40 Public Ownership
October 2, 1996
As a result of Getty's successful public offering and Index's proposal to go to
the market for capital some photographers and stock agents have suggested that
increased public ownership of the stock business may not be in the best interest
of photographers.Questions include:
As corporate managers take over the running of stock agencies formerly run by
photographer/owners, will there be more focus on what is in the best interest of
investors rather than all their photographers?
Answer - If we look at the large privately-owned stock agencies, we find some
give every photographer in the agency an equal chance at producing and getting
all their work seen by all clients while others limit the kind of images certain
photographers are allowed to include in the collection. The latter strategy
protects the rights of certain top producers, but may force new photographers
into production of low demand subject matter if they want to get anything at all
accepted by the agency.
Some agencies that have business and financial experts at the top are more even
handed with all their photographers than others that were founded by
photographers. There seems to be little correlation between the background of
the manager (photographer or non-photographer) and how they treat their
Consequently, whether the company is publicly or privately owned would not seem
to be a deciding factor as to whether the agency will act in the best interests
of all photographers, or just the owners.
Will the need to maximize profits for investors drive managers to increase
profits quarterly rather than invest in strategies that might be of greater long
term benefit to their photographers?
Answer - It seems to me that most agencies have been forced to focus their
efforts on immediate returns due to narrow profit margins and a lack of
investment capital. Photographers, as much as any outside investor, want to see
steadily increasing royalty checks and are impatient with strategies that might
delay immediate gratification for the potential of long term growth.
Agencies need to find a way to simultaneously maximize short term sales growth
and do research and development of new marketing strategies. Often it takes
additional capital and additional personnel to be able to focus on both areas at
Agencies with capital may have a chance to increase market share, but they can
also blow their advantage by making unwise investments or by trying to do too
much too fast. I am inclined to think that in the long run photographers are
more likely to benefit more if their agency has the capital necessary to
experiment, rather than being forced to wait on the sidelines until others have
clearly defined the new course.
Will publicly-owned stock agencies seek to maximize profits by having an
in-house staff produce images of those subjects that their sales statistics show
are in greatest demand? In this way they would increase their profits on these
sales by eliminating their need to pay royalties.
Answer - There are certain large privately-owned agencies that have large
in-house production departments. A large percentage of their sales come from
wholly-owned material. On the other hand, in 1995 only 6% of TSI's sales came
from wholly-owned material. There are a number of factors that an agency needs
to weigh before setting out on a course to produce a larger percentage of
material in-house in order to avoid paying royalties.
- A - They must pay all the production costs and catalog costs rather than
requiring the photographers to pay these costs as is the case when the agency
- B - If the trend becomes public knowledge they may alienate many of their most
productive photographers. This could be disastrous in the long term unless the
agency is prepared to go to full in-house production.
- C - They may limit their source of ideas for new images if they rely entirely
on their in-house staff to come up with these ideas.
- D - They will probably find it difficult to have as many photographers
shooting simultaneously if all shooting is done by staff photographers.
- E - Some of the best and most creative photographers may not be willing to
work as staff photographers.
- F - Some of the best photographers may go elsewhere if they can not get their
images of high demand subjects shown to clients.
All things considered, it is not an easy decision to move to full in-house
production just to avoid paying royalties. Nevertheless, photographers working
on a royalty basis should be alert to any trend that moves in this direction.
Monitoring Agency Operations
It is easier to monitor certain trends when statistics are available, than to
guess what a private company is doing.
For example, 6% of Getty sales in 1995 were from wholly-owned images. If this
percentage starts to go up in coming years it may give photographers cause for
concern. (Since Getty now wholly owns Hulton Getty the overall Getty
Communications percentage is likely to go up in 1997, but the percentage sales
from TSI images may not. Most TSI photographers will probably be unconcerned
about the sales of images from the Hulton collection because they are
non-competitive with the type of images TSI photographers produce.)
However, just because an agency is publicly owned doesn't necessarily mean
you can get access to the information you need. The Image Bank made a public
offering in 1990 and was later acquired in 1991 by Eastman Kodak Company.
Visual Communications Group (Telegraph Colour Library, Colorific, Pix and
Bavaria) also became a part of United Newspapers in the UK in 1994, a public
company. In both cases much less financial information is available because
these companies are divisions of much larger corporations. Detailed statistics
about division operations are not usually reported to the shareholders.
Public ownership is not necessarily good or bad. It is just a new factor
photographers must take into account when establishing an agency relationship.
If an agency the size of Index is successful in its public offering, expect many
other agencies to begin to explore the option of direct public financing rather
than selling out to a larger agency or corporation.
In the case of a public offering photographers should try to determine the
degree to which the capital raised will be invested in new technologies and new
business development, or used to pay off old debt. If the money is used in ways
that will grow the company, but not necessarily grow sales of the type of images
the photographer produces, that might be reason for concern.
See related Index Stock story.
See related Getty Communications story.