The stock photo industry seems to be going through another round of acquisitions and consolidations as owners of small, niche agencies find it difficult to compete in today’s market where there is a glut of supply, relatively flat demand and declining prices. Many agency owners are looking for ways to retire or move onto something else. I regularly get request asking “What is my company worth?”
Those doing most of the acquiring this time around are not the industry leaders with deep pockets – Getty and Corbis -- but medium sized distributors. Among those I have identified are
DesignPix,
SuperStock,
George Sinclair’s UIG,
Robert Harding World Imagery in the UK and
dapd in Germany.
As best I can determine this round of acquisitions differs from the ones we saw a few years ago when the sellers got big cash payments. I don’t think that is happening now. My gut feeling (and I don’t have hard figures to back this up) is that the owners of the companies being acquired are not receiving much in the way of a buyout fee. This is not necessarily a bad thing. Sellers may receive other benefits from transferring ownership even if they don’t get many dollars upfront.
Instead of cash, sellers may be benefiting in one or more of the following ways:
a – Receiving a continued income stream for some period of time from the revenue their collection generates.
b – An equity position in the acquiring company. If the overall company revenue grows, or if the company is later acquired by a larger company they benefit.
c – An employee position with a guaranteed salary.
d – Imagery is displayed on a more efficient and full service web site and it is easier to attract customers to such a site.
e – The images will be placed into a distribution network that the small agency cannot afford to manage on its own. Hopefully, with wider distribution the images will generate more revenue, although that is not always the case.
f – Consolidation into a larger organization eliminates some of the overhead costs that were necessary to make their imagery available for purchase.
g – Acquisition offers a way for the work of their image suppliers to continue to be marketed rather than just closing down the agency’s operations.
h – In some cases it may be more costly to close down a stock agency in an ethical way than to just turn the collection over to someone else to manage.
i – They are able to pass off the burdensome administrative work of dealing with photographers and clients to someone who can automate much of the process and handle it more efficiently and cost effectively.
j – Time to focus on other aspects of the photo business that interests them.
If I’m right then those who are considering closing down or getting out of the business need to be prepared to consider some of these options rather than hoping for the big cash payments that their colleagues received in the past.
The companies that acquire small agencies benefit in the following ways as long as they can keep their upfront costs low.
- They can expand their collection at minimum cost. Distributors need to constantly refresh their content in order to keep their customers interested in using their service.
- They get instant access to a large edited collection of images rather than having to build it one contributor at a time.
- They get access to a new group of contributors, many of whom have been active in the market for some time and they can easily determine who the most productive ones are.
- Having a continuing flow of new images makes them more attractive to the distributors in their network.
- In many cases the supply from existing contributors to the larger established distributors is falling off . Thus, they need to find new contributors. Acquiring other collections is the cheapest way to do this.