April 6, 2001
Toronto, Canada is becoming a favored destination for photographers dissatisfied
with their current representation and looking for a new agent. Toronto is the
home of Masterfile, now the third largest stock agency in North America -- after
Getty and Corbis -- with gross annual sales of $16 million in 2000. They expect
to do $20 million in business in 2001.
Masterfile currently represents 110 photographers and 20% of them earn over
$100,000 a year in annual royalties. At least one is "approaching" $1 million in
annual royalties. The agency has a staff of 140 and a ratio of one editor to
every 20 photographers.
It is interesting to compare these numbers with royalty figures for Stone that
Getty provided to Selling Stock in June of 2000 (See Story
315 .) Based on figures
provided for one quarter 20% of Stone photographers were only earning $40,000 or
more per-year, although this might have jumped to $50,000 for 2000, based on
quarterly growth year-to-year when the numbers were reported.
I estimate that the average earnings of Stone photographers for 2000 was $30,666
(1500/$46 million). The average income for a Masterfile photographer was over
Masterfile's most recent print catalog was number 28. They have about 15,000
images in various print catalogs. They mail two catalogs a year to in excess of
100,000 buyers worldwide. In addition, they have a very aggressive print
advertising campaign in the major publications read by art directors and graphic
designers worldwide. Since September 1999, they have mailed a 16 page tabloid
size color brochure monthly to their customers.
Until recently 85% of their sales around the world were from images in the print
catalogs, but that is changing rapidly as the internet kicks in. Currently about
50% to 60% of worldwide sales come from images in the print catalogs, but many of
these are purchased as a result of an online search rather than finding them in
the print catalog.
In February 2001, 58% of their North American revenue came from customers finding
the image on Masterfile's web site. Use of the web site has gone from zero to 58%
in less than two years.
With 58% of sales on the web it is becoming difficult to determine the
effectiveness of print catalogs. When someone purchases an image on the web it
may be the result of first finding it in a print catalog. If the customer enters
a catalog image number, rather than doing a search by keyword, in all probability
they found the image by going through a print catalog. Masterfile views print
catalogs as the best browsing tool and the web as the best research tool. They
intend to use both forms of marketing aggressively for the foreseeable future.
During a recent visit to the Masterfile offices in Toronto, I learned that they
have a relatively tight editing policy and only about 300,000 images in their
total file. 50,000 of those are in their online database at www.masterfile.com.
This number includes all of 15,000 images in print catalogs. Only about 2% of
their sales come from the file images that are not online. Nevertheless, Pigeon's
goal is to get most of the file images online. They have discovered that when
they add file images to the web, many of the images that sat in file for ages and
never moved, begin selling once they can be found on the web.
Despite the fact that they are a Canadian company, Canada represents only 10% of
their sales. About 55% of their 2000 revenue came from the United States. The
Masterfile has experienced in selling into the U.S. from Canada were perception
problems when it was necessary for U.S. customers to return film to Canada. For
this reason they set up an office in Chicago where all U.S. customers return
film. The fact that files are being delivered digitally in an
increasing number of sales also helps solve this problem.
Steve Pigeon, President of Masterfile, gets great satisfaction from the knowledge
that Masterfile is "more profitable than Getty and Corbis combined."
Masterfile pays photographers 40% of the revenues they receive, but there are NO
promotional charges (catalogs, dupes, scanning) of any kind. Photographers used
to receive 50% for analog sales and 40% for online, but in addition many had
substantial catalog charges considering the number of catalogs published by
Masterfile. In February 2001 Masterfile decided to lower the percentage and
eliminate all charges. Pigeon said this strategy will cost the company over $1
million annually, but the board believed it was fair and the resulting growth of
the company would more than make up the difference. The average fee per usage for
images licensed in the U.S. in 2000 was $575.
A downside for many photographers is that Masterfile is rigidly
photographer exclusive. Pigeon says, "I don't want to represent pictures, I want
to represent people."
He doesn't agree with the philosophy, so prevalent at other agencies, of "cherry
picking" the few best images from as many photographers as possible and
forgetting about the people. Masterfile seems to be the last large agency (and
there are few of any size) that has a philosophy aimed at trying to help each
photographer they represent reach their maximum potential rather than just
maximizing agency sales.
Many photographers have asked Masterfile for image exclusive agreements, but
Pigeon says, "Image exclusive is not in the cards at Masterfile." One of the
struggles many top photographers may have is what to do with whole shoots that
the agency refuses for one reason or another to market. Many photographers
represented by other agencies are finding that their agencies are rejecting a
large percentage of marketable images, for various unexplained reasons.
Pigeon's response to this concern is that "We don't reject an entire shoot unless
it's bad. You can get precious when you represent a few thousand photographers,
but with just ove 100 we'd have to be pretty dumb to reject an entire good
Masterfile will help photographers reach their potential, but they expect a very
serious commitment from each photographer. Each photographer is expected to
produce a certain number of new images each year and this figure is built into
the contract. The number depends on the type of work a photographer does so a
larger quantity may be expected from a nature or travel photographer than from
someone who produces concept images using PhotoShop.
Another unique characteristic of the contract is that Masterfile has an annual
sales quota for each photographer based on a minimum dollar value per accepted
image. The amount is negotiated and depends on the photographer's area of
specialty. If the photographer does mostly scenics the number might be around $35
per image. If he specializes in lifestyles it might be in the range of $135.
The contract states that "if the Gross Billings for the calendar year ... are
less than the Minimum Sales" (quota) the photographer has the option to terminate
the contract. If Masterfile wants to retain the photographer then they must pay
the photographer the "applicable Royalty on the difference between the actual
Gross Billings and the Minimum Sales for such calendar year."
As far as we know Masterfile is the only agency that offers this type of
guarantee. Pigeon says he has only had to pay out the minimum once in 28 years.
However, they will terminate a photographer's contract if the photographer
doesn't meet his/her production commitment.
The term of the contract is for five years with one year renewals after that.
Many agency contracts allow photographers to sell stock direct to their customers
so long as they don't market images through another agency. Masterfile's
agreement says, "During the term of the Agreement, Artist will not compete with
Masterfile in the marketing of any Stock Image." All stock sales must go through
Masterfile. Pigeon is concerned that the photographer's judgment of what is
similar, might not be the same as the customers. He doesn't want to take that
Any new images created for licensing as stock must be handled
by Masterfile. Masterfile believes that the only way they can offer exclusive
licenses is to have absolute control over all similars of every image offered.
Pigeon doesn't want something that is close, but not exact floating around, and
available for licensing, if they have given one of their customers an exclusive
They have all similars in their online database linked. If someone wants an
exclusive on an image they can put a hold on all the similars, if necessary.
However, that usually doesn't happen. Someone on Masterfile's staff goes through
all similars to determine which, if any, might present problems based on the
clients specific usage. All others would remain available for full licensing.
While customers can license usage online and download the image file without the
appearance of any human interaction, a human is in the background all the time.
Whenever a license in North America is completed, the information appears
immediately on the screen of someone in the Toronto office. The usage is checked.
If there is a potential conflict a Masterfile staffer will contact with the
customer within 15 minutes. This operation is manned 24 hours a day, 5 days a
The receipt the customer gets online says: "This receipt is not a License. A
license to use the selected Image for the purposes indicated below will be mailed
to you within one (1) business day following our review of the data you supplied.
In the meantime, you may download the Image to prepare for production but you
will acquire no rights until you have received and paid our License. If you
require immediate rights to reproduce the Image, contact Masterfile..."
They also check for sensitive issues. In their contract with the customer
Masterfile defines "sensitive issues" as follows and obligates the customer in
the event of a misuse.
"You hereby agree that:
a. You will not use or permit the use of any Image in a defamatory, libelous, or
pornographic context or contrary to ethical business practices;
b. You are responsible for all text used and claims made in connection with Your
use of any Images; and
c. If any Image depicting a person is to be used in a sensitive context
(including, without limitation, context relating to sexual conduct, criminal
activity, substance abuse, mental condition, religious, political or racial
bias), then the existence of a model release may not be sufficient to protect You
from action by the person depicted in the Image (the "Model"). If you intend to
use an Image in a sensitive context:
i. You agree to notify Masterfile in writing and Masterfile (in its sole
discretion) may determine to contact the Model and request a sensitive issues
model release on Your behalf;
ii. You understand that such release could require You to pay an additional fee
(which would require Your prior approval); and
iii. If Masterfile is unable to contact the Model, or if the Model refuses to
execute a sensitive issues model release, or if Masterfile (in its sole
discretion) declines to License the Image for Your purpose, then You agree that
you will not use the Image and no License will be granted by
In addition to the above requirements, a sales person or rights coordinator
checks all online licenses within fifteen minutes of a buyer completing any
online license. Five percent of sales have some type of exclusive.
Masterfile has 17 foreign agents licensed to use the Masterfile brand. The agents
are required to have a unique phone number for the Masterfile brand. If for any
reason Masterfile decides to move the images to another representative the phone
number is transferrable. This helps build that brand in the country. They also
have regular sub-agent relationships in 15 other countries. Included in this list
are England, Germany, Italy and Switzerland.
Each agent must report all sales of Masterfile images on a daily basis, in
addition to image number, artist name, print run, and fee the sub-agents are
required to supply: end user name, type of business of end user, rights
termination date, type of exclusivity, type of media, audience of media, and
territory of license. If there are no sales they are required to send a report
that says they have had no sales. Thus, worst case, Masterfile knows within 24
hours if there is a potential conflict to any usage. This information is entered
into a database that is available to all sales staff and sub-agents.
Occasionally Masterfile funds productions of wholly-owned business and lifestyle
images for the company. Pigeon says he was "forced to create our Production
Department in 1998 because our artists were not meeting the growing client demand
for business and lifestyle images." On these shoots they pay the photographer a
day rate, and in some cases 5% of sales. These shoots are done solely for the
purpose of filling gaps and the images represent only about 2% of the images
Pigeon expects that there will be less need for such shoots as the company adds
photographers during 2001 and he emphasizes that Masterfile did not do this to
lower royalty expense, but to meet client demand.
The following is an excerpt of an e-mail he send to all Masterfile photographers
earlier this year:
"WANT US TO STOP FUNDING PRODUCTIONS? ...here's the promise some of you are
MASTERFILE WILL STOP FUNDING PRODUCTIONS THE MOMENT THAT WE CAN RELY ON OUR
ROSTER OF ARTISTS TO CREATE WHATEVER IMAGES WE NEED - WHENEVER WE NEED THEM - ON
30 DAYS NOTICE, WITHOUT FAIL.
If that were to happen, we would gladly re-assign our art direction & production
staff to work with lifestyle shooters to increase your
At that point they may go to an outside photographer, but Pigeon insists, "we are
not in business to create pictures, but to sell other people's pictures."
Will They Sell Out?
One of the questions photographers have, given the number of agencies that have
been sold in the last few years, is will Masterfile be sold also.
Pigeon insists that he is not interested in selling. He also says, "I didn't get
into this business (28 years ago) for the money and I won't get out because of
the money. If we ever sell, and I have no personal interest in doing that, I
would have to know that we are doing the right thing by our photographers as well
as our shareholders." Several of his photographers are shareholders.
He also points out that the financial quotas they have in every photographer
contract would make it tough for any existing companies in the industry to buy
them because they would have to honor the Masterfile contracts.
Masterfile is very aggressive in tracking misuse. Almost 5% of their North
American income ($500,000) in 2000 came from someone making an unauthorized use
of a Masterfile image. Whenever they license a usage they always get the name of
the end client and the publications where the image will appear, not just the
design firm or advertising agency. Then they subscribe to these publications and
track how and when the image appears, to determine if it complies with the
A large percentage of the misuses are simple oversights on the part of the
customer. Customers are usually happy to pay promptly when such mistakes are
called to their attention. In these situations Masterfile usually charges the
customer their normal rates. Occasionally, the infringement is intentional and
then copyright claims are pursued aggressively.
Recently, a client requested a price for an ad usage of a very tight shot of a
businessman that showed part of his face and one arm held at a unique angle.
Masterfile quoted a $4800 price for the usage and never heard anything else from
the client. A few months later one of their "Infringement Researchers" was going
through magazines and spotted what he thught was a Masterfile image. A quick
check of the database showed it had never been licensed. On closer inspection it
became apparent that the image was slightly different, and was actually a shot of
another person, but it was also clear that whoever took the picture was trying to
copy Masterfile's image. They probably thought they could create a new image for
less than the Masterfile price and no one would ever know. Masterfile pursues
this type of infringement to the full extent of the law.
Masterfile, has probably the most extensive online pricing template in the
industry, with prices for very large print runs as well as small ones, and for
long time periods. They also offer prices for worldwide and unlimited use based
on the media, territory and duration of use. Sometimes these number can be in the
$40,000 to $50,000 range.
Many agencies don't want to publish high end prices because they want to retain
more flexibility in negotiations. Pigeon's theory is that anyone considering one
of these uses will come to them anyway to negotiate, and there is nothing wrong
with giving them the "starting number" online. In addition, many of the people
who ask for unlimited uses are just shopping, and will never get around to
serious negotiations for the high end uses. In such cases giving the customer the
number online is a more efficient use of the time of the Masterfile sales staff.
Masterfile invoices every sale and is not attempting to take credit card orders
online. Every customer must qualify before they can purchase images online. If a
customer wants to pay by credit card Masterfile will accept payment in that
manner, but they don't expect credit card sales to be significant in the
Masterfile created a separate company called "Wonderfile" in the Spring of 1999
to sell Royalty Free images. They were encouraged to do this by some of their
photographers who wanted to test RF. Wonderfile also represents some of the other
RF brands, but on the whole has been a disappointment.
They have put a lot of energy into marketing the brand, and are getting low
results for the effort. Pigeon's current advice to photographers is that since
they have the same costs in scanning and keywording RF images as they would have
RP, it is better to put the images into the RP marketing channel (Masterfile) and
have a greater upside potential for sales.
Masterfile encourages photographers represented by the agency to get to know one
another. Every new photographer is provided with a list of all their contributing
photographers and telephone numbers before they sign with Masterfile and
encourage them to call anyone on the list. Pigeon says, "In 28 years, I don't
think we've ever been given a bad reference by a contributing photographer."