Thanks to
Adobe Stock gross microstock revenue will start to decline. Let me explain why.
I estimate that about $143 million of
Shutterstock’s 2014 revenue came from subscriptions. Based on the $0.25 to $0.38 they are paying in royalties for subscription downloads and the fact that they say they are paying out 28% of the revenue they receive in royalties, it seems that they are earning about $1.25 for each image downloaded through a subscription. Thus, total subscription downloads were in the range of 114 million images for 2014.
We know that many of subscription customers don’t actually use all the images they download in projects. They download extra images that they use in the design stage of their projects, or maybe just to have on hand in case they might be used in a project in the future. Because it is all part of the subscription price that allows them 750 downloads per month there is no additional charge for downloading these extra images.
The big question, and the critical issue as we look ahead at the Adobe Stock offering, is how many of these 114 million images were actually used in projects. Nobody, not even Shutterstock, knows.
With the new Adobe system customers can store extra images they select in the Adobe Creative Cloud, use them during the design stage of a project, keep them there for reference just in case, and not have to pay for any they downloaded until an image is actually used in a project.
It costs Shutterstock subscribers $2,388 for a year’s subscription. If we assume that everyone subscribes for a year that means that Shutterstock has about 59,882 subscribers.
Let’s assume that these subscriber really only use an average 10 images a month (120 per year). It they switched to Adobe Creative Cloud they would pay $360 a year instead of $2,388. Gross revenue if all 59,882 were to make the switch would be $21,557,520 instead of $143 million. Suppose they use, on average 240 images a year, gross revenue paid out to Adobe would be about $43 million instead of the $143 million to Shutterstock.
That’s $100 million in savings for the customers.
Another way to look at it is that the average Shutterstock subscription subscriber downloads about 1,900 images a year. Suppose these customers only use 1 out of every 3 of the images they download, or 633 per year. They can save money with Adobe and still have access to all the same images. At $2.99 per image they would pay Adobe $1,894 instead of $2,388 and they save additional money for every image less than 633 that they use.
A significant percentage of the Shutterstock images are also available on Adobe Stock. If the customer can’t find what they want on Adobe they can always go to Shutterstock and purchase what they need as a single image for about $10.
Of course, all of Shutterstock’s subscribers are unlikely to switch, and the switching will occur over time (a year or two), unless Shutterstock can do something to counter Adobe’s advantage.
But it is hard to see how Shutterstock can offer a cloud option that so perfectly integrates with Adobe’s other products, and even if they could one would think they would need to match Adobe’s pricing. Consequently, it is hard to see why a significant number of Shutterstock customers won’t eventually switch to Adobe.