Revenue Analysis: iStockphoto Growth

Posted on 5/7/2008 by Jim Pickerell | Printable Version | Comments (0)

iStockphoto's Q1 2008 revenue increase was impressive compared to Q4 2007, but many image producers are worried about the declining number of downloads. Till the end of last year, virtually all iStock suppliers with reasonably sized collections could count on downloads and revenue rising steadily month to month.

According to my calculations, there were 5.2 million downloads in Q4 2007 and approximately 5.3 million, a 2% increase, for Q1 2008. This is iStock's lowest percent of increase for a quarter since the company was acquired by Getty Images in January 2006.

 

Q1 2007

Q2 2007

Q3 2007

Q4 2007

Q1 2008

Revenue (in millions)

13.7

15.87

18.54

23.64

30.74

Downloads (in millions)

3.5

4.25

4.6

5.2

5.3

Av. Per Download

$3.91

$3.73

$4.03

$4.55

$5.80

 

 

 

 

 

 

Avg. per download Increase from Q1 2007

 

-5%

2%

16%

49%

(The 2007 figures in the chart above are based on Getty's actual reported figures. The

Q1 2008 figures are estimates based on fragmentary information Getty's supplied and on reports from a sampling of photographers.)

In January, in a continued effort to grow revenue, iStock instituted a 30% to 35% price increase (depending on the mix of file-sizes downloaded). Part of the motivation for this increase was the recognition that a significant portion of its customers were commercial users who would pay much more for the images they needed.

It's hard to imagine that the difference between a $3 image and a $5 one, or one that was formerly priced at $5 and is now $10 would be enough to cause customers to elsewhere, but they did. Total downloads began to flatten. Evidently, even small increases are significant for low-budget customers, particularly when iStock's competitors still offer lower prices. It's possible that some customers are using such a high volume of images that even modest increases become significant. iStock's move to introduce a subscription model may be one way to address the needs of volume users.

The experience of Lise Gagne, iStock's No. 1 seller, is instructive. In 2007, she averaged about 19,000 downloads per month. In February 2008, despite being given a preferred position in the search-return-order, she had 15,821 downloads, in March 15,588 and 15,699 in April. The increased price-per-download still enabled Lise to earn more per-month than she had in 2007. However, in the case of many photographers, revenue was flat or declining compared to 2007 or earlier.

Now microstock photographers are discovering that even when they add lots of new photos during the month it does little, if anything, to increase their total number of downloads and revenue. Without another price increase in Q2 (which no one expects), more photographers are likely to see their monthly earnings flatten or fall further. Major microstock producers accept that they must produce new images just to stay even financially. This is a similar problem faced by RM and traditional RF producers for several years.

It should be noted that traditional RF distributors also lost customers years ago when they started raising prices. Revenues increased as prices increased, but the distributors lost lower-end buyers priced out of the market. Now, traditional RF distributors aim at the same high-end market as RM producers and find it impossible to address that huge customer base with smaller budgets.

Kara Udziela, public relations for iStockphoto says many of my figures are off "by very large margins," but she is unwilling to provide any clarification that would enable a more accurate analysis. I believe everyone in the stock-photo industry is required to react to what is happening at iStockphoto. If they can't get access to perfect statistical data, then they must base their decisions on the best information available.


Copyright © 2008 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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