Royalty Free and Market Size

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July 28, 1999

What's the impact of Royalty Free on the size of the stock photo market?

I estimate that the gross sale of stock photography worldwide is about $1.25

billion dollars U.S. The overall growth of the market in the last few years

has been less than 5% per years. While some large agencies have experienced

faster growth, many smaller agencies are seeing a decline in revenues.

Few hard statistics on actual sales volumes are available because very few

companies in the industry are required to publicly report any type of sales

figures. Thus it is necessary to do a lot of estimating based on scant data.

Alfonso Gutierrez of AGE estimates that gross sales are closer to $2 billion,

but I am comfortable with my number having recently reviewed the available data.

I estimate that the worldwide Royalty Free sales have been:

1996 - $80 million

1997 - $100 million

1998 - $125 million

1999 - $155 million

Thus, sales of Royalty Free represent less than 15% of total industry revenue.

More interesting than the dollars produced by RF is the percent of images used.

Considering the difference between the average cost for an RF image and the

average cost of a "Rights Protected" image, as much as 40% of the total number

of stock images used may come from Royalty Free sources.

In developing this figure, I have taken into account that many users buy

discs in order to use only one or two images. Therefore, I am not assuming

that every sale of a RF product results in use of every image on that product.

Also, the percent of RF uses is much higher in the commercial side of the

market that includes advertising, brochures and various corporate products.

It is lower in the editorial market because editorial needs demand a greater

variety of subject matter than is the case with the commercial market. Very

little editorial type of imagery is available as RF.

If we assume RF will eventually be able to control 100% of the stock photo

usages, at current RF prices, the market size would be about $500 million, not

$1.25 billion. (This assumption is based on 40% of the usages in the market

generating $155 million.) Buyers of stock photography will love it.

Even when RF controls a greater share of the images used, it seems unlikely

that the RF suppliers will be able to raise prices, given the competition

among various producers.

The Good News

It is my feeling that the RF will top out at 50% to 60% of all stock usages.

At current rates, that will probably represent 20% to 25% of the gross stock

billings. I believe there will always be a demand for imagery that will

not be economic for RF producers to supply. Some customers will turn back to assignments

in order to obtain certain images that can't be used by all their competitors.

The savings they realize from making some use of RF will make it possible for

them to spend more money on assignments. There will also be a place for an

alternative stock option. Customers will want:

• an image that is immediately available (faster than assignments).

• an image that has a different look from the RF options available.

• an image that will not be used as widely as many RF images are likely to be

  used.

• a creative idea that has already been execuited, but not something that will

  be used to death.

• a price that is cheaper than an assignment, but not necessarily as low as

  RF.

• in some cases, specific rights control, although not many buyers actually ask

  for that at the present time.