March 2001 Selling Stock

Posted on 3/10/2001 by Jim Pickerell | Printable Version | Comments (0)

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MARCH 2001 SELLING STOCK


Volume 11, Number 4


©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, 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

"The greatest tragedy in life is people who have sight, but no vision."

Helen Keller


Story 377

PHOTOGRAPHER SURVEY

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February 6, 2001 - The survey of Photographer Income and Expenses for 2000 is

now available online for photographers to fill out. All stock photographers are

encouraged to go to the site and fill in the information. The Survey has also been

mailed to many photographers. Go to www.pickphoto.com/sso and click on "2001 Photog

Survey." We are interested in getting as broad a base of data as possible.

The results will be collated and made freely available in a public section of the

SELLINGSTOCK site by the end of April.

This may be the most important survey SELLING STOCK has conducted to date. There are

indications that in 2000 the number of rights protected sales decreased compared with

1999. At the same time many stock agencies report receiving higher use fees on average

than in the previous year. In addition, we may be facing a downturn in the U.S. economy

that could change the sales environment for 2001. Reliable trend data is important. The

more photographers who answer these questions the better our data will be.

Long lead times between planning, production and income make producing stock

photographs a particularly difficult and risky business. An accurate understanding of

industry trends is necessary to anticipate the rapid shifts in the industry and plan

for the future. Old strategies for marketing and pricing stock images are no longer

adequate.

Industry consolidation in the past 18 months has dramatically changed the income

potential of many photographers. Most photographers need to develop new marketing

strategies to effectively compete in this new environment. Detailed information about

the market is critical when making such decisions.

This survey looks at production costs as well as income. We want to make the point to

agencies that photographer costs must be taken into account when pricing usages.

Currently no one, but the poor photographer trying to survive in a very competitive

environment, is considering the cost of production.

We are asking for very specific detail. We have made arrangements with Integrated

Statistics in Massachusetts to collect and collate the data so no one in the stock

photo industry has access to your private and personal data.

We urge every stock photographer to take the time to participate in this survey, and to

supply accurate information. Coupled with the baseline result of the surveys in the

last two years, this information can help us track trends and aid everyone in the stock

photography industry.


Story 381

CONVERGENCE

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ICL and Zepher Acquired

February 24, 2001 - Convergence has acquired Images Colour Library Limited,

(ICL) a UK based image library for 3.6 million pounds ($5.2 million dollars) and Zephyr

Images, Inc. a San Diego based library for $2.15 million. These acquisitions are a key

stage in the development of GlobalState's image business, Image State.

GlobalState Holdings, through its subsidiaries ImageState, VideoState and MusicState,

provides pre-edited off and online content for the professional user worldwide. Sheldon

Marshall, former CEO of VCG, is Chief Operating Officer of Convergence and chief

executive and president of GlobalState.

ICL is one of the largest independently owned image libraries in the UK with

approximately 300,000 images, of which 78,000 are in digital format. Richard Robinson

and Peter Robinson own 83% of the company that is based in London and Leeds and has 23

full time employees. It specializes in the rights protected sector of the industry. In

the year ended March 31, 2000 ICL's earnings before interest and depreciation were

approximately 3.05 million pounds ($4.42 million). This included a $900,000 loan to

Zephyr Images, Inc. which will be repaid on completion of the acquisition. The offices

of ICL in London will be the base for GlobalState's European operations.

Zephyr is a general image library based in San Diego and is 50% owned by Richard and

Peter Robinson, and 50% by Leo and Melanie Gradinger and other local management. The

company has 200,000 images of which 10,000 are in digital format. Zephyr operates in

the rights protected sector of the industry and its images are predominantly in the

lifestyle, business, concepts, nature and landscape genre. As of September 30, 2000

Zephyr's earnings before interest and depreciation were approximately $1.7 million.

Other companies that are part of ImageState include:

  • In June of 2000 ImageState acquired Adventure Photo & Film for a net consideration

    of $2.67 million. It is believed the annual turnover of the company is approximately

    $1.3 million. APF is a Ventura, CA photo and film library specializing in extreme

    sports such as mountaineering, rock climbing, sky diving, base-jumping, scuba diving

    and surfing. The library also has extensive wildlife and travel imagery. It houses

    approximately 150,000 still images and hundreds of hours of film from over 160 of the

    world's leading adventure photographers and film makers. They had 10 full time

    employees at the time of the acquisition.

  • In late 2000, WestStock and John Foxx images were acquired for an aggregate total

    of 8.3 million pounds (approximately $12 million). In the year ended March 31, 2000,

    WestStock's revenue was $1.1 million. WestStock licenses rights to still images using

    both the Rights Protected and Royalty Free strategies and has rights to approximately

    one million images.

  • WestStock was one of the early innovators of the digital delivery of imagery

    through CD's and the internet and supplied images for 31 of the first 36 CD's produced

    by PhotoDisc. The company has had its own internet site since 1995. In its last fiscal

    year WestStock's online sales, before photographer's commissions, was $579,000,

    representing approximately 27% of total turnover according to the press release. (This

    would indicate that total revenue was about $2.15 million. The inconsistency with the

    $1.1 million figure reported above could not be explained at press time.)

  • John Foxx is a Dutch company based in Groningen, Netherlands. It specializes in

    Royalty Free still photography and has 5 full time employees. In the year ended

    December 31, 1999, John Foxx's revenue before tax amounted to NLG 3.12 million

    (approximately $1.3 million).

    Following the acquisitions of WestStock and John Foxx, ImageState had over 1 million

    images in transparency form and over 40,000 pre-edited images online.

    The files of Zephyr and Adventure Photo & Film (APF) will be merged with the files of

    WestStock in Seattle. Seattle will become the U.S. headquarters for ImageState, the

    still images division of the company. A fully transactional ImageState website will be

    launched in April.

    MusicState was developed to provide edited rights-cleared music tracks over the

    Internet in MP3 format for the professional business user and was launched to a

    preliminary market in November 2000. Customers are able to search tracks by genre,

    tempo, mood and instrumentation. They can be listened to and purchased online and

    downloaded in full broadcast quality for use in advertising, film and other multi-media

    applications. MusicState is a 75% owned subsidiary company of GlobalState Holdings.

    In due course, the Director intends to launch VideoState which will provide an online

    library of film footage, accessible for the professional user via the Internet for

    research and ordering. Users will search the database by subject or keyword. The

    selected film footage will, subject to user bandwidth, either be downloaded online or

    delivered off-line in existing tape or CD format. VideoState already has a footage

    collection acquired from Adventure Photo and Film, based in Ventura, CA, which will

    form the basis of its library when the service is launched.

    Sheldon Marshall has an employment agreement for an indefinite term and terminable on

    12 month's notice by either party. Mr. Marshall receives a basic salary under this

    agreement of 120,000 pounds per annum (approximately $175,000)


    Story 369

    MOFFLY FORMS CREATAS

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    Creatas Acquires Dynamic Graphics

    David Moffly, former CEO of FPG has announced the formation of Creatas to sell high

    quality, value added products and services to creatives and consumers. These products

    include stock images, (photography, illustration and film), publications, and education

    to creators and consumers of these services. Creatas has also acquired Dynamic

    Graphics, a leading provider of visual content, knowledge and solutions for the graphic

    design community.

    Dynamic Graphics known mostly for their Subscription Services and Royalty Free Images

    with four individual units, Clipper, Print Media Service, Designers Club and

    Photography and Footage also has a vibrant business in trade publications, "Step by

    Step," "Dynamic Graphics" and "Step by Step Electronic Design". Dynamic Graphics

    educational unit is the Dynamic Graphics Education Foundation, which conducts

    educational seminars teaching design tools and techniques. Sales for Dynamic Graphics

    in 2000 were in the range of $20 million.

    Moffly won't rule out the possibility that one day Creatas will license rights to

    Rights Protected images, but for the moment they are only interested in selling Royalty

    Free. He is anxious to talk to RF suppliers about representing their line.

    "We are thrilled to make an acquisition of such a quality company. Dynamic Graphics is

    the market leader in Art subscription services and has a Royalty Free business that is

    leading the industry with its growth rates" noted David Moffly, Creatas CEO.

    "With this acquisition we have a platform to build a powerful creative services company

    with global reach. The company already has vibrant offices in Europe and Australia and

    we intend to build on these successes. Dynamic Graphics is unique in that its products

    and services touch the professional creative at various points in their professional

    lives. The magazines take a look inside the creative process, the art services

    businesses supply essential illustration and design elements, the photo and film

    businesses add a depth of choice and the school gives professional creatives important

    skills improvement opportunities."

    There have been rumors in the industry that Moffly and Sheldon Marshall of GlobalMedia

    would be getting together in some type of joint-venture. Moffly says that GlobalMedia

    has no interest in Creatas, but that Creatas will be licensing rights to the John Foxx

    line of RF images which are a GlobalMedia property.


    Story 369

    INVOICING AT FPG

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    FPG photographers have been complaining that their checks are small. It may not be

    because sales are off, but because authorized usages haven't been invoiced.

    A major advertising agency trying to close its books at the end of the year was anxious

    to pay FPG for usages made months earlier but which had yet to be invoiced. Repeated

    calls to the accounting department produced no results. Finally, they appealed to an

    industry expert outside of FPG to see if he had any contacts within FPG who could break

    the log jam.

    The source was able to learn that FPG had only two people handling all invoicing and

    they were months behind in the process. As a result of the inquiry the ad agency's

    transactions were moved to the top of the pile, and the agency received its invoice for

    almost $350,000 worth of uses.


    Story 378

    GETTY YEAR 2000 RESULTS

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    February 9, 2001 - Getty Images, Inc reported 4th Quarter 2000 revenue of $129.4

    million, up less than 2% from $127 million in the 3rd Quarter. Gross revenue for all of

    2000 was $484.8 million.

    Getty has reported minimal quarter-to-quarter revenue growth all year. Getty's pro

    forma revenue for 1st Quarter 2000 was $124.9 and some minor acquisitions in June and

    the buy back of TIB's London operation should have added revenue.

    The basically flat 3rd Quarter to 4th Quarter sales are all the more amazing

    considering that PhotoDisc, which represents almost one-quarter of Getty's gross sales,

    instituted a 20% to 25% price increase (depending on the size of file ordered) in

    September. This alone should have resulted in more than $5 million in increased revenue

    for the 4th Quarter if sales had remained level.

    CEO, Jonathan Klein also reported the average sale for Stone in North America is about

    $660 per image used. This is up from just a little over $500 the previous year. Stone

    NA should represent in excess of one-eighth of Getty's total revenue. If prices in NA

    are up this much, but quarter-to-quarter revenue is flat, it must mean that the number

    of units sold is down.

    When questioned by stock analysts during the quarterly conference call Klein refused to

    acknowledge that there was any evidence of a slow down in sales volume.

    Analysts had been predicting that Getty's 4th Quarter revenue would be $133 million.

    This was the first time in the company's history that it failed to meet analysts'

    quarterly expectations. Getty did exceed analyst estimates for EBITDA with a total of

    $30.7 million or 60 cents per share. Analyst estimates were 56 cents per share.

      "EBITDA" is defined as earnings before income taxes, depreciation, amortization,

      interest, exchange gains and losses and, when applicable, loss on impairment, debt

      conversion expense, integration and restructuring costs, extraordinary items and other

      income and expenses. EBITDA should not be considered as an alternative to operating

      income, as defined by generally accepted accounting principles, as an indicator of

      operating performance, or to cash flows as a measure of liquidity.

    The shortfall in revenues was attributed to the company's consumer operation, Art.com.

    This division represents about $19.2 million or approximately 4% of Getty's total

    revenues. Revenues for the 4th Quarter were about $4 million under expectations. Losses

    were $13.3 million for the year. Klein said that Getty would not allow the consumer

    operation to become a drain on earnings in 2001. The company is reducing staff at

    Art.com by more than 50 people and evaluating alternatives, including the "potential

    disposal of the business," according to Klein. In their projections for 2001 Getty does

    not project any revenue for Art.com beyond the 1st Quarter. (A little less than two

    years ago Getty purchased Art.com for shares and cash worth $135 million, and has had

    continual losses since the acquisition.)

    Klein also noted that 4th Quarter revenues were lower due to a strong dollar and that

    on a currency neutral basis revenues would have been $135 million for the quarter.

    Analysts' interpretations of the news was reserved, but basically positive. The stock

    was up almost 7% to 27 5/8 the day following the announcement.

    Web Sales

    E-commerce sales represented almost $49.3 million of the 4th Quarter revenue, or over

    38% of total revenues. Separating out VCG which Getty has only started to e-commerce

    enable, 43% of all sales were on the web. For the whole of 2000 there was $165 million

    in e-commerce sales, or 34% of all revenue for the year. This was a 134% increase in

    web sales over 1999. In the 4th Quarter more than 40% of Stone sales were e-commerce;

    more than 60% of PhotoDisc sales; about 60% of Allsport sales and more than 70% of

    EyeWire sales.

    Klein said, "We expect that substantially all of our North American business will be on

    the web in 3 years and substantially all worldwide business in 5 years. The trend is

    all in one direction and that is more on the web."

    It should be noted that an e-commerce sale is one where the customer uses the web to

    search for the image, but does not necessarily pay for the transaction on the web, or

    receive delivery on the web. Getty classifies a sale as "digital" or "analog" based on

    how the image is delivered. If a image is delivered on the web it is classified as a

    "digital" sale. If any type of "hard copy" is delivered it is called an analog sale.

    Thus, if a digital CD-ROM disc is delivered to the customer it is classified as an

    "analog" sale for Getty's accounting purposes. Getty has not provided any statistics as

    to the percentage of sales that are "digital," but many photographers report that they

    have very few sales where Getty takes a digital royalty share as opposed to the lower

    (for Getty) analog royalty share.

    Royalties To Creators

    Klein said that in 2000 Getty paid about $120 million to photographers and filmmakers,

    or a little less than 25% of total revenues. Rights Protected photographers should

    recognize that Getty wholly owns its Hulton Getty collection, most of the material

    handled by AllSport and much of the PhotoDisc imagery. Thus, if we only looked at the

    revenue generated by those who are entitled to royalties, the average amount paid would

    undoubtedly be higher.

    The company's average gross margin grew from 70.5% in the 3rd quarter grew to 72.5% in

    the 4th Quarter and was led by faster growth at Stone.

    Klein mentioned that later this quarter Getty would be introducing a new contract that

    would provide "fair and equitable treatment to photographers across all brands." He

    said, "Getty Images has been, and will continue to be, a financial gold mine for high

    quality commercial photographers. There is no doubt that the contracts are more

    favorable to our photographers than the contracts that we inherited with the

    acquisitions of VCG and The Image Bank and there are also many improvements to the

    terms concerning photographers. Nevertheless, we do not expect this contract to have a

    material impact on our 2001 financial results and the guidance (2001 expected revenue

    of $550 to $565 million) includes the implications of the new contract."

    In her report Rebecca Runkle of Morgan Stanley Dean Witter said, "One method to monitor

    the success of the new contract is to watch the speed with which the VCG/TIB

    photographers transition (the faster the better). Getty doesn't expect these changes to

    have a material financial impact, as the reduced rates from the web sales are expected

    to offset higher outlays due to expanded territories."

    During the conference call the analysts showed little interest in, photographer

    contracts or the recent letter from the StockArtistsAlliance outlining issues of

    concern not dealt with in the contract outline (Story 375). Likewise, the analysts

    showed no concern about the Penny Gentieu lawsuit or the recent ASMP letter to the SEC

    (Story 376).

    Other Items Of Interest

    Image Bank sales grew over 10% in the 4th Quarter compared with 4th Quarter 1999 and

    the sequential growth between 3rd Quarter 2000 and the 4th Quarter was 10%.

    Sixty-five percent of Getty's revenue comes from creative professionals that work for

    advertising agencies and graphic design firms. Other customers include: Publishing

    (Newspapers, magazines and web sites) 17%, Corporate Accounts 10% and Film 8%.

    Fifty-nine percent of sales were in North America, 36% in Europe and 5% in the Rest of

    the World.

    TIB sales grew over 10% in the 4th Quarter compared with 4th Quarter of 1999.

    Sequential growth from 3rd Quarter to 4th Quarter was also 10%. VCG did not grow in the

    4th Quarter compared with the 3rd Quarter.

    Klein also acknowledged that there was some weakness in motion picture film sales.

    Expected Sales In 2001

    The company lowered its revenue guidance for 2001 from a growth of 20-22% to 14-17%.

    It estimated sales would be between $550 million and $565 million. The company had a

    net operating loss of $0.67 vs. $1.50 previously.

    Flat Revenue Analysis

    Flat revenue implies that pricing gains are COMPLETELY offset by unit sale decreases.

    Are the recent price increase driving down unit volumes, and does that mean that Getty

    (or others in the industry) should cut prices to increase volume? My belief is that

    there are two other factors that are having more of an effect on unit volumes than

    price.

    First, there is strong anecdotal evidence from other suppliers to indicate there was a

    reduction in the number of calls in November and December. This seems to be continuing

    in January. I believe some image users have been delaying or cancelling projects as

    they try to retrench with the anticipation of a slower economy. This is happening not

    because the picture (a very minor part of the total project cost) is to expensive, but

    because they need to cut the total expense of the project itself. For the most part,

    buyers are not going to other cheaper sources, but are simply reducing their overall

    buying.

    Secondly, in the Royalty Free area another thing seems to be happening. For years RF

    buyers kept ordering new discs with 100 different images every time they needed a new

    image for a new project. They would bill the cost of the disc to the client and throw

    the disc in a box in the corner of their office. Now, as the economy begins to get

    tight for these graphic designers they go to that box in the corner, find an image they

    can use on their next project, and bill their client an image usage fee of which they

    get to keep 100%. If there is a real slow down in the economy, the Royalty Free

    strategy of selling each customer their own individual library could finally come back

    to haunt the RF producers, and the entire industry.

    In the last recession there was no RF so Rights Protected stock benefited, when

    compared with assignment costs. In the next recession, the RF libraries already sold

    may be the lowest cost option for the designers.

    Additional Figures From Press Release

    Revenue for the fourth quarter of 2000 was $129.4 million, a 61.9 percent increase over

    revenue for the fourth quarter of 1999. For 2000, revenue was $484.8 million, a 95.6

    percent increase over 1999 revenue. Organic revenue growth in the fourth quarter,

    excluding all acquisitions made in the last twelve months, was 26.4 percent and was

    29.4 percent for 2000. On a currency neutral basis, revenue for the fourth quarter was

    $135.0 million, representing revenue growth of more than 68 percent over the same

    period in 1999. E-commerce revenue in the quarter more than doubled over the fourth

    quarter of 1999 to just under $50 million, representing 38 percent of total sales for

    the company.

    EBITDA increased 225 percent over the fourth quarter of 1999 to $30.7 million, or 60

    cents per share, exceeding average analyst estimates of 56 cents per share. The EBITDA

    margin increased from 11.8 percent in the fourth quarter of 1999 to 23.7 percent in the

    fourth quarter of 2000, and increased from 14.1 percent in 1999 to 19.5 percent in

    2000. For its business-to-business operations, the company achieved EBITDA in the

    fourth quarter of $34 million at an EBITDA margin of 27.4 percent, and in 2000, the

    company recorded EBITDA for business-to-business operations of $108.7 million at an

    EBITDA margin of 23.4 percent.

    After tax cash flow for the fourth quarter was 44 cents per share, compared with 21

    cents per share in the 4th quarter of 1999 and compared with the First Call estimate of

    41 cents per share. After tax cash flow per share for the year was $1.39, compared with

    80 cents per share in 1999.


    Story 369

    B2B'S NEED SALES REPS

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    In the January issue of Wired the following appears under the tag line, "Surprise! B2B

    makes customer relations even more important"

    The article said, "As B2B apps have rolled out over the past year, it's become clear

    that the Internet isn't going to eliminate the need for sales reps. At first, some

    analysts believed that the 'frictionless' nature of B2B transactions would make it

    unnecessary for companies to maintain a sales force for calling on other businesses.

    Now it appears the opposite is the case."

    "Making products available on the Web allows business customers to choose from among

    several sources. This tends to turn high-margin products into low-margin commodities,

    which was demonstrated when PCs were first made widely available online. Computer

    manufacturers began competing on price alone, creating a price war that ate up profits.

    The lesson learned was that companies must differentiate their products and services

    beyond just their price tags.

    "Though building a recognizable brand name is one way to provide differentiation,

    personal relationships between buyer and seller have never been more important in the

    business world. As the mechanics of purchasing become increasingly automated, it will

    be up to sales reps to provide the hand-holding and service needed to secure ongoing

    loyalty.

    "The companies that are integrating B2B into their current sales efforts, keeping the

    sales reps in the loop, are the ones that are winning today, according to Harry

    Wohlhandler. 'Business-to-business selling is still a personal activity, with

    negotiation and human interaction,' he explains. 'Companies are quickly learning that

    it's a strategic advantage to have a personal relationship with the buyer.'

    "The importance of such relationships is illustrated by the many companies whose B2B

    activity is limited to prospecting for new customers, rather than closing business

    deals and taking orders. 'Fully 55 percent of the companies doing B2B today are only

    using the Internet to generate leads for their sales force,' says Wohlhandler, 'And

    even of those companies taking orders on the Web, only half of their orders, on

    average, are taken on the site.'

    "Wohlhandler insists that there are a large number of B2B transactions -- especially

    those involving service providers -- for which the Internet isn't an appropriate

    vehicle to close the sale. While he, like many other market analysts, predicts that the

    number of online transactions will grow rapidly over the next few years, reports of the

    demise of the sales rep in the B2B world have, it seems, been greatly exaggerated."

    This is GREAT NEWS for small and medium sized agencies with brand identity among the

    buyers. It points to the continued need for knowledgeable sales reps, negotiation and

    personal relationships. It should be a strong word of caution for the various start up

    companies such as Speedpix.com and Alamy.com that propose to offer a fully automated

    service with little need for direct contact with the customers. It also indicates that

    Getty and Corbis may not be able to reduce their number of sales reps and this could

    have a major impact on their future profitability.


    Story 373, 374, 375

    GETTY PHOTOGRAPHER'S CONTRACT

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    It is expected that any day now Getty will mail its new streamlined cross-brand

    contract to photographers who currently have Stone, The Image Bank, and VCG (FPG, TCL,

    Pix and Bavaria) contracts.

    Management has indicated that, "Our intent is simple: to work in a straightforward

    manner with you (the photographers), and to compensate you fairly for your high quality

    images."

    The agreement is designed to provide all "commercial" photographers shooting for Getty

    with a master agreement that achieves consistency and equity. At the same time they

    have built in flexibility through addendums.

    A summary of the terms of this new contract was sent to photographers at the end of

    January.

    Photographer Response

    While praising some of the proposed changes, many photographers moved immediately --

    well before the contract was actually in their hands -- to organize a legal action

    group called the StockArtistsAlliance (SAA) to retain legal counsel to review the

    document, make recommendations, and aid in the negotiations for those interested.

    Indications are that a significant number of Getty photographers are joining this group

    and see it as the most cost effective way of availing themselves of legal advice. Any

    photographer under contract to any of the above named brands can get information about

    joining SAA by contacting any of the following steering committee members:

    Glen Allison (Stone)  

    1-310-822-1534  

    GlenAllisonPhoto@aol.com  

    Peter Dean (Stone)  

    +44-139-833-1598  

    peter@agripicture.com  

    Mark Harmel (FPG)  

    1-310-546-6509  

    mark@harmelphoto.com  

    Kevin Kelley (Stone)  

    1-415-455-9260  

    KWKelley02@aol.com  

    Fred Licht (TIB)  

    1-818-763-9941  

    fredlicht@home.com  

    Steve McAlister (TIB)  

    1-214-746-6336  

    steve.mcalister@d2studios.net  

    Joseph Pobereskin (Stone)  

    1-973 313-0799  

    joseph@pobereskin.com  

    SAA Responds

    After receiving Getty's letter outlining changes in the new contract the SAA sent their

    own letter which praised Getty for positively addressing the following photographer

    concerns:

      --- No tight turnaround deadline to sign new contracts.

      --- One uniform contract for all brands.

      --- Addenda that will allow cross-brand marketing.

      --- Larger home territory for TIB artists.

      --- Image Exclusive vs. Artist Exclusive with no "right of first refusal."

      --- No restrictions on alternate agencies for our marketing.

      --- Faster Payments (However, 120 days is still too slow).

      --- Protection from Bad Debts.

      --- No charge for Catalog Images that don't pay for themselves.

    They also listed the following additional issues of concern that the photographers

    still feel need to be addressed:

  • The relationship should be one of artist/agent with all the implied fiduciary

    duties and responsibilities.

  • New images should be edited promptly.

  • There should be no catalog charges.

  • The proposed commissions were unsatisfactory and the present commission structure

    is outmoded and requires modification.

  • The definition of "Similars" should be less restrictive.

  • Getty should guarantee substantial audit rights and provide more extensive

    records to contributor's auditors.

  • Percentages should be calculated before deducting foreign taxes and prior to

    claiming foreign tax credits.

  • Getty should place the highest priorities on return of the images they have

    withdrawn from the market.

  • If Getty pays web affiliates (such as Random Eye) a percentage for click-through

    traffic, the photographer's percentage should be calculated on the gross fee paid for

    usage, not the amount Getty receives after affiliate deductions.

  • Contracts should not include non-disclosure clauses except regarding confidential

    information concerning image needs.

  • Getty should set minimum license fees.

  • Getty should minimize delays in reporting and remitting royalties from foreign

    licenses.

  • Contributors are concerned about high cancellation ratesand the lack of

    cancellation charges to clients.

    For the full text of this letter and Getty's initial outline go to

    www.pickphoto.com/sso and see Stories

    373 and

    375 .


    Story 370

    GETTY SNAPS AT ANALYSTS

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    Mark Getty has charged that industry analysts have "forgotten how to be objective". The

    interesting thing is that he is not talking about people like me; he's talking about

    the investment banking analysts who have told the world for so long that Getty Images

    was such a great buy.

    Evidently, when analysts start asking hard questions and not accepting the company line

    verbatim that is evidence of not being "objective."

    He complains that in the past Getty Images had to "carve banks into deals when they

    have done absolutely no work for us merely to keep them sweet." This sounds like Getty

    was "buying" favorable comments about his company (and that certainly doesn't sound

    like it's in the best interest of investors). But what really upsets Getty is that now

    the analysts are refusing to be bought, or once they are bought they won't stay bought.

    He unburdened himself to Neil Bennett of the Daily Telegraph in London for a December

    17, 2000 piece. For the full article see "Mark Getty Snaps At Analysts," Story

    370 on our online site.


    Story 368

    GETTY RETURNS IMAGES

    SIZE =5>


    January 11, 2001 - Getty Images has announced that they will begin returning to

    TIB photographers, early in 2001, approximately 5.5 million original images

    "inventoried in Dallas". They have had a team of approximately 30 individuals sorting

    through these images for the past nine months and organizing them by photographer.

    Getty has also confirmed that all of their offices and the offices of their

    sub-agencies have stopped licensing rights to original images in the Stone, TIB and VCG

    brands. All these images are being rapidly returned to Dallas which will be the central

    sorting facility. They intend to sort and return to the photographers all images from

    all these brands on an ongoing basis. They will no longer retain images until the end

    of the contract term. TIB and FPG photographers have already received a letter explaining

    the policy. The letter to the Stone photographers is expected to be mailed next week.

    In a letter to TIB photographers Stephen Morelock said, "Our goal is to put your images

    to work or return them to you in a timely fashion and within the terms of our

    agreement."

    "At the time Getty Images acquired The Image Bank, we inherited a large backlog of

    images already in storage. Getty Images has invested heavily in manpower and resources

    to bring order to this backlog and to put efficient systems in place to manage the

    images. A team of approximately 30 individuals has been at work on the project for the

    past nine months. They have taken images that were stored by subject matter and

    resorted them by artist. The result of our efforts is that all images in that backlog

    inventory (some 5.5 million originals!) have now been sorted by artist and we have

    begun the process of returning the images to released artists."

    Part of the motivation for this action was the suit for lost originals by photographer

    Charles Mason that resulted in an undisclosed out-of-court settlement last spring. This

    settlement came after court documents revealed that TIB had distributed images all over

    the world without tracking them. (A full report of this case can be found on the PDN

    site at: www.pdn-pix.com/news/arts_0700/art1.html.)

    Industry sources indicate that there may have been a number of out-of-court settlements

    for lost transparencies recently.

    Morelock pointed out, "As was announced at our previous artist meetings, it is not

    Getty Images policy to license original images in our offices. Therefore, we have asked

    each office and franchisee to return all originals to us. Some of these images will be

    elevated to CORE, where they will be aggressively marketed through our world wide

    distribution systems. The remainder will be sorted by artist and we expect to return

    them to you on an ongoing basis.

    "In addition, please be assured that the masters of your CORE images are stored

    securely. We hope this update increases your confidence that Getty Images is committed

    to the care and return of your images, having allocated the resources necessary to

    achieve this goal," he continued.

    FPG Returns

    Rana Faure, Director of Photography at FPG has also announced to FPG photographers the

    "permanent closing" of the FPG files. They will begin returning images in the 2nd

    quarter of 2001.

    The FPG files are now on their way to Dallas where they will be sorted by the same 30

    person team that worked on the TIB files last year. Faure said, "These images are all

    being sorted by photographer in preparation for their return. We are making excellent

    progress and we expect to begin the process of returning images to all photographers

    involved sometime around the end of the second quarter of 2001."

    Faure told photographers, "As you know, FPG stopped accepting new images for

    'file-only' promotion in January 1999, in a move to prepare for our evolution to a

    fully e-commerce enabled business model. Since then your editor has been selecting

    images for product representation only. After many months of careful preparation,

    evaluation and editing, we are now at a point where we are ready to announce the

    permanent closing of our files. We realize that this is a milestone in FPG's history,

    one that we have approached with the utmost care and consideration. We feel that it is

    critical now that we fully embrace the technology available to us today. This

    technology will allow our business to grow by providing better access and exposure for

    your images then was ever possible before.

    "Over the past several months, we have been closely evaluating the original images

    residing in our files for relevance and marketability. We have completed the process of

    selecting the most viable images from the file material and we are in the process of

    digitizing and uploading this material to the web. The selected file material will now

    be marketed as part of our core collection," Faure continued.

    Barbara Roberts, former President of FPG before the company was sold to Visual

    Communications Group and later to Getty Images, said, "The dismantling of the FPG file

    is totally tragic. One of FPG's biggest money makers was retro photography from the

    50's and 60's. Photography, like everything else, goes in and out of vogue on a cycle

    of about 20 years. I predict that the photography and fads from the 70's and 80's will

    have renewed demand in the 21st century. Nostalgia for the last century will explode in

    the next ten years. The documentary photographs on social issues that we produced while

    I was at FPG will have tremendous value in the future. Some FPG photographers have

    really chronicled the whole development of taste and culture in the 80's and 90's. The

    people at Getty Images don't seem to appreciate the absolute gold mine they are

    dismantling."

    Contact Your Agency

    It is recommended that any photographer with images at either TIB or FPG contact their

    respective companies and supply a current address where their images can be returned.

    TIB photographers are advised to write to Stephen Morelock at: The Image Bank, 2777

    Stemmons Freeway, Suite 600, Dallas, TX 75207, or e-mail him at

    smorelock@theimagebank.com. FPG photographers should write to: Sarah Whiteside at FPG,

    32 Union Square East, New York, NY 10003, or e-mail her at sarahw@fpg.com. If FPG

    photographers have questions, contact Claudia Micare at claudiam@fpg.com or by phone at

    (212) 358-6520 and she will be happy to assist you.

    New Year's Present

    Getty is offering all the other stock agencies in the industry (except Corbis because

    they intend to do the same thing) a huge present.

  • By closing down these files they are significantly reducing the number of

    competitive images in a number of categories.

  • They are leaving a number of the world's best photographers no alternative but to

    take a substantial portion of their work elsewhere in order to make it available in the

    marketplace. Once photographers make such a move it will be interesting to see if they

    continue to give Getty first choice of their production.

  • For many agencies this will be an unprecedented opportunity to add depth to their

    files with material from some of the world's leading photographers.

  • They are offering many of their customers no alternative, but to go to other

    sources to find much of the imagery they need.

  • Once they have dismantled their files there is little or no chance that they will

    be able to rebuild a file that competes in these particular subject areas, if they

    happen to discover that this has been an ill advised move.

  • This move is likely to significantly reduce the oversupply of images in the

    marketplace at the expense of some of the world's top photographers. Once the images

    are returned to photographers many will never see the light of day again. Some

    photographers will edit the best of their material and make it available to other

    agencies. Many will find the task too burdensome.

  • This move is likely to make it clear to customers that Getty is not a supplier

    concerned with their needs.


  • 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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