Photolibrary/Index Stock: Honeymoon is Over

Posted on 12/10/2007 by Jim Pickerell | Printable Version | Comments (0)

Photographers are confused and frustrated by recent happenings at Photolibrary's Index Stock brand. The company's Australian headquarters is doing little to explain or reassure.

A year ago Photolibrary acquired Index Stock, a company notorious for not paying commissions on time. Photolibrary promised that in "a week or two" they would pay photographers everything they were owed for sales in the previous six months as well as paying according to contract going forward. They didn't meet their self-imposed two week deadline, but they did make large payments to photographers in a short period of time.

Photolibrary also hired KPMG, one of the big four accounting firms to audit the Index books and implied that if they uncovered any non-payments for sales made before May 2006, those would be paid as well. Most photographers believed the accounting issues were finally solved.

On Nov. 11, about 1,500 Index photographers received emails from Carlos Santos, controller for Photolibrary/Index Stock, saying that at the time of acquisition, Index owed about $3.9 million to contributors. While a large amount had been paid, about $2.2 million was still owed. Each contributor was sent a summary of what he/she was still owed.

Santos also indicated that additional payment problems had arisen with regard to sales processed after July 2007, due to the transition from the old Index Stock accounting system to the new Australian IMS system. Santos was fired from his job on Nov. 15 after only being with the company about a month.

Photolibrary Chairman Tim Moore told Stock Asylum that the documents "Santos relied on in making the claims were stolen and manipulated." He told the SAA that the Santos letter was "an unauthorized correspondence from a "disgruntled employee," making inaccurate and false statements."

Moore refused to confirm whether the KPMG audit has been completed. It is unclear how far back it might have gone, and whether there were cross-checks to determine if numbers on sales reports from sub-agents matched Index numbers and were credited to the proper photographer. Santos said that when numbers didn't match they are recorded as "Sundry Revenue in the Photolibrary books."

It is not without precedent for stock agencies to have unmatched sales. When this happens, the issue must be addressed the instant the invoice comes in -- or it becomes almost impossible to track. If such tracking wasn't happening at the old Index Stock, then there may be significant revenue for which no photographer has ever been paid a royalty. There may also be sales forwhich the wrong photographer has been paid. At the very least, photographers have a right to know the size of the Sundry Revenue account.

PACA Investigates

The PACA Ethics and Grievance committee has received a documented complaint concerning a possible violation of its code of ethics and has six weeks to investigate. The committee has the option of dismissing the complaint, recommending that the member be placed on probation until it corrects the problem or recommending expulsion from PACA. Normally, PACA never reveals the specific substance of the complaint.

At present, Moore refuses to answer more detailed questions until PACA completes its investigation.

The potential problem here is that the complaint may be very specific from a specific photographer. If that's the case, Photolibrary can easily resolve the issue by paying the photographer what he demands.

It is clear that at the time of purchase, the Index Stock books were in horrible shape, and it was probably impossible for Photolibrary to determine the extent of the debt it might owe. It was rumored that Photolibrary paid under $1 million for the company and agreed to pay up to a fixed amount of royalties owed photographers, once the actual obligations could be determined.

It was also rumored that if it turned out the debt exceeded the amount Photolibrary agreed to pay, the former owners would be obliged to pay the difference. It seems likely that the debt is greater than first anticipated, but who is obligated to pay is unclear. Moore refuses to comment on these points, possibly because of certain contractual obligations resulting from the acquisition.

Photographers were delighted when Photolibrary acquired Index, but now it will take a lot of open communication for them to regain hope and trust in the company.



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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