Price Cutting for Market Share Unlikely to Succeed

Posted on 12/17/2009 by Jim Pickerell | Printable Version | Comments (5)

According to Paul Melcher, Getty Images is now offering publishers “new low prices in exchange for being the sole provider.” Assuming that is true, it could easily backfire on Getty, and may point to a need for photographers to revise their marketing strategies.

Does “sole provider” mean the publisher cannot use images from any other agency? Or are they only allowed to use images from other agencies when Getty does not have anything similar that fulfills the need (and who defines similar)? Does it include microstock or just traditional suppliers? Does it include images from independent photographers?

Is it just a matter of offering a price that is lower than others charge in order to become the first “preferred provider?” That has been going on for a long time, and as Melcher points out, most other agencies immediately match Getty’s price so their images will be considered on an equal basis. If everyone matches price, Getty’s market share will not increase until all the competition goes out of business. Then publishers will have fewer choices and be forced to use whatever Getty has to offer.

Let’s assume for the moment that Getty keeps lowering prices until all other agencies are out of business. Based on the royalties paid to photographers and third-party suppliers, it certainly seems Getty is headed in that direction. In theory, after Getty drives the competition out of business, the company can raise prices again. However, as long as one competitor hangs in there, Getty cannot afford to raise prices, because all the customers would race to the new low-priced option.

Getty may be able to drive competing agencies out of business, but it hardly seems possible that the company will be able to convince publishers not to deal with individual photographers when it does not have the image a publisher needs.

Getty has a lot of images, but it does not cover all subjects well, with a particular weakness in subjects that book publishers need. For years, the company has systematically rejected images that sell well to publishers—going back at least to the Getty acquisition of Click-Chicago in the 1990s. At that time, the company dropped a large number of very talented editorial photographers. A more recent example of a similar decision is the dumping of rights-managed images that were selling after the Jupiterimages acquisition. Now, when customers call to use or re-license one of those images, Getty tells them it no longer represents that image and refers them directly to the photographer. The photographer negotiates the rights and ends up with several times what he or she would have earned if Getty had handled the transaction.

On the news side, Getty’s focus is on covering the major stories and personalities, not the relatively minor and local events that publishers so often need. Getty can’t expect publishers to ignore such subject matter just because it does not want to produce or represent it.

As it lowers prices, Getty also needs to recognize that many of the companies they are driving out of business are its own suppliers. At 20% to 30% of the low, low fees Getty is already charging, many suppliers will not be able to remain in business for long. At the very least, these suppliers will stop producing new work. There is strong evidence that many have already stopped. Getty’s efforts to acquire images from Flickr photographers is not just a desire to get a different look, but evidence that the company is not getting the new images it needs from its traditional sources. Even Flickr photographers, if Todd Klassy is at all typical, are not always satisfied with the results they get from Getty and may prefer to deal directly with customers.

Certainly Getty has an advantage, compared to companies in other industries, when it comes to lowering prices. It has no production costs to offset. It makes no difference if it actually costs more to produce images than the producers are paid. There always seem to be new producers to replace those who drop out—again, consider the emphasis on Flickr. However, at some point, prices will get so low that Getty’s share of revenue collected will not be enough to cover its overhead. Adjusting the royalty percentage is an option, but Getty exploited that option to the maximum years ago. It is already at rock bottom, and it is hard to see Getty lowering it further.

Getty also has to worry about microstock companies. Will new customer agreements prohibit customers from using microstock, or just those of traditional licensors? Microstock sites are already raising their prices and will become more attractive to image suppliers if Getty’s prices continue to decline. Will microstock sites seek more non-released editorial content?

So what will happen?

Getty will not be successful in taking over the market, even if it manages to drive most traditional stock agencies out of business. Customers will go to individual photographers.

Returns for photographers from agency sales are likely to be so low that dealing through them will no longer be worth the trouble. To stay in business, photographers should start looking for options such as Photoshelter and IPN Stock to create their own image databases and deal directly with customers.

PACASearch paves the way for enabling customers to easily search for imagery across a large number of personal Web sites rather than having to go to each site individually. With PACASearch, the prime representative of the image negotiates the price and keeps 100% of the fee. Multiple cuts of the fee disappear. While PACASearch is designed specifically for agencies, there is no reason why a different version couldn’t be developed exclusively for photographers. Marketing such a search engine will be an issue, but given the lack of control image producers currently have over  pricing, and the small percentage of the gross fee they usually receive, it seems a likely course of action for anyone who wants to continue producing and selling stock. 


Copyright © 2009 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 301-461-7627, 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

  • Yva Momatiuk Posted Dec 17, 2009
    Jim,

    Do you -- or Paul -- have an access to an actual agreement? Without the document in hand, we can all only speculate.

    Yva

  • Bill Bachmann Posted Dec 17, 2009
    Has Getty ever heard of Anti-Monopoly laws? Why aren't other agencies suing for unfair & illegal practices?Can't they at least let the Feds know?

    Anyone have opinions on this?

    Bill Bachmann
    Orlando, Florida

  • Jagdish Agarwal Posted Dec 18, 2009
    Dinodia in India, has been successfully negotiating sole provider terms, with book publishers in India, for a long long time. First complete book, with all images from dinodia, was in 1987. And rates are not necessarily lower. Mostly we get higher rates. Because clients save time and effort, because all images are under one roof. And missing images, we source or shoot.

    jagdish agarwal /dinodia / india


  • Tim Mcguire Posted Dec 18, 2009
    Jim,

    I agree with your article. It doesn't really matter if Getty is really doing this or not. The prices are too low already. Over the past 10 years photographers have been getting less and less OF less and less.

    Getty's path could eventually leave a talent vacuum at big stock agencies because the model they represent is not financially viable for many (possibly most) stock creators living and working in developed countries. Clients with money will go where the best new images are (not sure where that will be yet).

    To a certain level independent stock artists could undercut Getty pricing for market share while still pocketing more per license than if their work were licensed through Getty... or they could match Getty prices and offer better, newer work.

    In the short to medium term volume will be the greatest challenge for independent direct licensing by creators. Getty will have a challenge sourcing good, inexpensively produced content from amateurs and pro artists in developing nations where overhead is lower. The problem for them is, technology has made Flickr and other technology platforms(Photoshelter, LisenceStream, IPN)available to everyone including those living in places where it is less expensive to live and work. Subscriptions to these technologies (PS, LS, IPN, Flickr)are far less expensive than Getty is, especially if you have good stock images and a way to market and distribute those images direct to customers through these new technology platforms.

    Tim McGuire
    www.EVOstock.com, a virtual stock image collective for pro photographers and visual artists.
    www.evostock.org

  • Bob Prior Posted Dec 18, 2009
    Following on from the above - how is it possible that professional images can continue being supplied by photographers who receive the resale prices currently being offered? Such action has been a questionable process for a considerable length of time and how long that kind of ‘business’ model can be sustained is, in my view, equally questionable.

    I have seen this happen before – in the print industry. Large print corporations, in an effort to keep their machines running and their turnover in place, no longer SOLD print but instead BOUGHT print, and the publishers, such as I, used that to our benefit by driving down the prices to rock bottom – BECAUSE WE COULD.

    However, that business model did not work in the long term, and those large printers went to the wall and the publisher went back to paying the right commercial price. And why? Because we had to. We needed to put ink on paper otherwise we would have no magazine to sell. And the same applies today - if images are worth so little to the SELLING process then why bother to buy any at whatever price – just leave the front cover blank! The reason I buy images is because it SELLS my magazines and poor quality images sell less magazines.

    It is not only the internet that is interfering with circulation but also the lowering of impact images and the reduction of the ‘wow’ factor that leads to purchase.

    One last point I would like to address is the last paragraph which seems to present PACA as being the only alternative means of sourcing images using the search engine principle. This is not true . Five years ago stockindexonline.com introduced the ‘one source’ search engine to its site which leads our current 360.000 monthly image buying visitors to keyword search over 150 stock photographic libraries at one hit. I would also add that those libraries are SPECIALIST libraries, thus giving a breadth and depth of results that will often challenge the larger umbrella sites.

    Robert Prior
    Stockindexonline.com and stockfootageonline.com


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