Selling Worldwide on the Internet

Posted on 8/11/2000 by Jim Pickerell | Printable Version | Comments (0)

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SELLING WORLDWIDE ON THE INTERNET




August 11, 2000





Many photographers believe that the Internet will totally eliminate the need for

sub-agents to handle the licensing of their images around the world. They believe

there will be centralized sites where they can place their images and clients

worldwide will rush to buy and pay by credit card.

This belief is encouraged by "dot com" designers, who often have

little or no experience in selling anything, let alone photography. Nevertheless,

they are convinced that the Internet can solve every problem in the universe. They

offer to totally eliminate the middleman, which can be very seductive to

photographers. Some are offering to give photographers up to 90% of all fees paid

by the buyer. Don't accept such promises on simple faith. Consider whether it is

really possible.

Our industry definitely has some advantages when it comes to on-line marketing.

Unlike many other industries who must use traditional methods to deliver their

produce, we can deliver on-line. Also, customers can determine by looking at our

product on-line whether it will meet their needs exactly. This is not true in many

other industries. But the Internet does not eliminate EVERY problem.

Consider A Few Things:

    1 - Are ALL customers likely to be willing to pay by credit card?

    2 - If they are willing to use a credit card, will they enter the number into their

    computer, or do they want to call and talk to someone who will accept the

    information over the phone?

    3 - Is it possible to provide a price schedule that adequately covers the wide

    variety of rights protected uses, or do on-line price schedules tend to push

    pricing in the direction of the Royalty Free model?

    4 - Is it possible to get many customers to come to your site without print

    marketing? Getting customers is not cost free.

Quick Answers:

1 and 2 - First, a few facts about Getty Images, the leader in e-commerce sales of

stock images. Forty-four percent of their core business revenue last quarter

(excluding TIB and VCG who are not very e-commerce enabled at this time) resulted

from pictures found on the web. But, Getty has more than 665 sales people

worldwide manning their call centers. Would they need that many people if everyone

was paying by credit card? [This 665 does not include marketing teams or other

sales support functions such as picture researchers who pull images from analog files.

If those people in support functions were added to the number of people just taking

sales calls, the number of people involved in sales at Getty Images would be much

larger.]

Getty won't tell us what percentage of their digital sales are performed without

human intervention, but it can't be much if 665 sales people are required to deal

with the rest of the sales.

3 - If you are trying to sensibly price for a rights protected use you must

recognize that every use is different and has unique characteristics. There are

price schedules -- "PhotoQuote" and "Negotiating Stock Photo Prices" and many

others. But these provide STARTING POINTS, not THE PRICE. Judgement of an

experienced sales person is absolutely necessary, if you want to establish a

win-win "price."

Automatic prices can work with Royalty Free sales where the customer gets a

particular file size for a fixed price, no matter what the usage. Automatic prices

will seldom work effectively in the rights protected arena.

To give an example, lets take a look at Stone's automatic price schedule. It is a

single page. For some uses like advertising, point of sale, billboards and book

covers the customer is required to call no matter what the usage. But let's look

at one of the listed usages with a price.

The price for inside brochure use, between 1/8th and 1/2 page, with a circulation

of between 10,000 and 100,000, in one country for one year is $740.

Consider this from the customers point of view. Suppose the customer's print run

is going to be 15,000; or the usage size is 1/4 page; or he expects the brochure to

be used more than one year; or he expects a small quantity to be distributed outside

the U.S.; etc. etc. etc. Isn't that customer going to want to call and negotiate

rather than pay $740 for the usage? The only time the customer should be happy

with the $740 price is if the picture is actually being used half page and the

print run is close to 100,000. Is this "customer friendly" pricing? All a price

schedule with such broad ranges does is get the customer into a general ball park

before he or she makes the call. It also takes care of those very rare

emergencies when the customer needs instant response and doesn't have time to call.

4 - If print marketing is not needed why does Getty Images continue to produce so

many printed catalogs? Here's some of the catalogs produced by the Getty brands

since January 1999:

    Stone -- 1999 - V18, Life, Work

    2000 - Road Trip, Quest, and Play/Players

    TIB -- 1999 - C24 Perceptions, C25 Attitude, Bokelberg 7, C26Annual

    2000 - People/Contemporary Living and Retrospective 2

    FPG -- 1999 - Selects V9, Historical Select Volume 4, StockDirectory 7,

    Sports, Higher Ground

    2000 - Temptations, Business

    VCG -- 1999 - Stock Directory 8, Best of Selects, Business

In 1999 the combined print runs for all catalogs were -- more than 400,000 for

Stone; more than 500,000 for TIB; more than 200,000 for FPG; and unknown for the

rest of VCG.

Try to think of any major "dot com" company that hasn't used a lot of print and TV

ads to draw customers to their site. Have the RF companies stopped sending out

catalogs as more and more of their sales are on-line? Sixty percent of PhotoDisc's

sales were on-line in the last quarter. How did any of these "dot coms" draw

customers to their sites in the first place? Is any of this advertising to attract

customers free?

With the answers to these four questions you should be getting the idea that sales

people and extensive print marketing will continue to be needed, even if the image

catalog is on-line and delivery is on-line. Only if you are willing to settle for

RF prices are you likely to be able to make significant on-line sales without sales

people involved in the transaction. At present, the average price for a RF usage

of a single image is $80 or less. The average price for single image licensed by

Stock Connection in the first 6 months of 2000 was $925. (See Story 327) Take your

pick. And don't forget that marketing costs are not free.

So when someone tells you they will give you 80% to 90% of the gross sale, consider

how many sales they are likely to be able to make if they don't have a sales staff

and they don't spend much on marketing.

Overseas Sales

But that isn't the end of our story. If you are a U.S. photographer making sales

in the U.S. maybe you can negotiate your own sales. Maybe you can find some way to

share, on a co-op basis, the costs of marketing your site so users will know where

to find your images.

What about the overseas sales? Close to 55% of the worldwide revenue generated

from stock photo licensing comes from outside the U.S. For some U.S.

photographers, and with certain types of work, the percentage of sales outside the

U.S. is even higher. What is the best way to deal with such sales from a U.S.

base? Do you know:

    1 - What prices are reasonable and fair in the UK, Germany, France, Belgium,

    Italy, Spain, etc? What are comparable rates in each of these countries for a

    particular usage? Where are rates higher?

    2 - How are you going to market and let buyers in these countries know that your

    images exist? Will the marketing strategies you use in the U.S. work in these

    other countries?

    3 - What rights are normally licensed in these countries?

    4 - If negotiation is necessary, how do you communicate with someone who doesn't

    speak your language? Do you only do business with those who can communicate in

    English?

    5 - What are the customs relative to negotiation in the country where you are

    trying to sell?

    6 - What are the various business and legal rules for operating in each country?

    What are the copyright laws? (Hint: They are not the same in every country.)

    7 - What do you do about the time differences if there are deadlines?

    8 - If the customer wants to be billed instead of paying by credit card what do you

    do? Do you require that the client make a bank transfer before you deliver the

    file? What will that cost both you and the client in bank fees and time wasted?

    Is this user friendly?

    9 - On the other hand, if you bill, how do you collect if the customer is slow in

    paying, or just decides not to pay at all. (Read about collection problems further

    down).

    10 - How do you monitor usage to make sure the client isn't making more use than

    they paid for?

Clearly, photographers are going to need help if they want to maximize the sale of

their work overseas. At the moment there are basically two options -- Getty and

Corbis -- with an infrastructure in place capable of effectively marketing

worldwide. On the other hand there are well known disadvantages to dealing with

Getty and Corbis that I won't take time to enumerate here.

Will there be a third, fourth or more choice, and when? There are PictureQuest and

Workbook in the U.S. with sites that consolidate the work of many agencies, but so

far neither of these companies have much reach outside the U.S. There are foreign

agencies with sites, but most of them don't sell much in the U.S. There are lots

of options in the planning stages, or the early stages of development. Before the

end of 2001 photographers will have many more choices.

What U.S. photographers need is strong representation in the U.S. and some type of

affiliation program that will allow their work to be agressively marketed and

licensed in other parts of the world. One solution is for photographers to make

their own separate arrangements with many different agencies throughout the world.

The other solution is for the photographer's U.S. agency to make such arrangements

on the photographer's behalf.

It is highly unlikely that the perfect solution is going to present itself and be

obvious to everyone. Most photographers will need to simultaneously test various

options for a period of time in order to settle on what works best for them. This

probably means that photographers need to be more agressive in seeking

image-exclusive, or non-exclusive relationships as they move ahead.

Don't Lock Up Your Images So They Can Only Be Sold On-line

Some on-line operations want the photographer to give them image-exclusive (with

similars) which means the image can't be made available for sale in any other way,

but on-line. This is probably not in the photographer's best interest at this

time.

After the first two quarters, Getty Images is on a growth track to have about $170

million in sales in the year 2000 that resulted from on-line search. For the most

part, on-line delivery was also supplied with these sales. This should represent

about 36% of Getty's total sales for the year. Add in the sales made by Corbis,

PictureQuest, the agencies represented on Workbook and individual agency sites

around the world, and I estimate that the gross sales worldwide in 2000 that result

from on-line search will be in the neighborhood of $250 million, or 18% to 20% of

the worldwide sales.

Every stock photographer ought to be involved in devising ways to market their

images on-line. But at the same time there is still a huge demand for analog

material and most people in the industry believe that is likely to continue.

Photographers need to position themselves so their work can be available in both

the digital and analog environments -- at least for a while.

Certain types of users -- textbooks for examples -- may rely on analog files and

their depth much longer than hard news users who have greater need for speed, and

for whom image resolution is not as big an issue. Unfortunately, many of the

current digital options focus exclusively on digital at the expense of analog.

Why Photographers Need Foreign Agents (Sub-Agents)

The material above provides a general summary of why photographers will need agents

to handle marketing and sales of images in on-line catalogs when these sales are

being made outside the photographer's local area. The following will explore, in

more detail, many of the reasons for this continuing need. It should also make

clear that foreign sub-agents are legitimately entitled to a significant share of

the usage fee they generate.

Language and Time. Probably the most important service the foreign agent

provides is having someone available for the customer to talk to in their own

language and their own time zone. Particularly during the early adoption phase of

on-line usage there needs to be a lot of customer education. They will need help

in learning to navigate the site and use its various features effectively. With

constant software upgrades this is likely to be a continuing need. Customers may

also need larger scans, next day delivery of film, or other special services.

Frequent buyers may need less support as time goes on, but infrequent users are

likely to need help every time they enter the system. Even large publishers who

buy lots of images may have staff turnovers that require continued training and

support for their new users. The customer wants to be able to talk to someone when

they have a problem. Preferably it is someone local and someone they know.

Consider the problems an English speaking seller will have in trying to make a sale

in another country; where another language is spoken; where there are different

business traditions; and where there are different attitudes toward copyright.

Research. Many buyers will want someone to help them with research and

e-mail thumbnail catalogs of selects. This will be particulary true when the image

was originally keyworded in English and the customers native language is different.

Yes, it will be possible to use other languages for searching, but not every

language.

In certain specialty areas, having researchers with expertise in the field is of

great value. This is the kind of support niche agencies have always provided. A

few examples of subject matter where special expertise is invaluable are:

automobiles, aviation, food, fine art, history, medicine, biology, education,

wildlife, underwater, travel location, religion, theater and dance, sports, dogs,

cats, horses, science, etc. Many buyers need more information than captions

provide. The chance that a sales person in a large impersonal call center is going

to have this knowledge, or have any idea how to get it, is slim.

Keywording. English keywords may not translate conveniently. If you think

the Internet is going to easily solve this problem then you ought to read "Hello

World" in the May 2000 issue of Wired Magazine. This article is available on-line

(in English, of course) at http://www.wired.com/wired/archive/8.05/tpintro.html.

This in depth study is must reading for anyone who thinks translation of keywords

into other languages will be a snap.

Basically, the more images in a database, the more complex the keywording needs to

be, and the more likely there will be a communication breakdown in translation.

Good keywording will be necessary. But there will be users who need aid in the

search process, particularly when the language of the searcher is different from

that of the keyworder.

The sales and marketing system that doesn't take this problem into account in its

basic structural design is likely to eventually fail -- even if it makes a fast

start.

Marketing. Foreign agents know the local buyers. They have the best lists

of potential customers. They also understand what marketing strategies work with

their customers. These strategies tend to be different in every country, and among various user

groups. It is important to understand these distinctions if you want to reach a

large user base. It is important to adjust your marketing to local conditions.

U.S. photographers, and for the most part U.S. agents, will need to develop

marketing relationships with local foreign agents, rather than trying to market in

other parts of the world themselves.

Catalog marketing is changing. Getty Images is producing catalogs that are smaller

in physical size and often on specialized topics. They are mailing them more

frequently rather than just mailing one major catalog a year. Catalogs may become

more positioning pieces designed to draw buyers to the Web, rather than to sell

specific images in the catalog.

Other means of advertising and promotion may become as important, or more important

than the print catalog. If possible, photographers should participate in and test

several different marketing strategies in this transition period for the industry.

Negotiation. Most U.S. buyers use Royalty Free images for many purposes.

This is likely to be true worldwide in the not too distant future. Thus, with fewer

opportunities to negotiate, each negotiation takes on greater importance. It is

critical for the seller to speak the buyer's language, understand local customs and

laws, including the local understanding of copyright and to have experience in

licensing rights.

This is particularly true when it comes to complex advertising sales where the

picture will be used in a variety of magazine ads and collateral uses.

Restricted Use. Some customers are willing to pay large fees to restrict

competitors from using an image during the duration of their license. Such uses

need to be carefully negotiated and monitored.

Defining Terms For The Customer. It is becoming more and more important to

carefully define terms with the customers before delivering images. The existence

of royalty free is causing many customers to believe that any time they pay a fee,

no matter how small, they have unlimited rights to use that image forever. Those

who are licensing specific usage rights need to get that understanding in writing

before they allow customers to download their full size image files.

With fax machines this is relatively easy. You get the client to sign off on the

terms before you make the delivery. But, the discussions and the writings must be

in the buyers native language.

If these kinds of details are taken care of in the "negotiating phase" there are

often a lot fewer problems in the "collection phase" of the sale. I will discuss

collection problems a little later.

Large Users. Certain large users, like book publishers, prefer to deal with

agencies that can supply them with a broad cross section of the imagery they need.

This can reduce the publishers administrative costs. Often the publisher is able

to negotiate per image discounts based on the quantity of images they are buying.

Smaller agencies and individual photographers are usually locked out of the chance

to make sales of this type.

This method of selling has advantages and disadvantages for the photographer.

Photographers should try to understand how the agency's pricing and discount

strategies work, and carefully weigh the benefits of participation. There is a

potential for volume sales but at lower prices. It is not always clear that the

individual photographer benefits enough from the volume to justify making the

images available at lower prices. On the other hand, holding out for higher

prices and giving up the opportunity to participate in this market can be

frustrating.

Usually, the agency has a particular strategy and photographers are only given one

choice. The only option open to the photographer is to move to a different agency.

However, in the Internet environment it is technically possible for each agency

to offer photographers greater

flexibility and to allow each photographer to make certain images available to the

Large User (Bulk Sale) market and restrict others to the high end market only. It

will be interesting to see if some agencies offer such options as Internet

marketing develops.

Model Releases. Customers may need to check model releases to determine if

they adequately cover the use. In some countries laws vary as to when releases are

needed to publish pictures of public buildings or private homes. In France there

are new laws that protect the privacy of individuals photographed in news

situations and photographs used in news publications. Going by U.S. law because you produced

the picture in the U.S. or are selling the picture from the U.S. may get you into

trouble. Various professional organizations are trying to find ways to identify

divergent rules and harmonize the rules internationally, but it may be quite some

time before such "harmonizing" becomes a reality.

Collecting. If all payments are not made by credit card at the time of the

sale (unlikely) someone needs to collect funds in the local currency. Collections

in the stock photo industry can be difficult in the best of situations. They often

become impossible if there is no one locally to provide systematic follow up. The

goal is not just to get images used. The goal is to get paid for the use of images.

As part of this process it is important to establish the credit worthiness of a

client before the image is delivered. Get a faxed signature on a delivery memo

before supplying the high resoultion file. It is important to also recognize that

you are not even safe when you are paid by credit card. While stolen credit cards

are used in only 1.2% of all Internet sales e-tailers are ten times more likely to

be ripped off by credit card buyers than bricks-and-mortar stores who are able to

get signatures from their customers and check ID's.

Stolen cards are much more likely to be used to purchase consumers products than

for business-to-business transactions. Nevertheless, Deborah Williams of Meridien

Research told USA Today that as much as 26% of on-line sales made by some sporting

goods and clothing e-tailers are fraudulent. Other vulnerable web sectors are

computer hardware and software, electronics, music and games.

In the U.S. there are on-line sellers in the stock photo industry who have as much

as 20% of the sales they invoiced six to twelve months ago still unpaid. Much of

this is likely to turn into bad debt. Part of the solution to this problem is more

attention to detail in the negotiating phase of the sale and persistent follow up.

Why might this problem be more prevalent on-line than in the traditional system of

personal negotiation? First, in the personal negotiation process you build a

relationship with the client and you work out a clear understanding of the rights

your licensing for a particular price, before the image is delivered. With on-line

there may be too much pressure to say yes to everything and quickly close the deal.

Every image is different, every use unique and there can be endless variations.

It takes time to negotiate a sale properly. Often the people assigned to buy

images are clerks, not experienced art directors. They often need a lot of

education (through the negotiating process) as to why we are asking for a

particular price, and what the industry standards for such transactions are.

If a little more time is spent during initial negotiations nailing down certain

details, a lot of aggravation in collection can be saved later. Assuming that

foreign buyers are no more or less honest than those in the U.S., photographers can

benefit greatly from having local representation.

Internet marketing systems are designed to eliminate communication as much as

possible; to make it as easy as possible for the buyer to get something he or

she wants; and then to collect, if possible. Photographers should recognize that

the more automatic the sales process becomes the more likely they will be giving

away uses for no fee through bad debt.

Monitor. It is helpful to have someone to monitor usages. Without such

monitoring, or its threat, there will be a great temptation to make uses beyond

those licensed. In some cases legal action will be necessary. That is only

practical if the action is brought in the country where the sale and usage took

place.

Legal Action. This doesn't happen often, but the fact that it does happen

encourages buyers in general to be honest. In the marketplace, there is a constant

need to pile contract provision on contract provision and clause upon clause to try

to protect one's rights.

One thing that agencies can usually do better than photographers, because they have

the manpower and more incentive, is keep up with industry developments and changes

that need to be built into the paperwork and processes. One of the ways they do

this is through participation in trade associations.

All things considered, it is not even a close call as to whether you need a foreign

agent representing your interests. By now it should be clear that any photographer

who wants to sell outside of his or her local territory needs a representative in

every region where sales are to be made.

Double Dipping

Many photographers who have listened to the mantra of the Internet gurus, and

believe that the Internet should be eliminating the middleman, are beginning to get

much more upset about "double dipping" or the situation where a parent agent in the

U.S. makes arrangements with a foreign sub-agent to handle sales for them in a

particular territory overseas.

This is particularly distasteful and hard for photographers to accept when the

foreign office is wholly owned by the parent. Photographers want to receive the

same percentage of the "gross fee paid by the customer," no matter where the sale

is made.

Nevertheless, there are legitimate reasons for why the costs of marketing and

selling will increase as the sales chain from producer to buyer gets more complex.

If a photographer is producing something in San Francisco and selling directly to a

customer right around the corner there is a much less complex sales chain than if

that same photographer is trying to sell to someone in Greece who he has never met

and knows nothing about -- and if the photographer hopes to collect for the use of

his image.

I have outlined above all the things the selling agent does to earn his share of

the fee. Depending on the specifics of the situation the Primary Agent or the

Parent Agent certainly has less costs in making overseas sales than when that agent

makes sales in their home territory direct to clients. The parent agent is not

involved in the negotiation or the collection of the sale. Thus there may be an

argument that the Parent agent is entitled to a lesser share

of the fee.

The parent agents participation in the foreign marketing may be less. The parent

does have the additional costs of putting together a network of foreign agencies

and making sure they are the most efficient operators in a particular country. The

parent agent also has to make sure funds are transfered properly and that

photographers are paid promptly.

The foreign selling agent is involved in the most critical work.

There is an argument that the Primary agent has less invested in the foreign sale

than in a local sale and thus should take a lesser percentage. On the other hand

even if the prime agent's percentage stays the same they are earning less in real

dollars because it is calculated on the remainder after the selling agent takes

their percentage. As we move from analog selling to digital selling there may need

to be some adjustments as to which group receives what percentage of the gross

sales, but clearly all parties -- photographer, prime agent, foreign sub-agent --

are still providing necessary and important services, and each must be compensated.


Copyright © 2000 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.  

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