Rights Managed Sellers Should Adopt Microstock Pricing Strategies

Posted on 1/8/2011 by Jim Pickerell | Printable Version | Comments (3)

It time for rights-managed sellers to adopt many aspects of the microstock pricing strategy.

The immediate reaction of many RM sellers will be, “I’ll never sell my images as royalty-free.” That’s not what I’m proposing. Photographers will continue to manage the rights to their images. They will continue to be able to license exclusive and restricted uses to their images. But from the customer’s point of view the basic pricing model will look and feel just like the microstock model that they have come to prefer.

I estimate that in 2010 no more than 1% of all the images licensed worldwide were licensed using the RM licensing model. All the other 99% were licensed based on a fixed price for a certain file size. If that’s what customers want then it is time to give it to them.

The key factor to understand is that this does not mean that the image must be royalty free. The question of whether the customer is allowed to make unlimited use of any image purchased, or whether the price is based to some extent on how the image will be used is totally separate from whether the price is based on file size.

Simpler Pricing Model

Some argue that a major factor in why microstock has been so successful is that customers want a simpler pricing model. I disagree. Getty Images tried that with its Rights Ready pricing and it failed. What Getty discovered is that the few simple price points that they established were either too high for most of the new customers they wanted to reach or they give those who were already Getty customers too much of a discount.

Today’s microstock pricing is not simple. If you look at iStock and the other microstock sites you will see that their pricing structures are very complex. If someone wants to really understand what they can or can’t do with an image they need to work their way through a long description – in some cases over 4,000 words - of how much use they can make of any given image for the “standard” price. All images purchased for the standard price have limitations on the use. When the customer needs to print more copies or in some cases use the image in a different way they must purchase an Extended License. The amount of use allowed for the standard price varies based on the type of use.

Like traditional RF, microstock started out with three different basic file sizes. Now, for the most part, microstock has seven. While microstock sites don’t charge based on the size of use in the printed product, to a certain degree the file size option accomplishers the same thing because the customer can’t make a full page reproduction with a small file size. Traditional RF hasn’t adopted the “Extended License” concept yet, but microstock sellers have found it a very useful way to get more money when extensive and larger uses are being made of their images.

More recently, microstock has solved the problem of getting higher prices for some use while still holding onto the customers who can’t afford to pay the higher prices, by creating certain premium priced collections. This is not necessarily ideal because there is no way to determine, upfront, which image some customer will want to use in a big way.

But, if you can’t get customers to even look at your collection because their perception is that it is too high priced – a problem for rights-managed sellers -- then maybe it is better to adjust your strategy. Of course traditional RF has created hundreds of different collections at different price points.

Currently, iStock has 33 base credit levels and in some cases there are different prices within each of these levels depending on the specific image. On top of that when the customer wants to make a larger use they must purchase a higher priced Extended License. The actual price in dollars that the customer pays depends on how large a package of credits she has purchased. The more credits one purchases the lower the price per credit. This provides a standard discount to bulk users rather than having to negotiate a separate discount with each user. Frankly, I bet most customers don’t know what they pay for a given image. They know the image costs X number of credits, they know whether or not they are getting a discount, but they haven’t bothered to determine what one credit really costs and multiply that number by the number of credits they are using for the purchase.

Picture buyers are not looking for a licensing strategy that offers fewer price points. They are looking for one that is straight forward, requires very few steps to determine the price and supplies the image at a reasonable price. The current microstock system is more user friendly for the customer than the RM model and has become widely accepted by the vast majority of image buyers.

Basic Elements of Microstock Sustem

1 – pricing based on file size delivered
2 – prices listed in terms of credits rather than dollars
3 – giving customers who buy larger packages of credits (and thus tend to be those who use many images) discounts
4 – limits on the amount of use a customer can make of an image before the customer must purchase and  “Extended Licenses”,
5 – allowing the customer to use the file they purchase on many projects over a long period of time (provided they have either purchased an extended license, or do not exceed the limits of the standard license).
One element that is no longer part of the microstock pricing model is low price. Based on the royalties some photographers are receiving the cheapest price on iStock is now more expensive than what Getty Images charges for some rights-managed uses through its Premium Access program.

How The New System Would Work

Of the five elements listed above the only one I would not to use is number 5. Instead, I would require customers to supply some very basic information about their intended use before they can complete the download of the image. In this way the type of use is tracked and limits are placed on the use if the customer does not purchase an “Extended License.” With such limitations in place, the image can be licensed for an exclusive use at any time because it will be possible to tell any customer who wants to make an exclusive use who used the image previously and how it was used.

Such a system would:
1 – greatly simplify the RM licensing process
2 – enable customers to use a licensing system that they have become very familiar with and like.
3 –give them all the rights they need in the vast majority of cases. (Very few customers want to make multiple uses of the images they purchase. When they need such rights they can get them by purchasing an “Extended License”.)
Tracking Usages

The customer would search for images, decide which one she needs and the file size needed in the same manner as occurs on most microstock sites. The number of credits required to purchase will vary depending on the image. When she clicks the button to “download this photo” or checkout she will be taken to a screen that lists all the major types of usage such as: brochure, catalog, magazine print ad, web ad, newspaper ad, poster, inside book, book cover, newspaper editorial, inside magazine, magazine cover, poster, powerpoint etc. There will be a check box by each. If the customer has a question about the limits of a standard license usage for a particular category she clicks on the category name and it will bring up a screen with a full explanation. If she already knows the limitations and that she will not exceed them, then she can proceed directly to checkout.

If, after reading the amount of use allowed for the standard price she realizes that she needs an extended license she can click another button to see the various types of extended licenses that are available for the particular category of use. Some of the common options that are currently found on microstock sites are: Multi-Seat (unlimited); Unlimited Reproduction/Print Runs; Items for Resale (limited run) and Electronic Items for Resale (unlimited run). Since the customer has already identified the type of intended it will easy to vary the types of extended license available for each use type. For example if the type of usage was for a textbook I would be tempted to make the standard price for a circulation of  up to 40,000 and have four levels of extended licenses such as: EL1  be up to 200,000; EL2 up to 500,000; EL3 up to 1,000,000 and EL4 over one million.

Obviously the circulation levels would be quite different if the category was magazine editorial or print advertising. Using the “Extended License” option in this manner would enable RM sellers to build a circulation option into the pricing system in a way that is comfortable for microstock customers. (I would caution anyone who wants to try this system not to get to greedy with multiple circulation breakdowns. Keep in mind that most microstock sellers allow 500,000 for the standard price. I would think the standard price should be somewhat lower than that, but don’t have more than one or two levels of extended license to get the 500,000 and generally no more than three or four levels of extended license total.
Finding The Customers

The biggest problem for most RM sellers will be in figuring out how to reach all those customers who have never purchased anything but microstock. Just instituting a new pricing strategy will not solve that problem, but it is one step in making rights-managed sites more friendly to these customers.

Some photographers are very worried about ever selling their images for low prices, but agencies like Getty, Corbis, Alamy, etc. are licensing RM images to some customers for extremely low prices all the time. If you’re going to have anyone representing you work your images are likely to sell for very low prices occasionally. Nevertheless, the images are still available to be licensed at much higher prices, if the right customer who wants to make a large usage comes along. With this microstock style pricing strategy your images will also be available for licensing for big dollars. The important thing to figure out is how to put reasonable limits on your extended licenses so any extremely large or unusual use must be negotiated.

Merging Models

Another potential advantage to instituting this model is that it will be very easy to eventually sell microstock, traditional RF and RM all on the same site. That could be a win-win for everyone. The trend in microstock is to offer multiple collections at varying price points, all on the same site. Microstock sellers need access to additional high end imagery. It would be very easy to integrate a few RM offerings – at various price points – into the mix with microstock. All the prices would be in credits. The only difference is that customers who want to purchase a RM images would have to choose a type of use.   

In such a system both microstock and the traditional sellers would win. Microstock has the access to and credibility with the customers. Microstock sellers could make more money if they were also offering some images at higher prices. Traditional sellers need a way to reach the low end customers while still being able to sell to their traditional market at reasonable prices.

The hardest part will be figuring out which images to offer at which price levels. Some people will only want their images offered at high prices and maybe they won’t be all that concerned if they don’t make that many sales. I think iStock’s Exclusive approach makes more sense. All exclusive images start out at the lowest exclusive price point. Then, each photographer is given an allotment of spaces (up to 20% of total images in the collection) in Exclusive Plus, depending on how well most of the photographer’s images sell. Most photographers will be smart enough to put their best selling images in Exclusive+ rather than using up that space for the image they “really love”, but which has never sold. One of the risks is that some buyers who might have purchased the image at the lower price might be turned off by the higher price. If this seems to be happening the photographer can move the image back to the lower price.

In general I don’t like the idea of assigning images to collections based on what I might think their value should be. I’ve sold too many rather mundane images for lots of money and had many “great” images by my definition sit and never sell because no customer ever saw in them what I saw. So it becomes very difficult to choose a price level for any given image. But, it may be better to randomly decide a price level for an image than to place it in a collection where the vast majority of customers will never look.

Copyright © 2011 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 301-461-7627, 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.  


  • Fred Voetsch Posted Jan 10, 2011
    A very though-provoking article. I believe that Mr. Pickerell has a rather accurate view here of the future of image licensing.

  • Mark Turner Posted Jan 10, 2011
    "The hardest part will be figuring out which images to offer at which price levels." That's only one issue, and certainly a challenging one. I also never know which images in my library will be licensed, or for how much. Most of my licenses are client-direct, not through what we used to call agencies, and to editorial customers who continue to pay better rates than microstock for the specialized images I provide. I would not welcome licensing based on file size.

  • Jim Pickerell Posted Jan 11, 2011
    Mark: Individuals selling direct probably should continue to quote prices based on very specific uses. The customers know them and are interested in their images specifically. Thus, the seller is in a position to control the negotiations. But, the advantage for most who deal with agencies is that the agencies offer them the potential to reach a much broader base of potential customers. The agencies must be concerned with how to get the customers to visit their site and in this case it is important to have a customer friendly licensing model.

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