.

    Getty's Preview service, which allows customers to use in house expertise in

    searching for imagery while utilizing the company's online delivery of

    selections and orders, continues to prove popular among Tony Stone Images'

    customers. Getty believes that the service is effective at ensuring that

    specialist image requests can be met digitally and that the service can help to

    alleviate customer deadline pressure. In addition, Getty believes that the

    service provides an excellent training ground for full e-commerce usage amongst

    all customer sectors. Due to its success, the company has extended the service

    to include its expansive historical collection, Hulton Getty.

    During the next twelve months Getty will invest in enhancing functionality and

    valued added services on their existing web sites. In addition, Getty will

    continue to e-commerce enable relevant parts of the company's content in order

    to provide imagery in a hassle-free web environment.

    In the third quarter of 1999, Getty plans to enhance the separate successes of

    existing web sites by providing the creative market with a hub web site, with

    e-commerce capabilities, containing imagery from some of its leading brands:

    Tony Stone Images, PhotoDisc, Allsport and Hulton Getty. Getty believes that

    existing and new customers will be eager to take advantage of this broad

    selection of high quality imagery.

    Getty intends to continue a strategy of integration during the next twelve

    months. Liaison and Hulton Getty share offices and management in North America;

    Tony Stone Images has extended its customer base to Liaison in 1998 and will

    provide the same benefit to Energy Film Library in 1999.


    Story 196

    EYEWIRE LAUNCHES PORTAL SITE


    February 1, 1999 - EyeWire, Inc. (formerly Adobe Studios) will develop a

    first-of-its-kind resource that will provide visual content - such as video,

    animation, photography, type fonts, illustrations and clip art -- and related

    graphics software, products and services within a single Web site: EyeWire.com

    (http://www.eyewire.com).

    EyeWire's key target market is the creative professional community, whose

    functions include graphic design, advertising, Web site creation and multimedia.

    According to EyeWire there are 500,000-plus professional graphic designers who

    regularly design and produce for print, broadcast and the Internet engaged in

    this industry. They spend several billion dollars annually on products and

    services.

    EyeWire's goal is to develop a site that will be a one-stop resource for all

    the needs of graphic designers, creative directors, art directors, broadcast

    designers, Web site designers, multimedia designers and desktop publishers. The

    site will also be of use to people charged with developing graphics materials

    who are within the small business community, the education industry, and

    non-profit agencies.

    Currently, people developing professional business communications are forced to

    find and purchase content, products and services through multiple sources, many

    of which are not found on the Internet. Using its own products and a rich suite

    of products/services from industry partners, EyeWire.com will create a

    time-saving "one-stop shop" that will provide:

    • Graphics professionals with the industry's most comprehensive selection of

      visual content, a diverse range of editorial features and how-to's,

      opportunities to buy and sell related products and services online, and the

      ability to enhance their expertise through participation within their own online

      community;

    • Business users with "content on demand" that offers the right visual

      solution - typeface, graphics or multimedia - or service, such as printing or

      distribution, without demanding that they do any sourcing or even leave their

      software application.

    Both markets will be served by EyeWire.com's MyWire "personal portal" that will

    allow users to build their own site that features favorite products and

    services; individualized information, such as pertinent articles, industry trade

    shows or competition deadlines; and personalization capabilities, such as

    flexible "look and feel" tailoring and support for multiple foreign languages.

    Key to the EyeWire.com initiative will be leveraging the EyeWire core customer

    base, which has been derived from the company's industry-leading direct mail

    catalog and customer service operation.

    "Becoming a portal -- even a vertical portal -- demands traffic, which we

    anticipate will come largely from converting our catalog customers to Web-based

    customers. We have a built-in traffic generator based on our record as the

    leading cataloger for visual content," said Brad Zumwalt, Chairman and President

    of EyeWire. EyeWire has mailed over 50 million catalogs to date. Currently

    they mail about 800,000 catalogs a month to business and professional graphic

    arts users. Their mass mailing program has been developed and refined for over a

    decade and is supported by EyeWire's telephone and Web-based customer service

    operation.

    Much of EyeWire's royalty free image collection has been provided by

    SuperStock. EyeWire also distributes the Digital Vision collection from the

    U.K. as well as other royalty free products. A key resource which designers use

    extensively, and which EyeWire currently does not supply, is "Rights Protected"

    photography. Look for EyeWire to offer RP images to their massive customer base

    in the near future.

    EyeWire was founded in 1985 (then known as Image Club Graphics) as a

    distributor of individual digital typefaces. They were acquired by Aldus

    Software in 1994. Aldus was purchased by Adobe Systems in September 1994.

    During its four years as an Adobe subsidiary, the company grew more than 450%.

    In the fall of 1998, company management reacquired the transformed company from

    Adobe, naming the newly independent organization EyeWire Inc. EyeWire has a

    growth rate of 50% per year, plus profits and revenue exceeding $20 million.


    PERSONNEL MOVES


    Holli Morton , Director of Sales and Personnel at WestLight, has retired

    after completing the integration of WestLight into Corbis. The WestLight name

    has disappeared. Holli is sister of Craig Aurness, Westlight founder.

    Matthew Klipstein and Charles Smith , founders of Digital Stock are

    wrapping up their relations with the company after the acquisition by Corbis.

    They will be leaving shortly.

    Photographer Randy Taylor has joined Liaison as Vice President of their

    Press Division.

    Lewis Blackwell will join TSI this month as Creative Director. He is

    responsible to drive and develop TSI's creative outlook. He replaces Stephen

    Mayes who resigned in early 1998.

    Gary Elsner , former VP of Sales and Marketing at FPG, has established his

    own consulting firm supplying a variety of services to stock agencies and

    photographers.

    See the on-line version of Selling Stock for more details of each of these

    moves.


    Story 192

    PICTURE PERFECT IN ARREARS


    March 8, 1999 - Picture Perfect and Todtri Productions, Inc. are seriously

    delinquent in their payments to stock agencies and photographers. Both

    organizations are owned by Robert Tod and based in New York City.

    Todtri Productions is a publisher of picture books and has obtained pictures

    from a number of U.S. and foreign stock agencies. The first public indication of

    trouble came in mid 1998 when Art Resources reported to PACA (Picture Agency

    Council of America) members that Todtri had failed to pay them for many pictures

    used in a number of Todtri books. The books in question had been released and

    distributed a year, or more, earlier.

    At one point the total usage fees owed to Art Resources was about $80,000.

    Early in 1998 Todtri made a few payments after repeated requests by Art

    Resources. By mid-1998 those payments stopped and Todtri would no longer respond

    to telephone calls. They still owe Art Resource about $42,000.

    At that time Robert Tod told Selling Stock he was having some cash flow

    problems because book distributors were delaying payments to him for some of the

    books they had purchased. He also explained that distributors were returning

    many more unsold books than had originally been anticipated. It is a practice in

    the industry that book stores can return unsold books for full credit. Tod

    assured Selling Stock at that time that all payments would be caught up soon.

    Meanwhile in late 1997 and early 1998 Picture Perfect released its PP12 catalog

    containing about 2100 images. Over 900 of these images were supplied by Nawrocki

    Stock Photo Inc.. Zepher Pictures and a number of foreign agencies also

    supplied images for this catalog.

    2 A few photographers supplied images direct to Picture Perfect rather than

    going through another agency. We have been unable to locate a single

    photographer or stock agency who has received any payment for images licensed

    through this catalog.

    Picture Perfect handles all sales in the U.S., and has distributed catalogs

    through between 20 and 30 agencies outside the U.S. In most cases, the foreign

    agencies are required to remit 60% of the gross sales to Picture Perfect in New

    York. We believe that about 100,000 catalogs have been distributed around the

    world with 30,000 to 40,000 of them being distributed to U.S. buyers.

    Not only have image producing agencies and photographers not received payment,

    but as of the beginning of 1999 only one agency had received any type of sales

    report.

    Photographer Andy Goodwin had a picture of his two sons used in a major ad

    campaign by Kellogg foods. As of the beginning of 1999 Picture Perfect would

    not tell Goodwin, or his agent Nawrocki Stock Photos, what they billed for this

    usage. Goodwin later learned it was $10,000, but he still has received no

    payment.

    We know that some foreign agencies have made sales and have submitted quarterly

    payments to Picture Perfect according to the terms of their contracts. We also

    know that some foreign agencies are withholding the fees collected because

    Robert Tod owes them much more for sales he has made on other projects than they

    owe Picture Perfect and Todtri.

    Based on certain information we have obtained relative to early sales in the

    U.S. we estimate that gross sales from the Picture Perfect 12 catalog through

    the end of 1998 was between $700,000 and $1,000,000. Based on industry averages

    we estimate that sales outside the U.S. should have been about equal to, or

    slightly greater, than U.S. sales.

    This means that the average gross sale per catalog image in the first twelve

    months was between $333 and $476. The average photographer share of these sales

    would probably have been between $80 and $114 per image.

    In response to my on-line article published in January, Tod said, "So far as

    Todtri is concerned, the company has been around for 10 years, is a

    multi-million dollar a year business and purchases approximately $500,000 of

    photo rights per year. In 1997, there was a downswing in the publishing

    industry and Todtri coincidentally suffered a number of calamities that took

    place at the same time--late deliveries, high returns, slow payments from

    principal customers, bad debts of more than $600,000. This was communicated to

    our vendors and with many of them we did our best to reduce our liability by

    entering in payment plans."

    I have been unable to locate any stock agency or photographer who was offered a

    payment restructuring prior to the January 1999.

    Capstone Financing

    In January some claimants began receiving an offer to settle claims for monies

    owed through November 30, 1998. Tod had made arrangements for financing through

    Capstone & Company, 515 Madison Avenue, 21st Floor, New York, NY 10022. Mr.

    Joseph Ingrassia is the investment partner handling the arrangements. The

    explanation they are providing to trade creditors is as follows:

    "Todtri Productions, Ltd. ("Todtri") has been, and still is engaged in the book

    publishing business on an international scale. In 1997, because of the difficult

    environment affecting the industry, a major account went bankrupt and several

    others were so adversely affected that their payments became extremely overdue.

    In addition, Todtri's largest account changed the manner in which they did

    business and is no longer a customer. In 1998, the international monetary crisis

    further negatively impacted on Todtri's finances. While Todtri has continued in

    business and has replaced the accounts, the process was painful and prolonged.

    As a result, Todtri has incurred diverse debts that is unable to either pay in

    full or in all cash.

    "Because Todtri's basic ongoing business is sound, it has received a commitment

    for a significant new financing which will enable Todtri to begin paying back

    debts and to continue in business stronger than ever. The lender has required,

    however, as a condition of making the financing, that Todtri's existing debts be

    restructured in an Agreement of Composition with its trade creditors.

    "Todtri has engaged Capstone & Company, LLC to organize that Agreement of

    Composition. The purpose of this letter is to describe the terms and conditions

    under which your trade payable due from Todtri will be paid. We ask that you

    return this document in the enclosed self-addressed stamped envelope. We are

    seeing to close the financing for Todtri at the end of January, 1999, provided

    the requisite number of trade creditors join in the Agreement of Composition. It

    is anticipated that the first payment would be made in February, 1999. To

    accomplish this, we need your cooperation in sending back your signed document

    as soon as possible, but no later than January 15, 1999."

    In this agreement Todtri offered to pay creditors 100% of what is owed, but

    payment periods are stretched out over many months and vary from creditor to

    creditor.

    Agencies that had licensed rights to Todtri for the use of images in Todtri

    books are being paid off in six months. Stock agencies that supplied images for

    catalog 12 (90% to 95% of the total images in the catalog) are being paid off

    over a period of two years.

    Tod says, "The lender has required us to enter into Agreements of Composition

    and Forbearance Agreements with our principal vendors according to different

    classes. Our vendors who are owed in excess of $50,000 and that in totality

    represents 94% of our indebtedness, have now all entered into these Agreements

    as a result of my trip to the Far East (in January) where most of them are

    located. Each vendor has been placed in a particular class according to the

    dollar amount owed. All vendors within each class get treated the same way.

    ALL vendors get repaid 100% of what is owed, most over a period of time, those

    less than $1,000 in one shot."

    Tod said in a January 25th letter, "...individual contributors are about to be

    sent sales reports along with full payment as soon as our refinancing is in

    place."

    He also said, "It is our understanding that all vendors have been sent either

    an Agreement of Composition or a letter advising them of our re-financing and

    our intended payments to them. If there are any vendors who have not received

    the above, then I request that they fax or write to me personally so I can

    ensure immediate action takes place."

    The offer from Capstone included a stipulated amount that was owed the creditor

    as of November 30, 1998. In order to share in the payment plan the creditor was

    required to stipulate that the amount was "payment in full" and give up their

    right to audit the books.

    Some creditors were reluctant to give up their right to audit because they feel

    that the numbers offered were extremely low and probably do not represent the

    totals collected during the period. If they truly do represent the totals

    collected then the publishing program has been an extremely inefficient one.

    The creditors in the Far East are for the most part color separators and

    printing companies that produce both Todtri books and Picture Perfect catalogs.

    It is assumed that their schedule of payments is less than six months since

    without them Todtri can not continue to publish product.

    We estimate that the debt to agencies and photographers is in excess of

    $300,000. If this is only 6% of the total debt as Tod indicates, the total debt

    must be in the range of $5 million.

    It is clear that Todtri has used the photographer share of monies collected in

    the past year to pay off operating expenses. Now, they are proposing to stretch

    out payments to photographers so they can pay other trade creditors in a more

    timely manner.

    Picture Perfect appears to recognize no obligation to the photographer's share

    of monies collected in trust until they are paid out to the photographer. In

    normal agency practices there is no obligation to pay the photographers until

    the agency has actually been paid by a client. Therefore, Picture Perfect's

    argument they make that some of their book publishing clients didn't pay their

    bills should have no relation whatsoever to the photographers being paid.

    Most stock agencies put receipts from licensing in an account separate from

    their general operating account, and never allow the photographer's account to

    fall below the total outstanding to the photographers. This is the way a stock

    agent should operate. Obviously, Todtri does not operate that way.

    Income Breakdowns

    The situation at Picture Perfect has given us a chance to explore the current

    economics of catalog marketing, for the sellers, catalog producers and

    photographers. The following numbers are hypothetical, but based on interviews

    with a number of people involved. We believe these numbers are realistic and

    probably close to the actual earnings in this situation.

    For purposes of this analysis we assume that sales break down 50% U.S. and 50%

    foreign, although it is possible that the foreign share may have been somewhat

    higher.

    According to Robert Tod 90% to 95% of the images in the PP12 were provided by

    other agents and we will base

    our calculations on 90%.

    Sales Level  

      

    $1 million  

      

      

      

    $700,000  

      

      

    Domestic  

      

    Foreign  

      

    Domestic  

      

    Foreign  

    Gross Sales  

    $500,000  

      

    $500,000  

      

    $350,000  

      

    $350,000  

    Selling Agent Share (40%)  

    $200,000  

      

    $200,000  

      

    $140,000  

      

    $140,000  

    Catalog Producer (40%)  

    Selling Agent in U.S.  

      

    $120,000  

      

    Selling Agent in U.S.  

      

    $84,000  

      

      

    Amount Left For Split

    $480,000

    $336,000

    Image Supplying Agent Share

    $432,000

    $302,000

    Photog Share From ISA

    $216,000

    $151,000

    Photog Share - Direct

    $48,000

    $34,000

    Costs Breakdowns

    Above is how the income should have been divided had everyone been paid

    according to contract. Now, lets look at the probable costs of each participant

    in this marketing venture.

    Foreign Selling Agents - Foreign agents purchased and distributed between

    40,000 and 70,000 books from Tod. We believe they paid about $3.00 for each book

    received which would make the total paid to Tod in early 1998 somewhere between

    $120,000 and $210,000. It appears that some dupes were included in this $3.00

    price. Some agencies would have wanted extra 6x9cm dupes which may have cost

    $2.00 each to produce, given the volume.

    On top of this, agencies had postage costs to distribute the books. It would

    probably have cost at least $3.00 per book to ship these books. In some

    countries shipping heavy print catalogs is even more expensive so we think $3.00

    per book is a minimum for distribution costs.

    Thus with purchasing the books and mailing, the agencies had a combined

    estimated outlay in early 1998 of somewhere between $240,000 and $420,000. As we

    can see from our chart above their 40% share for this catalog was at best

    $200,000. This does not include any of their staff and overhead costs in

    actually making the sales.

    Image Supplying Agents - We know that 90% to 95% of the images in the

    catalog were supplied by other agents. These agents will receive 60% of what

    Picture Perfect receives from each sale and split that with their photographers.

    If Picture Perfect makes the sale in the U.S. the ISA gets 60% of the gross fee

    paid. If the sale was made by a foreign country the ISA get 36% of the gross

    fee. The income that should have been paid to these ISA's would have been

    between $302,000 and $432,000.

    As of 1 January 1999 they had received no payments. If and when these agents

    get paid they will keep half the income, or between $151,000 and $216,000, and

    remit the rest to the various photographers who produced the images.

    The agent had costs of collecting the images from the photographers and

    editing. In some cases the agent may also have been required to pay something up

    front to Picture Perfect to help offset the initial production costs of the

    catalog. In this case the ISA's have also had legal expenses to try to enforce

    their contracts and collect the funds owed them by Picture Perfect. In addition

    the credibility of the ISA's with their photographers has been severely damaged

    as a result of the actions taken by Picture Perfect.

    Photographers - In many cases the photographers are required to pay $100

    to $150 per image to help offset the costs of producing the catalog. This amount

    is due to the agency or catalog producer out of the first dollars owed to the

    photographer. This would be somewhere between $200,000 and $300,000. Depending

    on the number of different images licensed photographers might not be owed much

    for 1998 sales. Of course, some photographers will do much better than the

    averages and others will earn little or nothing.

    Picture Perfect - We estimate that printing, design and separations cost

    them something in the range of $300,000; that postage, mailing lists, and

    mailing house fulfillment cost were at least another $45,000 and that the

    production of large format dupes added another $100,000 in costs for a total of

    $445,000. This is minimum cost of catalog production and distribution.

    Picture Perfect might have received between $210,000 and $300,000 from the

    foreign selling agents and they would have been entitled to keep up to $120,000

    or that. Their selling agent share of U.S. sales might have been as high as

    $200,000 but without knowing specifically which images sold, it is impossible to

    make a closer estimate of what they actually received. In addition, it is

    believed that some of the Image Supplying Agents made some up front payments to

    help offset the production of the catalog.

    Given the cost that Selling Agents, Image Supplying Agents and Photographers

    are likely to have had -- even if Picture Perfect paid what they owed -- nobody

    would be doing very well after the first twelve months of sales.

    Given the number of catalogs currently being produced, many in the industry

    believe the average useful life of current print catalogs is not much more than

    18 months. If that is the case it will be hard for anyone involved in this

    project to end up making money.

    Granted, a few of the major catalog producers are getting much better returns

    per image than this, but they accomplish their market penetration through

    overwhelming presence and huge expenses in supplementary advertising. The fact

    remains that there are too many pictures chasing too few buyers.

    If these statistics are at all representative, those who are not market leaders

    and who want to compete are going to have to find a more cost effective way to

    show their images to clients.


    Story 200

    NATIONAL GEOGRAPHIC GRABS MORE RIGHTS


    Assignment Shooters Lose

    February 9, 1999 - Photographers working for National Geographic are facing

    another cut in their annual income. This one comes, not in the amount of the day

    rate, but in the additional rights Geographic is appropriating for the single

    initial fee.

    According to the New York Times, Terrence B. Adamson, NGS Senior Vice

    President, Law, Business and Governmental Affairs, justifies this by saying that

    the trend among many media groups is to buy all rights with one fee.

    As best we can determine the basic day rate at National Geographic is about

    $400. For an additional $35 per day, which the photographer has no choice but to

    accept, Geographic gets a whole bundle of secondary uses. This list has been

    greatly expanded under the new guidelines presented to photographers at the

    annual photographers meeting on January 14th and 15th.

    These uses now include: NGS books (including picture books, trip planners,

    guide books, travel guides, diving guides, field guides, etc.) maps, atlases,

    globes, CD-ROM's, complete re-issue of NGM in digital format on CD-ROM's or

    on-line, calendars, greeting cards, posters as well as commercial merchandise

    like tee shirts, hats, and umbrellas, national ads, promotional cards,

    brochures, catalogs, NGS web site, computer screen savers, domestic and foreign

    NGS TV shows and videos and other magazines like Traveler, World, and the new

    NGS magazine: Adventure, "kids stuff", slide shows, games, painting kits,

    puzzles, art boxes, indexes, note cards, prints, matted prints and any other NGS

    use that might be devised in the future.

    A decade ago additional fees were paid for such uses with the fee varying based

    on the use. NG has slowly been chipping away at that practice. As the rights

    diminish, the day rate has stayed basically the same over several years.

    We understand that some stars are able to negotiate fees higher than the $400 a

    day, but that seems to be rare. More common are the photographers who are paid

    less than the normal day rates for travel days, editing days and administrative

    days. A photographer who gets a 30 day assignment from National Geographic

    Magazine puts in a lot more than 30 days effort for the fee he or she receives.

    One of the areas where there will be the biggest loss of income for those

    photographers who shoot for National Geographic Magazine (yellow borders) will

    be in resales to foreign publications of the articles they produce. Currently NG

    has five foreign editions but they want to increase that number to 11 in 1999.

    There is a payment for re-use in these editions and it has been $125 per full

    page picture used or 25% of the $500 page rate of the domestic edition. This

    page rate has not changed in six years and is very low when compared to other

    publications. Photographers believe that a rate of $900 per page would be closer

    to "market rates" based on the fees charged by Time-Life Picture Collection, NGS

    Image Collection and those recommended in FotoQuote. NG has proposed to maintain

    the $500 page rate and lower the percentage for foreign editions to 20%, 15% and

    10% depending on the country and the size of the distribution.

    This hurts the photographers in several ways. Not only are re-use fees low, but

    in the past the only way many photographers could justify doing NGM assignments

    for the low rates offered to sell re-use rights to foreign publications. These

    re-use sales could often bring in an additional $30,000 to $50,000 for a 20 page

    story with 12 pages of pictures, which, when considering the time and energy

    necessary to get 12 pages of pictures into the magazine, resulted in a

    reasonable return on investment.

    Now that NG is publishing their own magazines in all these foreign countries

    the chance for photographers to make additional sales of the prime story are

    basically eliminated. That would be fine if the photographer were adequately

    compensated for the original U.S. use plus the increased distribution, but of

    course that is not the case.

    Some photographers have calculated that the foreign rights to a story with 12

    pages of pictures would net them approximately $9,000 under the new NG agreement

    instead of the $30,000 to $50,000 they could have received by licensing uses of

    that story directly in other magazines as has been their right in the past.

    Shorter Assignments

    Another problem that many photographers are facing is shorter assignments and

    fewer assignment days per year from NG. This can be a mixed blessing. Short

    assignments, with some flexibility in when they have to be shot, can be

    performed without any negative effect on the photographer's other business. In

    the old days when a photographer was away on an NG assignment for several months

    he often found it very difficult to get new work from previous clients when he

    returned. In the interim, his previous clients had found more reliable

    photographers to handle their work.

    On the other hand, the unpaid work of coming up with a workable story idea and

    selling that idea to the story committee is often the same for a short story as

    a long one. In addition there may be a lot more time spent in editorial meetings

    and editing, if you are working on a series of short stories rather than one

    long one.

    In the end, photographers are trying to sustain their businesses on fewer paid

    days a year and a reduced income from stock sales.

    File Selects

    Another NG policy that has been in place for a while, and further embitters the

    photographers, is the policy that NG retains all rights to published images --

    and "file selects." Most NG photographers don't have a problem with the

    published images, but "file selects" are another issue. The magazine can easily

    lock up every good frame from a given shoot. Kent Kobersteen, Director of

    Photography, says the number will average around 100, but the photographer has

    no way judging, before or during the shoot, how much of the production he will

    eventually be able to license elsewhere.

    This also tends to lock the photographers into working with the in-house stock

    agency because the only chance they have of licensing rights to these "file

    selects" outside the NG family is through the NG in-house stock agency.

    In addition, the new policy forbids photographers access to their published

    originals, forever. Photographers believe that because they share copyright to

    these images, they should have the right to physically access them for their own

    purposes. It is interesting how NG can deny the photographers physical access to

    their property and then still argue for tax purposes that the photographers are

    not employees.

    Books

    Finally, there is the issue of re-use in books. Under the new policy the only

    time a photographer might be paid an additional fee for use in one of the 60+

    books NG publishes each year is if over 90% of the images in the book are the

    photographers. It is so unlikely that a photographer would have this percentage

    of images in a single book that is hardly worth discussing except that even then

    there is no guarantee that the photographer will get additional compensation. At

    the 90% level Geographic has agreed to negotiate the issue with the

    photographer.

    The happiest photographers seem to be those working for the lesser magazines --

    Traveler, World, and presumably the new Adventure magazine -- rather than

    National Geographic Magazine. They can work on short narrowly defined projects,

    NG keeps fewer of their images so they can make more off the stock produced, and

    they have no illusions about NG being a significant part of their income.

    When NG assignments were longer that freelancers could basically work full time

    for NG and make a living. There were gaps between assignments, but the

    photographers got enough work in a year to sustain themselves. Now, with shorter

    assignments, reduced re-sales, many are questioning whether they can continue to

    accept assignments from National Geographic - particularly the long magazine

    assignments. Many will continue to accept an occasional assignment, but they

    are aggressively "re-inventing" themselves and looking to other outlets to make

    a living.

    More than 50 photographers have signed a letter to John M. Fahey, Jr.,

    President and CEO of National Geographic Society, offering a counter proposal

    that would improve the photographers situation slightly. Even if the

    photographers get everything they are asking, NG will still be getting images on

    some of the most favorable terms in the industry.

    What's Likely To Happen?

    The same that happened about three years ago. The Geographic management will

    sit on the issue for a couple months, and the photographers will refuse to take

    new assignments until the rights issue is settled. Then management will say,

    "Our original offer stands, take it or leave it." If photographers don't accept

    the assignments offered they will be given to someone else.

    In the January 14th photographer's meeting one photographer clearly stated,

    "The contract you propose does not allow us to survive." To that Terry Adamson

    responded, "You are wrong....,and if some of you (meaning anyone in the

    assembled group) are not happy, we can do without you!" Three years ago,

    photographers grumbled when the "take it or leave it" ultimatum came, but they

    took the work, and NG will expect the same to happen this time.

    However, three years ago, many photographers started to aggressively build up

    non-Geographic business. Expect to see many more of the photographers who have

    been working for NG aggressively competiting for other work. They may still

    take occasional Geographic jobs as they transition their business, but their

    goal will be to move away from NG, not closer to them.

    One photographer believes the problem is that National Geographic management

    has a perception of their photographers as cavalier romantic types who prefer

    traveling to exotic locations to getting paid. He says, "the reality is that

    freelancing for this organization has no security, all the travel plays hell

    with family relationships, and at the end of the day we have no retirement

    benefits and little ability (especially with the new contract) to benefit from

    the images we took when we were young and fit."

    There is no question that photographers shooting for National Geographic like

    doing editorial assignments. But they pay a heavy price for the privilege -- and

    that price may finally be getting to be too great.

    Things For Photographer To Think About

  • Are you taking the Traveler, World and book assignments with the hope of

    being "discovered" and eventually getting a NGM assignment? Will an NGM

    assignment, if you could get it, help or hurt your career?

  • Will you be upset when a shot you did for Traveler or World later appears in

    one of the 60 books Geographic produces each year, or in the yellow border

    magazine, and you get no additional compensation?

  • Compare the work expected and the compensation on an NG assignment with that

    of any of the publications you work for. Are the rates NG is paying worth the

    trouble?

  • How many days do you have to work at $435 a day to cover your

    overhead and make a decent living?

  • How many paid days (where you get a day rate) did you work last year? Is

    that number going up or down?


  • 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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