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.**
Corbis Digital Stock
$ 30 Million
$ 8 Million
$ 5 Million
$ 3 Million
$ 2.5 Million
$ 2.5 Million
All the Rest
$ 34 Million
$ 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.
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
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
Thus, current total uses annually are: (RF) 2,066,666 plus (RP) 3,142,857 =
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
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.