Random Thoughts 21

327

August 3, 2000

Getty Images Call Center Staff

In the e-commerce environment are a large portion of the sales automatic and conducted without
the aid or a salesperson. Getty Images has more than 665 call center sales staff worldwide.
This number would be much larger if we include marketing teams and other sales related
functions.

Getty Images Pricing Strategy

An article in the June 2000 issue of Fast Company on Getty Images gave the following insights
into Getty's pricing strategies.

In September 1996, a Tony Stone sales rep made a $63,000 sale -- the largest in the
company history at that time. When Mark Getty went to congratulate her he asked how she had
come up with her asking price. She initially had asked for more, but the customer responded
that he could get a photo from one of Stone's competitor for half of the price. She countered
by saying, "But our photo is twice as good." Then they negotiated.



Still thinking about the company's elaborate, 92-page pricing guide, Getty pressed her again.
Where did her original asking price come from? She shrugged. "I just thought it was a really
good photo."



The article went on to say, "That transaction, as successful as it was, is also a legacy of a
pricing system that is both enormously complex and strangely random -- and that has plagued
the stock-photography industry since its inception. Every company starts with "list" prices
based on obscure algorithms that take into account company size, volume of business, how a
photo is used, and duration of exclusive rights. But reps routinely discount or increase
prices based on what it takes to close a deal.



"Getty and his colleagues realized that if one of the basic promises of the Web is simplicity
-- of selection, of acquisition, and of service -- they would have to drastically simplify
their pricing process as well. So Getty handed down an ultimatum. Forget 92-page pricing
guides. The new pricing guide would be one page. That one-page solution became a slick
digital form on the gettyone Web site, where customers answer 12 questions and get back a
price instantly. What's more, once a customer purchases a photo online, gettyone's Web site
immediately updates the photo's licensing rights in the company's database so that the image
is no longer available to other customers."

I agree that pricing stock photo uses is "enormously complex and strangely random," but I
don't see it as a "plague" for the industry. Instead, I believe sellers will benefit greatly
if the person closing sales is someone who has a solid grounding and experience in the
industry, who understands why certain photographs are worth more than others in certain
situations, and who is not just an order-taker.

Are Usage Fees Dropping?

Are usage fees dropping? Not at Stock Connection. In the first six months of 2000 we had a
31% increase in the average license fee we were able to get for usages compared with the first
six months of 1999. In 1999 our average price per use was $705. In 2000 it was $925. (By
way of comparison Getty Images says Stone's average price is around $500.)

One might suspect that if we are keeping our prices that high, we would be making many fewer
sales. In fact, the number of units licensed was off 12% when comparing 2000 with the same
period in 1999. However, there was no indication that the number of sales made, relative to
the number of calls received, was changing in any significant manner. While the number of
calls we receive are down, we believe that is a result of more people choosing to buy Royalty
Free before they even consider a rights protected option -- a fact over which we have little
control.

Nevertheless, gross revenue is up 15% in 2000 over 1999. This certainly points out that even
in today's competitive environment a strategy of holding the line on pricing can result in
higher average prices per unit sold, and overall revenue growth.

Getty Not A Library

In a recent 123Jump interview Jonathan Klein had the following to say:

Question: And does Getty eventually hope to digitize 100% of your images?



Klein: No, under no circumstances would we do that. Our approach is very simple. We digitize
an image when we are absolutely certain that image will generate sales. Getty is not a
library and we are not collectors, so we know that a lot of our 70 million images are unlikely
to generate a sale.

(Later in the article he said Getty has 1.2 million images online and that he would be
surprised if they ever have more than 3 million. 90% of their sales come from 500,000 images.
[Some months ago Mark Getty was quoted as saying 80% of their sales were from 200,000
images.])

To read the entire article go to:

http://www.123jump.com/p9.htm?p=/archive/a000719032.htm&f=foot3.htm

Cost of On-line Credit Card Sales

Stolen credit cards are used in 1.2% of all Internet sales. E-tailers are ten times more
likely to be ripped off by credit card buyers than bricks-and-mortar stores who are able to
get signatures from their customers.

Because of this many dot coms find that their margins are hurt and that they must raise prices
to cover costs.

According to USA Today, some sporting goods and clothing retailers have told Deborah Williams
of Meridien Research that as much as 26% of their sales are fraudulent. The most vulnerable
web sectors are computer hardware and software, electronics, music and games.

The Web is a fraud hotbed because the buyer doesn't have to show his face, present a card or
sign a receipt. Credit card companies typically pick up the tab for off-line merchants as
long as they have a signed receipt. Web retailers pay credit card issuers an average of 2.5%
of sale and $.30 per transaction plus $40 a sale to resolve any fraudulent incidents.

To combat the problem dot coms are installing software that checks the shipping address given
by the buyer with that of the account holder.

Webshots Update

Several photographers have reported that they continue to find unauthorized uses of their
images on Webshots.com. In our story 313 we pointed out that a number of photographers and
agencies had actually licensed images for display in Webshots' professional section.

However, the major purpose of Webshots is to allow amateurs to post images that they want to
show to friends and family. There are 3,000 to 4,000 images on the site to which Webshots has
purchased rights. Amateurs have posted more than one million images.

What seems to be happening is that a number of the amateurs are finding images they like,
scanning them and posting them for all to see and use -- much like Napster.

However, unlike Napster, the major business of Webshots is not to steal copyrights.
Nevertheless, they are facilitating it.

In the Napster case U.S. District Court Judge Marilyn Patel said, "Napster was mainly used to
download copyrighted music, something that should come as 'no surprise' to the company, since
internal Napster documents from the early days of the company acknowledged its main use was in
pirating music."

On the other hand Judge Patel did not restrict Napster from promoting new and unknown artists
(read amateur photographers) who consent to their music being circulated online. Because of
this statement, I don't believe the Napster decision applies in any serious way to Webshots.

I like it that Judge Patel rejected the argument that such a use of copyrighted material for
personal purposes was a "fair use". She said, "It's not a typical personal use when music is
distributed to many anonymous users" on the Internet.

PACA's lawyer, Nancy E. Wolff, contacted Webshots a couple months ago about these problems.
So far she has received no official response, but unofficially it is PACA's understanding that
Webshots is trying a "technological" solution that will require a couple months to test.

AntiquesPortfolio Case

A recent High Court decision in the United Kingdom has confirmed that simple photographs of
three-dimensional objects, in this case antiques, are protected by copyright.

Antiquesportfolio.com plc engaged a design company (Rodney Fitch) to carry out design and
branding consultancy work for its antiques web site. Antiquesportfolio.com claims that some
of the material the design company produced was based on photographs of antiques in "Miller's
Antique Encyclopaedia" published by Reed Consumer Books. It claims that this infringed
copyright and that Rodney Fitch was therefore in breach of contract.

The design company was held to be under an implied obligation to carry out its work with
reasonable skill and care. This included a duty to use reasonable care not to include
material knowingly copied from a third party. Alternatively, the design company may have
breached an implied obligation to deliver work which was fit for the purpose for which it was
commissioned.

The design company also argued that the photographs in question were not protected by
copyright anyway. Photographs only attract copyright protection if they are "original". In a
recent U.S decision (Bridgeman v Corel) it was held that photographs of paintings could not be
considered original. In the Antiquesportfolio case, however, it was decided that photographs
of three-dimensional objects do involve an element of judgment, even if only at a basic level,
in the positioning of the object, the angle at which the photograph was taken, the lighting
and the focus.

Quoting from a leading text book on copyright law (Copinger and Skone James on Copyright), Mr
Justice Neuberger confirmed that "in terms of what is original, for the purpose of determining
whether copyright subsists in a photograph, the requirement of originality is low, and may be
satisfied by little more than the opportunistic pointing of the camera and pressing of the
shutter button."

This Antiquesportfolio case will lend support to museums and photo libraries who criticize the
Bridgeman decision. But it still remains to be seen whether a UK court will accept that a
photographic reproduction of a two-dimensional work is protected by copyright.

Charles Swan can be reached at The Simkins Partnership, a media law firm in
London Tel: 020 7907 3060, Fax: 020 7907 3111, Email:charles.swan@simkins.com.
For more information vist their web site at http://www.simkins.com.

Boston Globe Contract Update

Photographers and writers conducted an informational picket outside the Boston Globe on July
24th to raise public awareness of the newspaper's rights grabbing contract. There was no
interference with the Globe's traffic or business.

Five members of the Massachusetts Congressional Delegation have sent a joint letter to the
publisher of The Boston Globe expressing their displeasure with the contract. Two other
congressmen have offered their own letters. Representative Barney Frank, a member of the U.S.
House Judiciary Committee Subcommittee on Courts and Intellectual Property asked the publisher
to compensate freelancers for the additional use of their work and wrote:

"Denying any additional compensation to writers, photographers or artists for additional uses
of their work, especially if these additional uses contribute to the company's revenue stream,
seems to me unfair. In general, I believe that we as a society have done too little fully to
compensate creative people for their work."

Since the first of July, the deadline date of the contract, the Globe freelancers estimate
that 75 percent of the photographers in New England who formerly worked for the Globe have not
signed the newspaper's contract. This figure is based on observations of credit lines and
conversations with photographers.

The Boston Globe has hired three part time photographers on one year contracts. These new
staffers will handle coverage in the community editions of the newspaper where freelance
contributions have traditionally been prominent.

The court action against the contract is alive and well. At this point, there is little to
report as the attorneys from each side file legal motions. It is worth noting, however, that
two more freelancers have singed on as plaintiffs. What sets them apart from
the other plaintiffs is the fact that they have signed the Globe's contract. They believe the
contract is unfair and that they signed under duress.

Latin Stock

Latin Stock has announced the appointment of Laura Inigo as the new Managing Director of BIF
(Biblioteca Internacional de Fotografia) their associated agency in Mexico. Laura has been in
charge of operations at BIF for the last seven years. Previous director, Jamie Baldovinos,
remains a minor shareholder in the company, but no longer holds an executive position.