RF and Stock Photo Uses

Posted on 11/10/1999 by Jim Pickerell | Printable Version | Comments (0)

263

RF AND STOCK PHOTO USES


November 10, 1999

At the recent Photo Expo and PACA International conference in New York we talked

with representatives from a number of the leading Royalty Free companies.

Based on those discussion I make the following assumptions:

  • The average unit price for an RF disc sale is $225.

  • The average price to purchase a single image on-line is $75.

  • Currently 20% of the total RF units sold are single images online and about

    80% are from discs. (The percentage of single images sold by PhotoDisc and

    probably Corbis is probably higher, but for most other companies it is lower.)

  • Eighty-five percent of the RF sales worldwide are in North America. So far

    there has been very little penetration of RF, or electronic search for rights

    protected images into Europe in spite of the fact that the European market for

    stock photography is at least as large, if not larger, than the U.S. market.

  • The percentage of sales for personal use is very small, but I could find no

    one who was willing to share estimates with me.

  • There is a rapid movement away from discs and toward single image purchase.

  • I estimate that the gross sales of RF still images are about $155 million.**

    PhotoDisc   

    $70 Million   

    Corbis Digital Stock   

    $ 30 Million   

    Eyewire   

    $ 8 Million   

    Digital Vision   

    $ 5 Million   

    John Foxx   

    $ 3 Million   

    Artville   

    $ 2.5 Million   

    PhotoAlto   

    $ 2.5 Million   

    All the Rest   

    $ 34 Million   

      

      

    Total   

    $ 155 Million   

    ** These figures include still photography and illustration, but not

    cinematography, or other graphic arts products that are being sold by some of the

    companies engaged in the Royalty Free business.

  • When someone purchases a disc they make on average the equivalent of three

    (3) traditional rights protected uses. This could be one-time use of three images

    from the disc, or it could be using one image for three different purposes that

    would have been priced separately in the rights protected market.

    There have been some customer surveys, but most of that information is very closely

    held. However, even those with the best data are engaged in a lot of guess work

    when it comes to the number of uses actually being made from the products purchased

    because there is no requirement to report that information.

    Yet assumptions about this number are critical in determining Royalty Free's

    penetration into the current market and the potential growth of that market.

    As a larger percentage of RF sales are to single images acquired through online

    search it will become easier to estimate the number of images actually used, if not

    the number of times they are used.

Analysis

One of the most important things to determine is the growth in usage of stock

photography. As we will see this doesn't necessarily track with growth in number

of sales or dollar volume.

Using the basic assumptions outlined above, along with generally accepted

statistics about the rights protected market, I can draw some interesting

conclusions about usage.

From the comments made in seminars in New York it seems to be generally accepted

that the size of the stock photo market worldwide is about $1.25 billion in annual

sales.

In the early 90's when there were almost no RF sales the size of the stock photo

market was about $1 to $1.1 billion. It was generally accepted at that the gross

fee for the average Rights Protected usage, worldwide, was about $400. That seems

to be dropping in two ways.

First, the average fee paid seems to be coming down. I believe it is now in the

range of $300 to $350. This is being driven by the pressure on many sellers to

compete with royalty free. In addition, customers are tending to get additional

rights for the initial fee. This is particularly true in book publishing where

certain uses that were previously charged as re-uses are now being included in the

initial basic fee. It also occurs when the clients get web use in addition to a

basic print use for about the same fee as they would have paid previously for the

print use alone.

Working The Numbers

In the early 90's with a market of $1.1 billion and the average use fee at about

$400 there would have been 2,750,000 uses annually.

Today, the average use of an RF image is $75 (3 divided by $225 for discs and $75

for single image purchase). This means that with $155 million in sales RF is

generating about 2,066,666 uses annually. (Keep in mind that if we have erred

there are probably more uses per sale rather than fewer which would result in an

increased number of annual sales.)

Meanwhile the RP side of the business has about $1.1 billion in sales ($1.25

billion minus $155 million). At $350 per use RP generates about 3,142,857 uses

annually. (If the average sale is as low as $300 then the number of uses could be

3,666,666.)

Thus, current total uses annually are: (RF) 2,066,666 plus (RP) 3,142,857 =

5,209,523.

This is a healthy 89% growth in usage in the last few years with virtually no

growth in revenue. Royalty Free has 40% of the usages (2,066,666 divided by

5,209,523) but only 12% of the revenue ($155 million divided by $1.25 billion).

North America Alone

The comparisons for North America are even more dramatic. Assume that 45% of

worldwide sales are in North America. Thus, in the early 90's 1,237,500 of the

uses were in North America.

Currently, with 85% of the RF sales in North America the gross annual income for RF

is $131,750,000 and there are 1,756,666 uses. On the RP side there is about $500

million is sales representing 1,414,285 uses. That makes 3,170,951 uses in North

America (1,756,666 + 1,414,285) and Royalty Free represents 55% of the total uses.)

Rights protected sellers in Europe should not be sanguine. While the impact may

not have hit Europe yet, at most the buyers are a couple years behind the U.S. in

terms of use of technology. The growth here in the U.S. has been very dramatic in

the past twelve months. My predication is that by 2002, RF will have the same type

of impact in Europe that it now has in the U.S.

Obviously, there are many variables in these equations that we are unsure about,

but the overall directions seem clear.

Where Do We Go From Here?

Royalty Free's claim that they have grown the market in terms of number is uses is

true. It is hard to imagine that there would have been such a growth in the number

of uses if there hadn't been a lower price model.

But, is it necessary for prices to remain as low as they are?

The RF people we talked to seemed to universally agree that price alone is not the

only, or even the main reason that image users buy RF. They recognize that they

could raise their prices significantly and still remain way under the price of

their Rights Protected competition. But most seemed to be afraid of the "Two Ton

Gorilla" (PhotoDisc), and are unlikely to raise prices before TTG. Digital Vision

is expected to break ranks and step out with higher price points in the spring, but

everyone else will probably wait to see what PhotoDisc does.

One theory offered is that Getty Images will have to raise the PhotoDisc prices

because that is the only possible way they can reach the revenue figures the

investment community is projecting for them in the coming year.

With the purchase of The Image Bank, Getty seems to have run out of companies to

acquire, within the stock photo industry, that will add significant revenue to

their bottom line. By the end or 1999 Getty's revenue will be around $300 million

and financial analysts are projecting sales of $360 million in 2000 -- a 20% growth

rate. Looking across the landscape it is hard to see enough companies that Getty

could possibly acquire in 2000 to add $60 million in sales to their bottom line.

It seems clear that if PhotoDisc were to raise prices everyone else in the industry

immediately match them. The big question is what will PhotoDisc do in 2000?

The RF companies also believe they have reached "critical mass" in terms of

content. One of their major concerns is that the new players entering the market

will dilute the market share of the existing suppliers. There no longer seems to

be the expectation that the market will continually growing unabated, no matter how

many new suppliers enter the market. The market leaders are getting much more

picky about what they offer. They have no trouble in getting content, but are

accepting fewer images and looking to add breadth rather than depth to their

product line. They seem to finally be accepting that there is a limit to the

amount of imagery the market can absorb.

Photographers will find it as difficult to get their images accepted by a good RF

company as it has been to get accepted by a major stock agencies. As more single

image sales are made, rather than discs, photographers, particularly those with

only a few images in the system, will find that they earn less per image.

Photographers will no longer earn a share of the sale, even if their image is never

used, as has been the case with disc sales.


Copyright © 1999 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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