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 Now, when customers call to use or re-license one of those images, Getty tells them it no longer represents that image and refers them directly to the photographer.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.