353 NOVEMBER 2000 SELLING STOCK
Volume 11, Number 2
©2000 Jim Pickerell - SELLING STOCK is written and
published by Jim
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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
Lesson from Exactly.com: It's not enough to have a bunch of well known photographers
that say your great. It's necessary to have a business plan that works.
Story 350 GETTY HAS SLOW GROWTH IN THIRD QUARTER
November 1, 2000 - Getty Images, Inc. reported 3rd quarter 2000 revenue of
$127 million, up from $123.6 million for the 2nd quarter, or a 2.75% increase for the
For the first three quarters of 2000 the revenues have been $104.8, $123.6 and $127
million. Getty has advised investors that they expect sales to be in the range of
$133 to $135 million for the fourth quarter which would result in gross revenue for
the year of about $490.4 million. It should be noted that the big jump in second
quarter growth included the acquisition of VCG.
Getty's gross sales for 1999 were $247.8 million but this included only 38 days of
TIB revenue and none of VCG. The 2000 revenue will include a full year of the TIB
brand and over nine months of the VCG brand.
E-commerce revenues were $44.9 million and represented 35% of the total sales for the
Company. For the first three quarters E-commerce revenues have been steadily rising
from $31.5 to $38.3 and $44.9 million respectively. If e-commerce revenue remains
at the same 35% for the 4th quarter the total e-commerce revenue for 2000 would be
approximately $162 million. Based on the steady growth they have experienced, I
would expect that the final number would be somewhat higher than this.
CEO Jonathan Klein said that nearly 40% of Stone's 3rd Quarter revenue was from
e-commerce sales. In September more than half of Stone's North American sales were
transacted on the Internet. It should be noted that in e-commerce sales there may be
an element of negotiation rather than deriving all prices from a fixed on-line price
schedule. In addition the client may be invoiced rather than being required to make
automatic payment by credit card.
Just under 20% of sales for The Image Bank collection took place on the web site in
the 3rd Quarter. A full e-commerce web site for FPG images was rolled out in late
Adding To The Collection
In his conference call to investors CEO Jonathan Klein reported that they had
completed the editing of the TIB files and that most of the images were already
available on the Gettyone site. He also indicated that the integration of the VCG
files is ahead of schedule and is expected to be completed before the end of the
When asked how many images they expected to add in the future Klein said they had
approximately 1.2 million images in the system now. Ninety percent of sales come
from 500,000 of these images and 80% of sales come from about 250,000 images from the
four major brands - Stone, TIB, VCG and PhotoDisc.
He also indicated that in the four major advertising brand categories they expect to
add about 15,000 images per-brand, per-year for the next three to five years. These
four brands represent 80% of their sales.
In the historical collections that they wholly own they will be adding 100,000 to
200,000 new images per-year in the next three years. In news, sports and other
photojournalistic area they expect to add 3,000 to 4,000 images a week given the
nature of the editorial market. Klein pointed out that the files sizes of these
images will be much smaller than 48MB and thus cost them much less than $45 per image
to input and store.
Klein said the average per-image price for the Stone brand in North America was $640.
This is up from just over $550 about a year ago and approximately $400 when Getty
acquired Stone in 1997. They instituted a price increase at Stone, PhotoDisc and
other key brands in early September, but because it came at the end of the quarter it
did not have a strong influence on 3rd Quarter revenue. However, they have seen no
resistance to these new prices or reduced volume as a result of the increased prices.
In his speech at Photo+Expo, Mark Getty said the average transaction at Stone was
around $1500 meaning that they sell about 2.34 images per transaction.
Klein acknowledged that the average per image price is lower in other parts of the
world than in North America. He also said that the average price for an advertising
image sold through Stone in North America is over $800 and that the average per-image
price for one sold to the Publishing market is under $200 in North America.
The total number of registered users has risen to approximately 1.1 million. Over
40% of those registered on Gettyone.com are new customers to Getty Images.
During 2000 Getty Images has closed 11 offices and eliminated over 400 positions.
However, during that same period they have also created many new positions,
particularly in technology, to support their growing infrastructure of websites.
Thus, on March 22nd they reported that their total number of employees was
approximately 2,600 and in November the number remains at 2,600. Their highest
staffing during the year was approximately 2,800 employees.
It has been argued that by selling through the Internet fewer people will be needed
to conduct business. At Getty that does not seem to be the case at the present time.
While different skills may be needed the overall numbers appear to remain
essentially the same.
Breakdown of 3rd Quarter Revenue
In the 3rd Quarter 56% of revenue came from North America, 35% from Europe and 9%
from the Rest of the World. The percentage from Europe was affected by the weak
Euro. On a currency neutral basis Europe would represent a larger percent of total
Klein said that PhotoDisc royalty free sales continue to grow at about 20% on an
annual basis and that the vast majority of those sales are in North America. They
are trying to do more to extend this brand to other parts of the world.
Thomas Weisel Partners is estimating that Getty's revenue for 2001 could exceed $600
million which would be consistent with at 20% to 22% annual revenue growth.
Revenue for the third quarter of 2000 increased 109 percent over the third quarter of
1999 to $127 million. Organic revenue growth, excluding all acquisitions made in the
last twelve months, was 37 percent and was 42 percent on a currency neutral basis.
This is the third quarter in succession in which organic revenue growth has exceeded
EBITDA increased 250 percent over the third quarter of 1999 to $27.4 million. The
EBITDA margin increased from 12.9 percent in the third quarter of 1999 to 21.6
After tax cash flow per share was 37 cents, compared with 17 cents per share in the
third quarter of 1999. Loss per share before integration and restructuring charges
was 48 cents in the quarter, down from a loss of 56 cents in the third quarter of
1999 and net loss per share after integration and restructuring was 52 cents, down
from 69 cents in the third quarter of 1999.
Getty plans to make Art.com, its consumer business, profitable on an EBITDA basis in
2001. They expect the integration of the businesses they have acquired to be
completed by the 2nd Quarter of 2001.
Story 341 EXPRESS PRICING DIES
October 11, 2000 - Discount prices don't always result in an increased volume
of sales as SuperStock discovered recently.
SuperStock Cancels Express Pricing
SuperStock has canceled the Express Pricing strategy they adopted in January and
returned to traditional pricing. (See Story 276 on our on-line site.)
Gary Elsner, COO of Superstock, said, "We discovered that while customers care about
price, it is only at the final moment of the purchasing process."
"The first priority of picture buyers is to find the right image for their project.
What we learned is that they will use a variety of sources in the initial selection
process. When they find the image they want, then they deal with the pricing issues."
"We tried to add value by offering a simpler, easier way to purchase imagery, but it
didn't attract the customers. The buyers were unwilling to base their choice of image
providers solely on price."
Let me repeat, so you don't miss it. THE BUYERS WERE UNWILLING TO BASE THEIR CHOICE
OF IMAGE PROVIDERS SOLELY ON PRICE.
"The final confirming factor that Express Pricing wasn't a useful strategy is that we
dropped it in August, went back to our old more complicated methods of pricing, and
so far most of our customers haven't picked up on the fact that there has been a
change," Elsner continued.
Some SuperStock photographers report that their royalties have dropped more than 40%
"The results did not justify continuing this experiment," Elsner said.
Cutrate Royalty Free
On the other hand, it seems that some in the industry never get the message.
PhotoSpin believes that Royalty Free photos are too expensive. They have launched a
new subscription service that dramatically lowers the prices they charge for RF
images when compared with the prices of their competitors.
Customers can now pay a single $99 per year subscription fee for unlimited access to
low resolution files of PhotoSpin's entire library of over 15,000 images. In addition
PhotoSpin expects to add 1,000 new images per month to this library and these will be
included in the subscription price.
For $199 per year customers can get a key to the full PhotoSpin collection, including
high-resolution, print-ready images and illustrations, and the complete library of
video clips, audio files, fonts and more.
There is also a FREE tier that gives interested customers limited access to the
PhotoSpin collection. (On the site it is hard to figure out what is available for
free, but at these prices who cares?)
"There is a huge need for this kind of service," says Val Gelineau, the CEO and
co-founder of PhotoSpin. "No one else is providing an open-ended 12-month ticket to
an entire library of high-quality images targeted towards professionals."
One of the many problems with this model is that graphic designers and ad agencies
who typically use RF bill the fees back to client projects. How will these buyers
bill a "subscription fee"? PhotoSpin may be moving toward the SOHO (small office/home
office) market which is not typical of what is generally happening in RF.
The PhotoSpin collection includes award-winning photographs, illustrations, video
clips, sound files, fonts, and more. PhotoSpin's OEM clients include MetaCreations,
Live Picture, Microsoft, Encad, Artville, Ulead, WebUtilities.com, Altamira Group,
Scream Design, Andyart.com, PixoArts, KGA and ScanSoft.
What About The High End?
Keep in mind Getty is now saying that the average price for a Stone image in North
America is $640. Stock Connection reported a couple months ago that the average
price for the images they licensed in the first half of 2000 was $925. Some clients
are willing to pay more.
Story 352 INDEX STOCK CLOSES OFFICES
November 8, 2000 - Index Stock Imagery has closed all their offices except
their New York headquarters and reduced staff by about 20%. They currently have
about 100 people at their New York headquarters. They have also cut staff salaries
across the board by 5% and CEO Bahar Gidwani has taken a 10% pay cut.
These cuts were a condition investors placed on the company before they would provide
the balance of a $20 million round of funding. The investors expect the company to
reach the break even point and become profitable in January 2001.
Index had received some of this $20 million in order to keep it operating through
2000. In 1998 Index received $12 million in funding. With this new round investors
have put $32 million into the company. Mr. Gidwani will not reveal how much cash
remains, but it is clear that after January investors expect income to more than
cover the costs of operations.
While there have been significant staff cuts, some work like scanning, previously
done in-house, will now be outsourced.
Index is also late in paying photographers commissions for the last quarter due to
continuing problems with their sales tracking and accounting system. The goal is to
have an on-line system that enables each photographer to determine how much he or she
is owed at any point in time.
We first reported in March (See Story 289) that Index was having problems with this
accounting software. At that time they said the system would be fully functional in
Index has approximately 530,000 images on-line and 85% of their customers are served
on-line. Index is implementing a preference system which will bring the best of
these images to the top on any keyword search.
Story 342 RIGHTSPRING
October 11, 2000 - Peter Howe has combined forces with a technology company in
Southern California, and will shortly offer a technology and service platform to
stock agencies that will enable them to distribute their content worldwide on the
The pricing for these services is still being worked out, but an announcement is
expected within a couple weeks. The basic charge for this service will be a
percentage of sales. There will be an a la carte menu of services, and agencies will
be able to choose the services they need.
The technology company has developed a database that they have been using very
successfully in the music industry. They recognized that the already developed
technology is very applicable to the stock photo industry, and thus the reason for
making this offering.
Each agency will have its own portal, with its own custom front end, which it can
promote to its customers. The back end will be maintained in a single database. One
of the major advantages to the small and medium sized agency is that they do not have
to get involved with learning and keeping up with all the technology issues. The
technology company will guarantee to maintain a server on a 24x7 basis and to make
sure that the technology used is always current.
Rightspring is a technology service provider not a content company. They do not plan
to negotiate or set prices for the sellers. Initially, they will deal only with stock
agencies who have drawn a body of content together and are prepared to keyword,
market their service, negotiate prices and handle their own collections. Rightspring
will consider dealing with certain individual photographers who have the
infrastructure to respond in a timely manner to client requests, negotiate and
They expect to be up on-line by January 15th.
"Our goal is to level the technology playing field for the small supplier," says
Peter Howe. "We believe that a large percentage of the buyers want to work with
smaller organizations who supply specialist services and content. We want to help
these smaller organizations compete and remove the technology issues from
Story 344 SPEEDPIX MOVES AHEAD
October 11, 2000 - Speedpix has instituted a policy of no up-front charges for
contributing photographers. A fee of $50.00 per image will be deducted from sales.
Only 50% of any royalty owed will be used to pay off the photographer's outstanding
obligation ensuring that the photographer gets some income with the first sale.
Speedpix has a very simplified pricing structure. All prices listed on the site are
for a single one-time use, and a one year license for the usage. Customers who want
multiple insertions or exclusivity must contact Speedpix to determine the prices for
Mike Morrison's explanation for this pricing strategy is as follows: "If you try to
set up a small shop next door to a supermarket and your business model offers buyers
exactly what they are already getting in the supermarket in terms of quality, ease of
use, and price (albeit with a greatly reduced depth of coverage) - you would be a
little foolish to expect to gain market share from the supermarket.
"If you set up your little shop next to the supermarket, and your plan is to shout
out loud that you offer the same quality goods, with a much greater ease of use and a
much simpler - most times cheaper - pricing structure, you may have a chance of
taking sufficient market share to start rocking the boat.
"The only stock selling model which has come along in recent years and actually been
successful in taking market share from the big boys is Royalty Free. We hate royalty
free - but if you look at it from the buyers point of view you can clearly see why it
works - it offers something which is radically different - and advantageous to the
"If Speedpix is to be serious about becoming a major player in the stock game we must
do the same! The pricing structure we operate is very simple for the buyer to
purchase single time usage rights. However, we still have the ability to offer both
Industry specific and complete exclusivity. We still charge extra for multiple
insertions and collateral usage (where the same image is used simultaneously in a
range of ways). Although our current top individual sale price is $600 we are often
seeing sales going over $2000 due to these factors.
"Speedpix is a quality product with a distinct advantage for the buyer. The only
thing which can potentially stop us building a highly successful photographer based
selling machine - is the photographers themselves. We need great photographers to
believe in what we are doing and to have the vision to give us some great work now!,"
Speedpix had initially planned to only accept credit cards as payment for usages, but
before going live they learned that many major buyers have a centralized purchasing
system that does not lend itself to credit card payments on the spot. For this reason
they established customer account facilities.
Morrison estimates that approximately 75% of current sales have been paid via account
rather than direct credit card. "It will be interesting to see how this figure
changes as we add more US based customers to our client base."
Speedpix has started advertising in the U.S. and currently has either half or full
page ads in every issue of Communication Arts. Ads have appeared in PDN, Photo Expo
Show guide, Photo Source book. Morrison says they will be increasing US advertising
coverage in magazines one at a time with careful analysis of results. They have
discovered in the UK that some publications produce a lot of interest whereas others
produce very little.
Speedpix also plans to do targeted direct mailings, telephone sales and direct
appointments with large buyers in targeted US cities. Because everyone is so busy,
the biggest barrier to getting clients to use any new system is to get them to take
the first look. In the UK they have found that direct contact either by telephone or
by appointment is proving far more effective in actually creating new buyers than
simple advertising by whatever media.
When Getty Images decided to close down Planet Earth Pictures in the UK, there were
reports that photographers were trying to interest Speedpix in uploading a certain
segment of the images into their system.
Morrison reports, "There is a certain amount of mis-understanding here - due in part
to poor wording on the letter we sent out to photographers on this issue.
"We were approached by photographers asking us if we felt there was some way to
rescue Planet Earth.
"Having looked at the way in which this specialist library works (clearly a filing
cabinet based library where manual searches need to be made by expert staff for
obscure specific images) we made it clear that an on-line solution was not really a
good idea. We have provided support to those individuals who are hoping to set-up a
file based system at a new location in London. We also offer a facility where the
more commercial images could be marketed via an expanded wildlife section of the
"We polled PEP photographers from all over the world in an effort to see if they
would be interested in proceeding with a new file based library should it be a
possibility. We have received overwhelming support.
"In order to clarify the situation for the many photographers who are thinking,
wrongly, that we are taking over Planet Earth - we have set up a web page where
on-going information on this issue will be posted at http://www.speedpix.co.uk/pep/."
Morrison continued. You can go to www.speedpix.co.uk for more information.
Also see the original Selling Stock Story 256.
Story 340, 343, 352GETTY NEWS
Steve Powell has told Allsport photographers at the Olympics that he will be leaving
his position as President of the Editorial and Press Division of Getty Images and
In a Morgan Stanley Dean Witter report investors were recently told that the Magazine
sales represent 4% of the gross sales of Getty Images and other Publishing represents
8% of sales. With gross sales expected to be $480 million in 2000 that would put
Getty's worldwide Magazine sales at about $19.2 million and Publishing sales at $38.4
One of the interesting things about these figures is that Getty's percentages are so
low. We believe that in excess of 30% of the stock photo market worldwide is for
editorial and publishing uses which would also include editorial web uses. Editorial
uses are much stronger in Europe than they are here in the U.S. Getty's percentages
would indicate that they are making weak penetration into this significant segment of
the stock photography market.
Amended TIB Contracts
TIB photographers are receiving a contract amendment that in theory would provide
them with a better guarantee of return of images than is in their existing contracts.
The amendment also deals with other points that a group of over 100 photographers has
been requesting for several months.
One of the problems is that this document is structured to amend only the most recent
version of the contract. It refers to certain specific paragraphs which are not part
of the contracts many photographers have signed. The vast majority of TIB
photographers have older versions of the full contract and do not want to sign the
latest version because it is much more restrictive than their older contract. Without
first signing the newest version of the full contract they can not take advantage of
the provisions in the amendment.
TIB Contract Addendum
TIB is distributing a new contract addendum to photographers. One of the issues is
return of images. The addendum promises to return all core images within 60 days
which is a big improvement over previous contract which had no time limit. However,
for all other images which for many photographers is more than 95% of what they have
filed with TIB, the company agrees to search for them for up to three years. If, at
that point, the images haven't been found TIB (Getty) wants to be absolved of any
responsibility to find or return them.
There is no definition as to how hard they will look before declaring images lost.
Given the Chuck Mason story that appeared in PDN in July,
www.pdn-pix.com/news/arts_0700/art1.html and the huge number of images sitting in
warehouses, many for more than three years, this appears to be a back door way to
dump that material as well as a lot of other images rather than going to the trouble
of returning them.
So far every photographer I have talked with is rejecting this addendum on the basis
of this issue alone, even though there are a lot of other issues within the addendum
that give them cause for concern.
Getty's Sales By Market Segment
Morgan Stanley Dean Witter reported Getty Images sales by market segment as follows:
If film is included along with Corporate and Advertising, 85% of Getty's business is
aimed at this top end of the market. It is also interesting that only 12% of Getty's
sales are to the Magazine and Publishing fields. I believe that worldwide Magazine
Editorial and Book Publishing represent closer to 25% of the total market revenue.
Forbes Analyzes Getty's Accounting Practices
Forbes magazine has published an interesting article analyzing the accounting
practices of Getty Images. You can read the full text of "Image Problem" at the
Forbes web site. www.forbes.com/
Story 346GETTY SPECIAL COLLECTIONS
October 25, 2000 - Getty Images is developing a new marketing strategy called
Special Collections which they are not prepared to talk about publicly. It has been
difficult to get a handle on how this will work for photographers, but the following
seems to be what is planned.
They will be developing a series of catalogs on particular subject areas. It appears
they will be marketing them through the TIB portal. The subject areas that are
evidently under consideration are nature, wildlife, scenics, travel and sports. It is
unclear whether the on-line images in each special collection will be limited to only
images that appear in the print catalogs, or whether additional images on the subject
will be made available only on-line.
The suppliers of these images will not be limited solely to TIB photographers. Images
from many Stone photographers have been selected for these "Special Collections" and
these photographers are being asked to sign separate contracts to cover these
particular images. It is unclear whether images from FPG or VCG photographers are
being considered for these collections.
It appears that one of the major advantages for many photographers is that they have
an opportunity to get many more images into promotion. In some cases, images that
had been previously rejected for the Stone site are now being considered for the
"Special Collections." It also appears that the images don't all have to be brand new
images. Some photographers report at least some of the images being selected were
shot many years ago. In any event, it appears that the editing philosophy is
radically different, and maybe looser, than has been the editing philosophy for
either Stone or TIB in the last couple years.
Photographers whose images have been selected for some of these new collections have
started receiving new contracts. I have not seen a copy of the contract. There
appears to be some level of confidentiality required, to even look at the contract,
and this confidentiality remains in effect even if the photographer eventually
chooses not to sign the agreement.
[As the stock photo industry goes more and more digital it seems that the
confidentiality clauses of the computer industry are becoming more and more common at
all levels of discussions. Lawyers in the computer industry tell me that the
principle reason for these clauses is that every deal is different and no two people
get the same deal. There is no such thing as a standard deal. It is like buying a
used car. Thus, individual photographers beware and negotiate hard.]
Nevertheless, there are indications that the percentage of sales offered may be
similar to the current TIB percentages which works out to be about 30% of gross sales
worldwide. This is a significant drop in percentage for the Stone photographers.
Earlier in October, photographers were given a very short deadline of a couple weeks
to agree or disagree to this new arrangement. They are being told that a selection of
images could go up on-line as early as November and if they want to have their images
included they must sign the new agreement immediately. The implication is that if
they don't sign right now they won't get another chance to be part of these "Special
Now, however, there are reports that the deadlines have been temporarily dropped and
photographers will have more time to consider the offer.
It is not clear what the per image charges will be for participation in this "Special
Collection". Recently it was reported that photographers are being charged over $1300
per image for each image that appeared in the LIFE catalog.In a seminar in London
recently, which was sponsored by Getty, Art Wolfe intimated that he would be
contributing to a Wildlife catalog that is scheduled to be distributed as an Image
Bank product next Spring. This sounds like it may be one of the first "Special
Collections" products. Wolfe also indicated in this seminar that his sales have
fallen off from what they were a year or so ago, but he did not say how much.
Getty refused to comment on the points discussed in this story.
Story 348GETTY DUMPS ARTVILLE PHOTOS
November 1, 2000 - Getty Images is moving to close down and consolidate
brands. We reported in September (See Story 338 at our on-line site) that Planet
Earth Pictures, a nature and wildlife agency in the UK was being closed and all the
images were being returned to the photographers. Some photographers have already
received all of their images.
In late September Getty began notifying photographers with images on the Artville
royalty free discs that as of January 1st Getty would no longer be marketing
photographic work through Artville. It is our understanding that they will continue
to market illustration work through that brand. Artville has about 250 titles and
approximately half of them are photography.
Photographers were told that "the majority of the images in the collection did not
meet the Getty Images' quality standards," and thus they found it necessary to stop
selling this material.
It is unclear how much revenue Getty might be giving up with this move, but it is
believed that gross sales for Artville products are several million dollars annually.
Of course, Getty's hope is that with Artville products no longer available their
customers will be happy to settle for the images that PhotoDisc or Eyewire offer. The
strategy, of course, is to sell a high volume of a limited offering, rather than
giving the customers greater variety and choice.
With Artville, scanning costs were not a consideration in continuing to sell the
products because every image was already scanned at high resolution. In addition
Getty has decided to destroy their inventory of photographic discs as of January 1st
rather than continue to sell the product.
New Option For Photographers
Fortunately for the photographers who supplied the content, PictureArts Corporation
has moved to continue to make this material available to buyers. PictureArts will
launch Brand X Pictures early in 2001. This new Royalty Free service will have over
6,000 images and 60 to 80 disc titles at launch.
PictureArts is the parent company of FoodPix stock images and Burke/Triolo
Productions. Jeffrey Burke, president of PictureArts, said, "Our experience in the
stock picture industry, both with FoodPix and as a major contributor to the Artville
brand, gives us a good viewpoint from which to launch such a venture. We are
confident that our unique mix of traditional and cutting-edge imagery will appeal to
graphic arts professionals everywhere."
Brand X Pictures will be composed of two distinct collections; the 'X" collection,
which will offer a wide variety of useful, proven subject matter and the "Lit"
collection, which will feature highly stylized, unique images. Burke said, "We are
very fortunate to have acquired the future licensing and distribution rights to most
of the Artville photography collection. We feel there is some outstanding photography
there which hasn't been in the marketplace for very long, and therefore has great
sales potential. The 'Lit" collection has some incredible images that all the artists
are proud to put their names on, which is a very important point for us."
PictureArts will aggressively market and promote the Brand X Pictures product line
worldwide. In North America images will be available through on-line, telephone and
other direct sales channels. The products will also be available worldwide through
selected on-line and mail order re-sellers.