6REFLECTIONS ON CEPIC
June 15, 2006
The most important event on the stock industry calendar is the annual CEPIC Congress, held this year early in June in Biarritz, France. This year there were almost 800 attendees from 375 stock photo organization and 51 countries.
The conference always has interesting seminars, but as worldwide marketing of images becomes more and more necessary probably the most important aspect of the Congress is to network and meet with other business associates to renew relationships and arrange deals for the next year.
In my discussions with many attendees the following are some of the things I learned and my thoughts and observations.
Distributors Adjusting Search Order
One distributor which represents many brands and normally tries to be fair to all told me of a recent experiment. For one month he adjusted the search return order to favor one of the largest brands that he represents and revenues for that brand increased by 40% for that month. Revenues for the brand with the poorest position in the search return order declined by 35% in the same period.
The possibility to effect revenue so dramatically raises a number of different issues. It is clear that Getty is already favoring to some degree its wholly owned imagery and the images of its owned brands over the images of its more than 70 image partners. By how much is not clear. Other portals with wholly owned imagery will probably follow if they haven't already.
The next logical step would be for portal operators to go to their image suppliers and say, "Will you accept a lower percentage royalty in exchange for a higher ranking in the search return order?" All image suppliers should begin considering their answer to this question.
The answer is not simple. If you are getting 30% and you're asked to go to 25% that may generate more total revenue for you if the search order position increases the total revenue your images sell for by 40%. (This is most likely to result from an increased number of sales, not from higher fees per usage.)
If you don't go to the lower percentage you've got to be concerned by how many others will do the same and thus, push your effective search return position lower in the overall rankings. But if you do accept the lower percentage you also have to be concerned about the number of others who will accept the same percentage, because that could reduce your chances of seeing an increased volume of sales.
It is worth remembering that in effect the same thing happened with the introduction of print catalogs. In that case in order to increase sales volume you had to get images out of the general file and into a print catalog. This worked fine until we got to the point that there were so many print catalogs that the odds of licensing a picture through one of them wasn't all that much better than just having a picture in the general file.
On the other hand, once all portals recognize that they can effect revenue in this way, many will start playing some suppliers off against the others in an effort to improve their margins.
More Production Companies
More and more small companies are setting up operations focused entirely on just producing images rather than trying to license rights directly to customers as well. These companies look to portals and distributors to do the marketing for them and try to get their images represented by as many distributors as possible.
Often such companies are started by people with extensive experience in the industry and a clear understanding of the subject matter that generates the highest rates of return. Many of these companies are either hiring staff photographers, or paying freelancers on a day rate basis, in an effort to wholly own as much of the work as possible.
Wholly Owning Images
All the major companies have for some time been moving to wholly own as much of their imagery as possible. The advantage for them is that it increases their margin on each sale, but there are also significant risks.
As oversupply increases the return-per-image will go down and there is no good way of predicting how fast that will happen. When investing on new productions the person putting up the money must make a judgment as to what future return might be in order to keep from overspending on production. In the past the decision was usually based on the kind of return that was received from similar earlier productions. That works fine as long as average return-per-image is staying relatively level, or going up.
But when the average return-per-image begins to fall due to over supply, slow or no growth in the number of images licensed or a decline in the average return per-image-licensed the risks are dramatically increased. We are at a point in the development of this industry where one, or all three of these things simultaneously is possible.
Becoming A Production Shooter
At least one very successful stock photographer with lots of years of experience believes that all stock photographers should be seeking to spend one-third of their time each year producing wholly owned images for production companies. In such cases the photographer would work on a day rate and transfer all rights to the production company. In this manner the photographer could reduce his/her risk, cover immediate financial obligation and generate capital for his/her own self-funded productions.
My friend says "It is not just a numbers game," and believes photographers need to recognize that in today's market they won't automatically grow revenue by producing more images. As a result they need to diversify their risk rather than putting all their efforts in the most speculative form or investment.
Part of the problem is coming up with a strategy for calculating a reasonable day rate for a wholly owned production. I will try to do a separate story on this subject in the near future.
Picture Researchers Using iStockphoto
One agent was talking recently to a picture researcher living in Malaga, Spain who does a loft of work for book publishers in the UK. He asked her where she goes to find the images she needs. She said that used to use Getty and Corbis a lot, but now she is getting a lot of what she needs from iStockphoto.
The agent was surprised and said, "Isn't it much harder to find images on iStockphoto than on the other sites?"
The researcher responded, "Yes, but I don't care because I get paid by the hour. Spending more time just increases my return from the project."
She went on to point out that not only did she make more money by using iStockphoto, but her customers were happy as well. If she finds 10 RM or RF images on Getty or Corbis the license fees will probably cost her client $1,500 to $2,000. I she finds 10 images on iStockphoto at $5.00 each the license fees would cost the client $50. So the researcher's customers are happy to pay the researcher twice as much as they might normally pay because their overall cost for the project ends up being much lower.
Ambivalence About Micro-pricing
The overall attitude of the CEPIC attendees to micro-pricing seemed to be one of ambivalence. Some are convinced that it will have little or no effect on traditional sales of RF and RM because the traditional customers will want professionally shot images that are fully model released and are easy to find. They see micro-pricing as expanding the market for imagery and doing nothing to cannibalize RF.
Others think it is possible, or a foregone conclusion, that micro-pricing will cannibalize RF and it is only a question of how much. They point out that there are certain types of images like nature, scenic, wildlife, travel, food, etc. that don't need model releases and may occasionally be produced just as well by amateurs as professionals. They also believe that the declining number of RF single images licensed by Getty over the last two quarters and the fact that Getty is obviously trying to increase the number of RF units licensed this quarter by offering significant discounts may be indications that micro-sites and subscription are already beginning to take share. The only question for them is how soon it will happen and how deeply
All would agree that it is too early to tell for sure, but that the situation bears watching.
Distributors Adding Subscription
Many image distributors seem to be looking for a way to add subscription products to their offering in order to make a broader scope of images and pricing models available to their customers. Also, there is no shortage of companies offering images through subscription who are willing to participate in such deals.
The trend seems similar to what happened when RM sellers, after years of trying to ignore RF, decided to begin offering RF as well as RM in order to better meet the needs of their customers.
The big question is how fast the adoption of subscription products will be.
Jupiterimages Offering Lower Single Image Prices
In an effort to make their subscription products more competitive with the micro payment sites Jupiterimages will begin offering lower resolutions for single image purchases at lower single images prices. It appears they have discovered that many of the customers searching on the subscription sites only want to use one or two photos and buying a subscription to get the use of one or two photos isn't much of a bargain.
For example, the subscription price for Photos.com starts at $139 per month, but a single image download for a 28MB file is $219.95. At Ablestock.com subscriptions start at $229.95, but a single image download is only $199.95 and at Photoobjects.net subscriptions are $99.95 a month and single image downloads are $199.95.
Now, they are offering several smaller file sizes at lower prices. On Photos.com they offer a 1-2MB file for $49.95, 3-4MB for $79.95 and 12-16MB for $149.95. The price for the 28MB file remains the same.
While subscriptions are a real bargain if the buyer intends to use many images, if she only wants one or two images for a relatively small use the price for a 28MB file was not much better than regular royalty free, and certainly no bargain when compared to the micro pricing sites.
It appears that a significant number of Jupiter's potential customers are not volume users of stock, but only want to use an image occasionally. To capture these customers and be more competitive with the lower priced offerings from iStockphoto, Fotolia, 123rf, Photostogo and Indexopen Jupiter has decided to offer smaller file sizes at significantly lower single image prices.
One of the original reasons for setting the single image prices so high was so single image buyers wouldn't decide to use the subscription products rather than the more expensive RF. Evidently that is no longer a concern.
High End Sales
For a long time I have tried to get a sense of the percent of images that are licensed for single uses for high dollar figures, as opposed to images that generate high dollars as a result of multiple sales.
I was able to obtain some information that leads me to believe that significantly less than 1% of all images licensed are for fees of $3,000 or higher. On the commercial side of the market (where nearly all of these sales occur) I believe these sales probably generate between 10% and 13% of gross revenue. If we look at the total market, including all editorial sales, I believe these high ticket sales would represent less than 7% of the gross revenue.
It is important for photographers to consider whether they have much chance of ever participating in this less than 1% of the market and whether there are other business strategies they might employ. It might be better to focus one's efforts on growing their business in the 99% lower end of the market and ignoring that top 1%.
UK photographer Darryn Lyons, owner of the agency, Big Pictures (www.bigpicturesphoto.com), has developed a new way to get a broader selection of images of major celebrities. By subscribing to Mrpaparazzi.com any amateur or fan can get daily text alerts for 25p of the locations of major celebrities and celebrity hot spots. Then they can run down to their local disco or shopping center with their digital camera or cell phone, join the crowd of regular paparazzi and snap to their hearts content (or until they get shoved out of the way by someone fighting for position).
Once they have a shot they can submit their pictures online to Mrpaparazzi who will attempt to license them and pay 50% of any fees collected to the photographer. The service is aimed at 18 to 30 year olds. If celebrities think they are being harassed now by adoring fans, just wait until all those fans have the hope of earning money for their pictures.
Production Companies Focused On Latino Market
Finding a niche where there is an undersupply of imagery can be difficult. Two to three years ago one such niche was pictures of Latinos involved in all the every day business and lifestyle activities in which all cultures are involved. Medio Images stepped in to fill that gap and quickly built a very comprehensive file of such images. The images were marketed through Getty Images and a host of other portals. Eventually Getty bought the collection for approximately $17.5 million.
Now, there are at least five or six new production companies with a focus of producing more images for the Latino market. All, I'm sure, have the vision of selling out to someone for as much or more than Medio got.
Throw Out The Dupes
An agency in Findland has reported that they recently threw out all of their dupes because film images are no longer in demand and not worth storing. The surprising thing to me is that I thought there would continue to be some demand for film in the smaller markets, but evidently that is no longer the case.
Worried about someone making unauthorized use of your images? Check out Templatemonster.com. This site offers graphic designers and corporations custom web templates on virtually all business categories enabling them to create instant web sites. These templates can be modified to promote any specific business. Most of the templates use professional stock images and the vast majority of these images have never been properly licensed. Maybe some of them are yours!!
Leila Boujnane of Idee Inc. (www.ideeinc.com) tells me that their Espion photo search software has located hundreds of unauthorized uses for their customers on Templatemonster alone. Espion Site Search is a visual search tool that crawls the web looking for matches to the more than 12 million thumbnail images that have been supplied to Idee for comparison purposes by various images providers.
Once a use is identified, detailed information is provided to the image supplier who can then determine if the specific use was authorized. In the case of unauthorized use it is the suppliers responsibility to attempt financial recovery. Idee receives a percentage of all fees collected as a result of any unauthorized use that they first identified.
Digital Railroad (www.digitalrailroad.net) has more than 550 photographers and 30 agencies with individual web portals on its site. These suppliers are from 46 countries and have a combined total of more than 3 million images on the site. The vast majority of this imagery is editorially oriented with only about 15% being from suppliers that focus on marketing to commercial buyers. Less than 10% of the images are RF.
At present each supplier markets to his or her own select group of customers. If an image buyer wants to review images from several contributors she must go to each contributor's site separately. In the near future image suppliers will be offered the option of also posting their images on a portal that contain images from a broad cross section of contributors. At that point buyers will be able to go to one URL and review images from many contributors with a single search.
Where Is Jerry Kennelly? Living The Good Life!
On Friday night Jerry Kennelly made a whirlwind trip to Biarritz from Monte Carlo to "thank his former distribution partners, friends and associates for a decade of faith, belief and relentless support" and to celebrate his recent sale of Stockbyte.
After much fine food and drink, at around 10 o'clock, Jerry announced that his six passenger chartered jet was at the airport, and he was off to Monte Carlo where this year's Ernst & Young "Entrepreneur of the Year" pageant was taking place. Jerry was one of three EOTY winners last year in Ireland, and he and his wife Johanna were invited to attend this year's festivities.
Jerry invited dinner guests to join him, but the only person who didn't have commitments at the CEPIC conference the next day was Jack Gernsheimer, husband of Nancy Wolff.
Jack flew to Monaco with Jerry, without so much as much as a change of clothes, and reports that it was beautiful looking down over the moonlit towns along the Cote D'Azur. On the flight Jerry spoke of many things, including Create Africa, the foundation for business development he's establishing in Nairobi. In Nice, they were whisked to the Monte Carlo casino in a speedy Mercedes and arrived about midnight where they met up with Jerry's party that included other EOTY winners.
Jack reports that after animated discussions and some serious people watching, as well as the sighting of a Bugatti, (a $2 million car) they wrapped up the whirlwind night, appropriately, in an Irish Pub, dancing to a kick-ass cover band. Jack limped off to the hotel around 4 AM, still fully expecting to wake up from a fantastic dream.