Random Thoughts 116

Posted on 2/22/2006 by Jim Pickerell | Printable Version | Comments (0)



February 22, 2006

Picturesque Does Semi Shutdown

Picturesque has announced a semi-shutdown and has begun returning images to its photographers. In a letter to photographers owner Steve Murray said that the digital images would still be available at www.picturesque.com, www.stockworkbook.com and www.alamy.com as well as through several sub-agents in Europe.

However, the company will no longer maintain a general image file or do custom searches. He said, "if an image is not online then it simply does not exist. In fact, any image that is not online somewhere does not exist to clients since so few people ever go beyond the web for image search anymore."

The agents Picturesque had been dealing with in Japan, Spain and Italy have all gone out of business. When I tried to search the picturesque.com site I got a message that said the page cannot be displayed.

Photographers have the option of terminating their contracts with Picturesque, but that would mean removing their images from all the web sites currently selling their work and that is probably not in the best interest of most photographers.

Jupiter Acquires The Beauty Archive

Jupiterimages has announced that it has acquired the assets of The Beauty Archive (www.thebeautyarchive.com). The Beauty Archive is a leading provider of rights-managed images for business users and creative professionals in the editorial, advertising and design industries. Terms of the acquisition were not disclosed.

"The acquisition of The Beauty Archive combined with our acquisitions of PictureArts, Agence Images and Stock Image, further solidifies Jupiterimage's position as one of the largest providers of rights-managed images around the globe," stated Alan M. Meckler, Chairman and CEO of Jupitermedia Corporation. "The Beauty Archive's world class images shot by award winning photographer Hywel Jones are a tremendous addition to Jupiterimages," added Meckler.

Jupiter Pulls Brands Off Getty

Jupitermedia has sent a letter to Getty Images notifying them to stop distributing the RM images of Stock Image and the RF images of Pixland. Both collections were acquired by Jupiter last month.

Getty has made a big point of not distributing images owned by competitors and had previously dumped Comstock, Thinkstock and PictureArts after they were acquired by Jupiter. Recognizing that the handwriting was on the wall Jupitermedia's CEO Alan Meckler decided to move first. In his blog he wrote, "Now the tables have been turned. Jupiterimages is now self-sufficient. It does not need any involvement with Getty Images to be successful."

Getty Images Changes Tune On iStockphoto

In his blog Alan Meckler recently pointed out that at the end of the Getty Images quarterly conference call in April 2005 Jonathan Klein was asked what he though of the subscription photo image business. His response included the word "crap" in a way that could only be interpreted that all subscription offerings in the commercial image space were "crap".

According to Meckler now that Klein has paid $50 million for the subscription photo business iStockphoto he must think that "crap" sells.

Quite a turnaround.

Royalties Plunging

A Getty photographer who shoots RF wrote me that her royalties have dropped to the level they were in 2001/2002 and are continuing to decline. According to her, other photographers she has talked to are seeing the same kind of results. She asked WHERE IS THE MONEY GOING?

I told her, there is nothing sinister going on. It is purely a matter of percentages and simple math. In the last couple of years Getty has added a huge number of images to its collection. When I did a count in December 2003 (reported in Story 601) Getty had 346,091 RM images on the site and 189,523 RF. When I did a count today there were 776,945 RM and 468,208 RF. That's a 124% increase for RM and 147% increase for RF.

Meanwhile, on a quarterly basis there has been a very small rise in the number of images actually licensed in the last two years. In the Q4 2005 there were 14% more RM images licensed than in Q4 2003 and 19.5% more RF. Thus, unless you've added more than double the number of images to the site than you had on there in December 2003 the odds are that your images will have been chosen much less frequently than was the case two years ago.

During this same period the average price per image remained about the same for RM -- $552 in Q4 2003 to $558 in Q4 2005. The average price for RF went up some -- $165 in Q4 2003 and $237 Q4 2005. Nearly all of this RF jump occurred in 2004 and the average price was nearly flat in 2005. Thus, in 2004 if your RF revenue was still growing it was probably due to price increases while I suspect the number of images actually licensed was declining.

There are two other factors that probably have an impact. As new images are added your previous good sellers get deeper and deeper in the search return order and it becomes less likely that buyers will find them. In addition, as more and more image partners are added each brand gets fewer images in the first 100 or 500 returned from any search in an effort to be fair to everyone.

Given these statistical factors it is very likely that the average return per image will continue to fall. The theoretical way to stay even is not so much to produce better quality images, but to produce, and get accepted on a regular basis, more volume than the average growth of the file. If everyone does this it becomes a vicious, never ending cycle with more and more images being offered for purchase and a lower and lower percentage being licensed because there is little or no growth in the total number of images licensed.

This problem is particularly acute if you're shooting high demand subject matter because other images that solve the same visual problem are being shot by everyone else and his brother.

Why Getty's Stock Price Has Fallen

One of the things that has puzzled me is why Getty's stock price has fallen about 10% after they reported record revenues and profits in January. One analyst provided an explanation that I hadn't considered before.

"Many investors value Getty on a free cash flow multiple. To those investors, neither margins nor profits matter. As we saw in 2005, Getty can enhance margins and profits while at the same time not growing their free cash flow. In the beginning of 2005, Getty said they would generate 200mm of free cash flow. After making two acquisitions, both profits and margins for Getty increased. However, free cash flow did not, as Getty embarked on an effort to create its own images rather than license. By shooting photos and capitalizing the cost, they created images that can be sold at 100% gross margin whose expense never hits the P&L - or not until much later when it is fully amortized. As a result, the fundamentals of the business optically improved (better margins and profits) but the underlying cash generation of the business (its true health) did not."

Based on this explanation it seems to me that despite the fact that Getty has a lot of cash they may be motivated to use more care in how they spend it. If they are going to pay a lot for a company, or to own content, they had better be sure that the purchase will generate significant revenue and profit growth relatively quickly.

Copyright © 2006 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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