Maximizing Revenue: RM or RF?

Posted on 7/28/2008 by Jim Pickerell | Printable Version | Comments (2)

Return-per-Image (RPI) may offer a false sense of return-on-investment. Photographers would be better advised to calculate return-per-shoot. Before microstock, stock distributors were clamoring for more RF, but demand has changed. At the recent CEPIC Congress, distributors were looking for RM collections. Photographers need to carefully determine which model is more advantageous for them. Two major arguments favor RM over RF.

(1) Customers occasionally pay large amounts for broad, unlimited, exclusive use of an image. A photographer who recently switched from shooting RF to RM recently licensed rights to an image for $80,000 and use fees much higher than RF.

(2) Distributors currently favor RM because they can negotiate lower fees.

The director of a production company that markets both RM and RF told me he believes RM is the preferred choice. His average annual return-per-image (RPI) for RM is three times RF. However, there may be flaws in this argument.

At 3:1, the argument for RM would seem to be conclusive, but it's dangerous to build a career around a strategy dependent on a certain number of sporadic big sales. If may be better to drop the big sales from your calculations. Then examine the averages on those sales at a more dependable level.

To calculate RPI, simply divide total images in a collection into the gross revenue received. But a more important number is revenue received relative to the cost and time it took to produce the images. Higher billings don't mean much if it costs a lot more to achieve revenue. The important thing is not gross sales, but net margins.

Assume the average annual returns per image are $600 for RM and $200 for RF. (3:1 but not real numbers from this particular source). Despite occasional high ticket RM sales, the volume of low sales severely reduces RPI. The photographer's agency pays him 35% of the $600 or $210 for RM sales and 20% of the $200 or $40 for RF sales.

Getty licenses rights to twice as many RF images annually as RM. This is probably close to an industry standard. Taking this sales volume into account, the comparative numbers would be $80 vs. $210, still giving RM a big advantage.

Note that RF is a nonexclusive product. Until recently, it was easier to place the same RF images with multiple distributors than with RM. If a particular RM image was exclusive with Getty, it could not be marketed elsewhere. That probably knocked out well over 50% of the image's sales potential. Thus, an RF image represented by multiple distributors might sell as often as four times as frequently as an RM image exclusive to Getty, raising RF revenue to $160 compared to $210 for RM; still an advantage for RM particularly if the photographer gets more than 35%.

Yet another factor: the RM selection process is usually much tighter than RF. Photographers who use both methods of marketing get two to four times more images selected from an RF shoot. If 60 RF images were marketed from a single shoot, the average annual return for the shoot would be 60 times $160 or $9,600. The same production might produce only 30 RM images or less. At $210 per-image, 30 images generates $6,300 annual return.

Of course, from these numbers all overhead and production costs would have to be deducted. Some say production costs for RM shoots can be significantly lower RF. Segmenting all these costs and tracking sales by shoot rather than by image may be difficult, but the results in measuring actual profits on various productions would be more revealing.

It should also be recognized that exclusive future use to RF images can be licensed in the same way as RM. When RF images were on discs and purchasers had unlimited rights to use any image on the disc, it was impossible to track use of a particular image. Now, most RF images are sold individually, not on discs. This makes it possible to determine actual use of each specific image. It's also possible to remove an image from a collection so it's no longer available for sale or future use.

Most customers interested in an exclusive care little about who used the image in the past, unless it was a direct competitor. Their primarily issue is insuring that the image won't be used by others in the future. Moodboard recently licensed rights to an RF image for $16,000. These are a few things to think about when deciding whether to license images as RF or RM.


Copyright © 2008 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.  

Comments

  • Steve Pigeon / Masterfile Posted Jul 28, 2008
    Jim - You said "Now, most RF images are sold individually, not on discs. This makes it possible to determine actual use of each specific image. It’s also possible to remove an image from a collection so it’s no longer available for sale or future use."

    You are right that it's possible to remove an RF image from a collection but you are dead wrong about being able to determine how that RF image was used previously. RF licenses are too broad to enable anyone to say with any certainty how the licensees may have used the image previously. The only way to do that would be to contact each of the licensees and ask them exactly what they did with the RF image after they downloaded it. Good luck finding that out.

    - Steve Pigeon, President, Masterfile Corporation

  • Don Farrall Posted Jul 29, 2008
    Steve Pigeon wrote "You are right that it’s possible to remove an RF image from a collection but you are dead wrong about being able to determine how that RF image was used previously. RF licenses are too broad to enable anyone to say with any certainty how the licensees may have used the image previously. The only way to do that would be to contact each of the licensees and ask them exactly what they did with the RF image after they downloaded it. Good luck finding that out."

    - Steve Pigeon, President, Masterfile Corporation

    Not only is this true, but anyone who has purchased an image previously under an RF license can do what they want with it in the future. The potential for the new "exclusive" owner of that image to see his "exclusive" image appear in an unwanted manner still exists. Buyers of RF images consider the image there's to use however forever, this is what they were sold.

    Don Farrall

    Getty contracted RF and RM shooter

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