New Business Model - Issue 7

Posted on 9/24/2007 by Jim Pickerell | Printable Version | Comments (0)


Issue 7 - The only reason for pricing something below the cost of production is having a reasonable assurance that through multiple use, enough income will be generated to provide a profit.

Many of the things we use every day are priced below the cost of production. A few examples: seats in a football stadium or a car rental. The price of a seat to see a football game, or even the sum total of the amount everyone pays for all the seats in the stadium, will not begin to cover the costs of building that stadium and the other factors that go into that day's entertainment. The price to rent a car for a day doesn't cover the cost of building that car.

But, if you rent a car for a week instead of a day, you pay more because you receive more value. If you buy a season ticket to football games, you'll pay more than for a single ticket because you receive more value.

Why is this important? Because value received should be the basis for pricing image use, just as it is for pricing uses in these other areas of commerce. When a customer asks why you charge them more than you're charging "X" to use a particular image, the answer is that in your judgment, the customer is receiving more economic benefit.

But there is another unknown factor that goes into the pricing of a stock photo that other types of rentals usually don't address.

In the rental of a stadium seat or a car, there is usually a way, through some complex calculations, to determine how much revenue is likely to be generated before the asset is used up. This gets us to the reasonable assurance element of this model. There is no way that I've been able to determine to calculate how many times a given image, or a collection of images, will be licensed over any extended period of time.

It may be possible for a photographer with a reasonably sized collection to predict that because his collection generated "X" last month, it will generate about the same next month. But it is difficult to extend this logic far into the future because the photographer has absolutely no control over the amount of content brought into the marketplace, or at the price point it is brought to market. If the overall world collection is growing at a much faster rate than the photographer's collection, it is likely that his revenue will go down, no matter how good his images are, due to stiffer competition.


Copyright © 2007 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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