September 2001 Selling Stock

Posted on 9/10/2001 by Jim Pickerell | Printable Version | Comments (0)

425

SEPTEMBER 2001 SELLING STOCK




Volume 12, Number 1



©2001 Jim Pickerell - SELLING STOCK is written and
published by Jim
Pickerell six times a year. The annual subscription rate is $120.00 to have the printed
version mailed to you. The on-line version is $100.00 per year. Subscriptions may be
obtained by writing Jim Pickerell, 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-251-0720, fax 301-309-0941, e-mail: jim@chd.com. All rights
are reserved and no information contained herein may be reporduced in any
manner whatsoever without written permission of the editor. Jim Pickerell is also
co-owner of Stock Connection, a stock agency. In addition, he is co-author
with Cheryl Pickerell of Negotiating Stock Photo Prices, a guide to pricing
stock photo usages.

Thought For The Month


"I enjoy having a variety and large selection of companies to do business with. I especially like
companies that specialize in a particular theme. This way I am almost assured to find the image
that I need. Variety and competition are what keeps us all on our toes, and at the cutting edge."


Mark Elias, Elias Graphics, New Jersey


As seen in Graphic Design:USA


NEW PRICING GUIDE




Negotiating Stock Photo Prices Update


The Fifth Edition of Negotiating Stock Photo Prices will be ready for delivery at the beginning
of October.


It is two books in one and contains:


  • Updated prices for hundreds of uses in: print advertising, brochures, magazines,
    newspapers, textbooks, all types of non-publication advertising and a greatly expanded section on
    pricing web and electronic uses.


    It includes negotiating tips and an expanded discussion of strategies and techniques that can be
    used when negotiating Rights Protected uses in today's very competitive market. It encourages
    sellers to consider the unique factors of the specific image and the particular use when they
    are negotiating, in order to produce a price that is a win-win for both the seller and the buyer.


    Using these techniques at Stock Connection the authors had an average price per image licensed of
    $975 in 2000. It is expected that this figure will rise as we begin to employ the new prices in
    the months ahead.


  • The book also contains an indepth discussion of recent trends in the stock photo industry
    and our analysis of where the industry is headed. While the industry has been through some rough
    times we, see some interesting opportunities for many stock photo sellers. We outline what we
    believe you will need to do to profit in the future.


    Special Pre-Publication Discount


    The regular price of this books is $40.00 plus $4.50 p/h in the U.S. and $9.00 for international
    orders. There is a SPECIAL PRE-PUBLICATION DISCOUNT of $30 plus p/h until September 21, 2001.
    Call 301-251-0720. Mail: Jim Pickerell, 110 Frederick Ave., Suite A, Rockville, MD 20850.



    THE FUTURE IS ALAMY.COM



    September 6, 2001 (Story 424) - alamy.com is beginning to look like the leading option
    for photographers to market their images. They plan to launch a major promotional campaign this
    fall to image buyers.


    One of the major advantages of alamy.com is that it comes closer to being a pure technology
    service provider (TSP) than most of the alternatives. Many of the other operations are focused
    toward trying to be full-service stock agencies, rather than just providing technology services
    to all comers -- photographers, stock agencies, editors, etc.


    The alamy.com system is a new model for marketing stock photography. It promises to offer
    photographers much more control over their work, and eliminate many of the disadvantages that
    have been inherent in the stock agency systems up to this time.


    When alamy first announced their plans in the fall of 2000 many photographers had reservations
    for a couple major reasons:


    • They questioned whether alamy.com could supply all the services stock agencies
      presently supply on only 10% of sales.


    • It appeared that the editing of the file would be very loose and many thought that a poorly
      edited file would turn off customers.

    In answer to the first question, alamy never intended to offer ALL the services of stock
    agencies. They are focused on being a supplier of technology services, and that is what the 10%
    covers.


    To understand the true value of this offering you must first accept a few facts:


    • While photographers can build their own searchable web sites, it is very time consuming
      to keep up with the latest developments in technology. It is very easy for a photographer to end
      up spending more time building a web site than taking pictures.


    • There is an advantage for the customer in being able to go to one location to find the
      images offered by many suppliers, rather than having to search through hundreds of different
      sites to find what they need.


    • There is a huge advantage for the customer in being able to use a keyword searchable
      database to search for images rather than try to find images on web sites that are not fully
      keyword searchable.


    • Sites with a large number of images proved economies of scale that are not available to
      small site operators. This enables large site operators to provide a much more efficient service
      at a much lower cost per-image.


    • Sites must be marketed to be effective. The larger the number of images those costs can be
      spread over, the cheaper the cost-per-image.


    • There are advantages in having someone else manage the day-to-day operations of an online
      site.


    • There is an advantage in being able to get started with a relatively low entrance fee,
      rather than having to pay the full costs of setting up a searchable site before starting to offer
      images.


    • The needs of stock photo customers are much different from assignment customers. A personal
      web site may work very well in presenting a portfolio to a targeted group of customers who are
      looking for a photographer with specific skills that they can hire for an assignment, particularly
      if this targeted group is of limited number. The stock photo buyer wants to see a
      cross section of images from a number of photographers on a very specific subject. And that
      subject will change from day to day and job to job. Two totally different types of marketing are
      required to reach people with these different buying needs -- even though they may be exactly the
      same individuals on different days.

    If you accept these statements, then there is a big advantage to having someone who will just
    supply technology services. Based on our analysis and discussion with alamy we believe that once
    they reach a critical mass of imagery they will be able to supply these basic services for 10% of
    revenue.


    However, there are a lot of normal agency services that are not part of alamy.com's core
    business. They will not be providing:


      1 - Assistance in editing


      2 - Scanning


      3 - Keywording

    The way they handle negotiated sales, and the degree to which there will be any negotiating will
    be different from a traditional stock agency. They will not have a worldwide staff of
    negotiators.


    Custom marketing to special user groups is likely to be done by the suppliers rather than
    alamy.com. And they are not set up to provide special research to assist buyers in finding the
    images they need. This may change, but is not in the present plans.


    If photographers don't need these kinds of agency servies, then this is not a problem. But every
    photographer that the services alamy.com offers for their basic fee are not as comprehensive as
    the services of most stock agencies.


    The alamy.com system is designed to overcome the technical and cost hurdles in building a
    comprehensive online presence. This reduces capital investment and enables the photographers to
    focus on their key skills of editing and production.


    New Developments - Solutions for the Editing Problem


    alamy.com is now offering two new features that greatly expands the potential of their site. They
    are Custom Portals for Agencies and Collections.


    Now with Agent 1.0 stock agencies can have their own website address where customers can search,
    purchase and download images. The agency can also handle negotiations directly with their
    customers and all library contact details are displayed on their home page. This custom portal
    shows only the agency's images and nothing else. The agency can then promote that portal to the
    agency's customer base. They pay 10% of sales to alamy.com for managing and maintaining the
    technology, and they focus on what they know best -- the editing, customer relations and
    negotiation of sales. Agencies can also use this tool to create smaller collections of their
    total offering -- much like a catalog -- that show their best images on a particular topic.


    "This is a major breakthrough for the industry. For the first time, agencies can offer their
    customers full e-commerce capability. Agent 1.0 is an effective and secure way for agencies to
    take their first step into the digital future. By having no upfront costs, libraries can also
    invest more in marketing and focus on delivering value to their customers," said James West,
    alamy.com CEO.


    Some of the libraries already using the new service are Arcaid, Garden Picture Library, Steve
    Bloom Images, Image Source, Image Farm, Pictor, and BBCWild. To see an example of a specialized
    agency using this service see www.alamy.com/ARCAID and
    search for "museums".


    One of the major advantages of this strategy is that it is now easy to market custom sections of
    the alamy.com site, as well as the total site. Potentially much more marketing will be done
    because various groups will be doing special interest marketing to special interest buyers.


    Getting Images Into Special Marketing Groups


    Photographers who post their images on alamy.com directly will also benefit from this service. In
    the near future alamy intends to make it possible for agencies with images on the site to connect
    with photographers who have already posted images on the site, and include images (when approved
    by the photographer) in separate agency promotions.


    Here's how that will work. After reviewing images that are available on the main site, the agency
    will make contact with the photographer and indicate that they would like to show some of the
    photographers images as part of their edited group of images, on their portal. If the
    photographer agrees, the images can easily me made available through both the agency's custom
    portal and the main alamy.com portal.


    Of course the agency will take some type of percentage of any sales they make because they are
    going to be spending money promoting their special portal. What this percentage might be is left
    to negotiation between the agency and the photographer. alamy.com is out of the picture at this
    point, but alamy will still be managing the overall portal and setting certain rules for how
    transactions will be handled.


    One of those rules ia that if an agency negotiates a sale, certain specifics about the sale must
    be reported in a online reporting system the day the deal is completed. Eventually (this module
    is not completed yet), the photographers will be able to view this information for all sales of
    their images, and determine on a daily basis which of their images have been licensed in which
    parts of the world.


    This is a total win situation for the photographer. The image remains on the main alamy site. If
    a sale results from a customer coming to the main alamy site (which is promoted separately) the
    photographer gets 90% of the fee minus the 3.5% to 5% charged for either credit card payment of
    invoicing. If the sale results from the customer entering the agency portal the photographer
    gives up an additional percentage, but this is only on those sales that he wouldn't have gotten
    otherwise.


    There is no limit on the number of agency portals on which a photographer can participate. The
    only limiting factor would be if some of the agencies insisted on being the only agency in their
    country representing a particular group of images. Some agencies may choose to operate that way.
    But such a strategy would seem not to be in the best interest of the agency because it would
    limit their offering to their customers. In any event, we expect that in the near future there
    will be plenty of agencies seeking to represent the images photographers have posted on the alamy
    site in certain special markets.


    What About Exclusives?


    If multiple agencies are able to license rights to my images doesn't that eliminate the
    possibility of making big ticket exclusive sales?


    The simple answer is No. If the image is only available on the alamy site, all the sales
    information on that image from all the agencies licensing it will be available on the alamy site.
    Thus, any one of the agencies can, at any time, determine whether there are any restrictions on
    the licensing of that image. In addition, if an exclusive is licensed, a block can be put on the
    licensing for any competing purpose during the time of the exclusive. This feature is not fully
    operating on the Agent 1.0 version, but it is a simple process to set up and is sure to be
    offered in the not to distant future.


    For any who are skeptical, consider what had to happen when an exclusive was licensed through one
    of the many Image Bank offices that used to be located around the world. If a U.S. exclusive was
    licensed in New York there had to be communications with Atlanta, Dallas, Los Angeles, etc. that
    told them they could not license certain uses to that image for a certain period of time. The
    online database just makes this process simpler. It is not important whether all these sales
    offices belong to one organization, or whether they are many organizations so long as the data is
    reported to, and maintained, in one central database.


    Getting New Work Up Quickly


    One advantage for the photographer is that they can put new images up as fast as they want to and
    not have to worry about some agency taking too long to look through their new images. At that
    point the images can at least be seen through alamy's main site. Once the images are on the site
    photographers can contact any custom portals they would like to work with and ask them to take a
    look at these new images. Many of the organizations with custom portals will be happy to accept
    images in this way since they no longer have to incur costs of scanning and keywording.


    New Groupings


    Some photographers want to set up cooperatives. These can be organized around any subject such as
    travel, wildlife, nature, education, aviation, cars, etc. Certain photographers who produce
    several different types of work might want to become part of several cooperatives. One of the
    keys to making such cooperatives successful will be in deciding how to market their custom
    portal, and identifying a particular group of customers. We recommend that photographers not rush
    out to set up a cooperative until they have a solid plan for promoting their portal, and have a
    plan for handling negotiations when the automatic price doesn't work for the customer.


    Choosing Which Groups To Join


    Get a contract, be convinced that the agency will pay you promptly for any sales, understand who
    the agency will be marketing to, get comfortable with their pricing structure and see how this
    type of marketing develops. Also try to get an easy termination clause if the relationship
    doesn't work out as expected. alamy can easily add or remove images from any custom edit group.


    Collections


    alamy.com has also developed a system called "Collections". With this system any editor can come
    onto alamy.com, select a group of images for a special collection, give
    that collection a title, and have it included on the alamy site as part of a list of collections.
    The editor must get permission from each photographer to include their images in the collection
    unless the photographer has given blanket permission to be included.


    When photographers upload images, alamy.com offers them the option of having their images
    included in: all collections, collections with specific approval or no collections. I recommend
    that photographers not give blanket approval and only allow their images to be included in
    collections with their "specific approval" until it becomes clear how well the collections
    strategy will work. One of the problems this raises is that the collector must do the work before
    he knows whether he can use the images in his collection, or not. But, I believe photographers
    should not give up an additional 20% of sales until they get a thorough understanding of how
    collections might be used.


    Let me explain a little more about collections. Suppose an editor searches the alamy.com site for
    "Birds of North America." This person finds that there are too many bird pictures to look through
    and they are not well organized by North America, so the editor decides to produce a
    "Collection." The editor puts together a selection of what he or she thinks are the best North
    American bird pictures and gives this collection a title. If a buyer searches through this
    collection and chooses an image from it the collector gets a percentage of any sale that results.
    If the buyer finds the same image on the general alamy.com site without using the collection the
    collector gets nothing. In this situation it may be beneficial for most photographers to have
    their images included in the collection because it is likely to be a useful aid to buyers looking
    for this type of imagery.


    Keep in mind that while alamy.com has set 20% as the collectors share, that is open to
    negotiation, if you are giving specific approval. Some collectors may accept less, although it is
    hard to see how it will be worth the collectors time to accept much less in most cases. Some
    collectors may want more, and that may be worthwhile if the collector is going to promote the
    collection in some special way and you believe the collection is likely to really produce
    results.


    At the moment, alamy is hand picking collectors to maintain the quality of the editing, and to
    see how the whole collection strategy develops. It is not clear, at this point, that buyers will
    use collections. If that is the case then an editors work could be totally wasted. To really be
    effective, I believe specific collections will need to be promoted in some way, and it is not
    clear exactly how that is going to happen.


    One area where I think collections are likely to be very effective is in textbook research. Many
    textbook researchers spend weeks doing indepth research for the book projects they work on. They
    are often required to provide five or six images for each situation they are trying to
    illustrate. They may pull together hundreds of images on a specific broad book topic. Once the
    researcher has such a group of images for a particular title, if he or she creates a collection
    that will be available for use by the next person working on a similar project, this original
    researcher has the potential of earning additional income from the work already completed. This
    will also be an incentive for researchers to use alamy.com as much as possible.


    Agencies can also use the collection strategy to develop smaller groupings of images on
    particular subjects within the images they are already authorized to represent. This may turn out
    to be one of the most beneficial ways to used the collection tool.


    Editing Solution


    It should be clear that the above initiatives solve the entire editing issue. There is no longer
    reason for concern that alamy.com will become to large and unwieldy. Now there are all types of
    custom edits being marketed separately. When this strategy fully flowers it will offer the best
    of all worlds for photographers. It provides custom edits that can be promoted separately, and a
    huge site that has plenty of depth in lots of subject areas for those who want to spend the time
    to go through it.


    It makes it possible for photographers to get their images into an online database quickly at the
    least cost. And it offers them the possibility of having those images marketed by many different
    marketers using a wide range of marketing strategies.


    It is important to recognize the huge advantage this system offers buyers over the Getty and
    Corbis offerings. No longer will the buyers choice be limited by the vision of a few editors who
    have risen to the top at these large corporations, and who control what will be shown on to all
    buyers.


    Through alamy.com hundreds of different editors will be offering different selections, and
    different perspectives to the limited sections of the market with whom they deal. In this way a
    much more eclectic offering will be made available to the buying public. There may be some
    difficulty for the buyer in learning which custom portal to enter. But that can be solved to a
    great extent through targeted marketing. This is far less of a problem for the buyer than having
    no idea whatsoever where to go to find the image they really need.


    Pricing Uses


    One of our concerns about alamy.com is their pricing structure for uses. Most of the rates are
    based on United Kingdom rates which are often very low when compared with normal U.S. rates. In
    the next version of the software, expected to be launched before the end of the year, stock
    agencies will be able to require that all uses be negotiated. Then they can charge their normal
    rates.


    Based on everything we can determine from the buyers of Rights Protected images in the U.S., we
    feel that requiring buyers to negotiate uses rather than providing them with automatic pricing
    will not inhibit them from using the site.


    Statistics


    Another potential advantage of a large central site are the statistics that can be generated and
    made available to the suppliers. alamy.com promises to provide information in the future as to
    what subjects are being requested and the subjects that are in greatest demand.


    As this industry moves ahead image suppliers will need to be smarter about what they shoot and
    what they post online. They will not be able to afford to spend money to post images that no one
    is interested in buying. They will need regular feedback on what is being requested. The data
    from a large database will be much more useful than the data that can be generated from any
    small, individual photographer site.


    Thanks to Getty and Corbis


    We need to take a moment to thank Getty and Corbis for working through a lot of the problems in
    online selling and pointing the way to what does and doesn't work. Due to the pioneering work
    done by Getty and Corbis customers are now more ready to accept online search and delivery than
    they were a year or two ago. With today's knowledge many of the expensive mistakes and the
    general costs of the past can be avoided.


    Given the huge upfront investment that Getty and Corbis have made to get their operations where
    they are today, they have little alternative but to retain a high percentage of revenue (thus
    keeping the photographer's percentage low) in order to return something to the investors who have
    subsidized their huge start up costs.


    At this particular time a new start up like alamy.com has the benefit of not being saddled with
    huge unnecessary costs, the knowledge of what has already been tried and found not to work well,
    and a technology that is more mature.


    It is unnecessary to spend the kind of money Getty and Corbis have spent to build an efficient
    online operation. Much of the technology is much cheaper now and alamy.com does not have to do
    much of the costly experimentation. It also seems clear from Getty and Corbis' efforts that
    acquiring all the major agencies had not been beneficial for two major reasons:


    • They don't own the product they are selling, the photographers do.

    • They have fired or gotten rid of most of the people with institutional knowledge and good
      customer contacts.

    alamy.com has set up a system that gives the photographers more power. It supports, and takes
    advantage of the existing agency structure, rather than trying to supplant it with something
    totally new. It recognizes the value of many of services to both photographers and customers that
    agencies have always provided and supports those existing practices and operations. If it turns
    out (as I believe it will) that analog files will still be needed to some degree alamy.com can be
    successful and profitable at whatever level the digital search and delivery is needs. With their
    structure Getty and Corbis can only be successful if they can drive everything to digital.

    History will probably prove that Getty and Corbis came into the market too early when there was
    little knowledge and costs were too high. It looks like alamy.com's timing will probably be
    flawless. They got in at a time when the early leaders were beginning to falter, but early enough
    to lead the Second Wave.


    ADVERTISING SPENDING DOWN


    According to Publishers Information Bureau total magazine advertising pages for February 2001
    were down 9.7 percent from the same period in 2000.

    News magazines have taken a particularly hard hit. U.S. News & World Report ran 26 ad pages in
    its March 19, 2001 issue -- a drop of 51% from the 48 pages it ran on March 31, 2000. So far this
    year U.S. News ad pages are down 15%; Time magazine, 11%; and Newsweek, 26%.

    Analysts, advertising buyers and media executives say the rapid drop off of in advertising
    spending reminds them of the early 1990's, the worst advertising recession since World War II.
    Technology advertising in magazines was down 21% in February and retail advertising was down 34%.

    Optimists point out that we're in a period of greatly compressed economic cycles. The bad times
    come very fast, but the good times can return just as fast. But with sales falling and companies
    pressed to make their numbers on Wall Street they cut where it is easiest which is often
    advertising. Advertisers in need of cash are not buying packages for they year as they do in the
    good years.


    GETTY SALES DOWN AGAIN


    July 26, 2001 (Story 420) - Getty Images Inc. reported gross sales of $115.9 million for
    the 2nd Quarter of 2001, down from $124 million in the 1st quarter. On April 25th, CEO Jonathan
    Klein had said that Getty expected sales for the quarter to be between $120 and $130 million.

    In his conference call with investment analysts, when the company pre-announced earlier in July,
    Klein said this was the result of continued weakness in the U.S. market and exacerbated by a
    sharp deterioration in the European market. He indicated that the results were, "a disappointment
    to us and very unexpected," and attributed the falloff to a "massive turn in the last half of
    June, a period that has been traditionally strong."

    At the end of June call volumes went down, searches on their web site went down and the requests
    for analog sales also fell off. The Getty sales staff reported that customers have become more
    price conscious, have to get more approvals, and are cancelling projects at a more frequent rate.
    Customers pick less expensive licensing options and license fewer exclusives than had been the
    case previously, and they are using fewer Rights Protected images and laying off some of their
    art buyers.

    Klein had no answer for analysts as to why the falloff was so sudden but said that the end of
    June is traditionally a time when customers try to spend their quarterly budget.

    Based of their customer research, it seems that buyers either have money to spend or they don't.
    Project are either being done, or they are totally cancelled. Customers are not trying to figure
    out how to do the same number of projects less expensively.

    It's been over a year since Getty made it's last major acquisition and their quarterly sales have
    been:












    2nd QT 2000  

    3rd QT 2000  

    4th QT 2000  

    1st QT 2001  

    2nd QT 2001  

    $123.6 million  

    $127 million  

    $129.4 million  

    $124 million  

    $115 million  




    They expect sales to continue to fall off for the rest of the year and estimate that sales in
    both the 3rd and 4th quarters will be between $100 and $110 million. If sales hit the middle
    level of those estimates gross sales for the year will be approximately $449 million, down from
    $484.8 for 2000. This would be a drop of at least 7% if we don't factor in that Getty didn't own
    VCG in the 1st quarter of 2000 and that they did own Art.com which they sold at a loss recently.

    E-Commerce Sales


    E-commerce revenues rose from $52.6 million in the 1st quarter to $52.9 million in the 2nd
    quarter. Because overall sales were down the percent of total revenue was 46% for Q2 compared
    with 42% for Q1 and 31% in the second quarter of 2000. Despite the relatively slow growth in
    e-commerce sales, Klein still expects all North American sales to be generated on the web in less
    than three years.

    Reducing Staff

    Getty announced in early July that they would cut their worldwide staff from 2300 to 2000 by the
    end of the year. (See the next story for the effects of some of those cuts.) They expect to save
    $15 million to $20 million annually as a result of this reduction. Klein indicated that due to
    the increased efficiency of Getty's e-commerce marketing system it is unlikely that it will be
    necessary to replace these people when the economy turns around.

    No Lowering Of Prices


    Klein said that despite the falloff in sales volume, they have not seen a lowering of prices.
    Price increases instituted last year are holding. Customers are not moving to Royalty Free to
    save money, as some had expected in a down economy. PhotoDisc showed some growth, but less than
    double-digit. PhotoDisc and Eyewire have seen single images sales online "grow significantly."

    But, since single images sell for much less than discs, it is possible that Getty is experiencing
    a growth in transactions without a corresponding growth in revenue. This was not confirmed by
    Klein. Some RF customers may be making more use of the discs they bought a year or two ago.

    Stone and The Image Bank sales had moderate double-digit growth compared with a year ago.
    However, these improvement were not sufficient enough to offset weakness elsewhere including a
    sharp decline in VCG sales (FPG, Telegraph Colour Library, PIX, Bavaria). Klein said progress at
    FPG has been brought to a halt and more "remedial therapy" is needed.

    The VCG operations in France and Germany (PIX and Bavaria) continue to struggle. Europe
    represents more than 35% of Getty's sales. A new full e-commerce web site is due for worldwide
    launch in October. Today Germany and France can not do full e-commerce on the Getty web site, or
    search in their own language. Klein expects a growth in sales in Europe after the launch of the
    new site.

    Klein also said that, "now is not the time to contemplate further price increase."


    Photographers Contracts

    Photographers had an August 1st deadline for signing their new contracts. More than 500 of the
    leading photographers from Stone, TIB and VCG, representing over $80 million in annual sales for
    Getty, have been rebelling against the terms in this contract since it was introduced in March.
    On July 26th Klein told investors, "We have seen an acceleration in the return of contracts. We
    already have more than enough high quality photographers with signed contracts to enable us to
    get the imagery our clients need."

    Despite this statement, five days later, Klein extended the deadline to August 31st and the
    deadline has since been extended again to September 14th.

    There are a number of issues in this difficult to understand contract that still upset many
    photographers, but the latest deal breaker is the liability issue. Many photographers who have no
    intent of supplying Getty with new images were prepared to sign the contract as a way of
    protecting their income flow from the images Getty has already posted online. However, many have
    decided that the liability risk this contract presents are too great.

    Getty's solution to this problem is for the photographers to purchase "errors and omissions"
    liability insurance to protect themselves. However, due to the unique characteristics of the
    contract, and the risks it lays on the photographers, most insurance companies were unwilling to
    write such insurance.

    Getty does not want to put any restrictions on how customers may use the images they purchase
    through automatic online transactions, but recognizing the potential liability Getty wants to lay
    this risk off on someone. The photographers were the convenient fall guy.

    Since early August Getty has been scrambling to find an insurance carrier who will write a policy
    for the photographers. To change the contract, or for Getty to assume some risk, appears not to
    be an option.

    Assuming something is worked out on the insurance issue, there is still a major question as to
    whether photographers who sign this image-exclusive contract will offer any new images to Getty.
    Many will sign only to keep the images already in the system active, but they are fed up with
    Getty and are rapidly seeking other ways to market their images.

    The second most important issue at the moment is the audit clause. The way it is structured it
    makes it almost impossible for an individual photographer to ever audit Getty. And yet many
    photographers are beginning to have great concerns as to whether the accounting software is
    working properly and whether they are being paid for all uses of their images.

    It will not be surprising if their is another extension of the contract deadline beyond September
    14th. And, whatever the deadline, Getty has not seen the end of their problems with their
    suppliers.


    Looking Ahead

    In the conference call with investors Klein said, "customers are in a recessionary condition." He
    added, "We continue to be cautious about the challenging U.S. and European economic environments
    and their impact on our sales, we remain positive about our business and its ability to weather
    the downturn and emerge even stronger. Media and advertising are an integral part of today's
    economy and when our customers have more money to spend, we will be in an excellent position to
    continue to grow, thanks to our market-leading products, large customer base and global
    presence."

    Consolidation

    Another thing that may be affecting Getty's sales is the combining of three large similar
    collections -- Stone, TIB and FPG. This may be resulting in lower sales overall for these brands.
    Previously, when these brands were competing head-to-head, they may have been providing the
    clients with a larger selection and more choice and thus making more sales. Now, to get that
    extra choice, after reviewing the Getty selection, the clients may be going elsewhere.

    There is some indication that Getty's major competitors are seeing less of a falloff than is the
    case at Getty.

    From a cost point of view, Getty has needed to limit the selection and variety on the images they
    offer. The question, which will only be answered over time, is will buyers accept one of the
    choices Getty offers, or will they continue their shopping for the image they really want by
    going somewhere else.

    The net lost for the second quarter was $23.7 million or $.46 a share, compared with $30.3
    million, or $.62 a share a year ago. EBITDA, or earnings before interest, tax, depreciation and
    amortization, was $22.6 million, up slightly from a year earlier. Cash flow per share rose to
    $.36 from $.33 a year earlier.


    GETTY CLOSES SCANNING


    Seattle Scanning Operation Shut Down

    August 13, 2001 (Story 421) - Getty has laid off most of the people in PhotoDisc who were
    charged with scanning and cleanup of new images. This department in Seattle was the only place in
    the U.S. where major scanning was being carried out.

    The official explanation from Getty Public Relations is, "We are integrating our scanning labs
    and transferring that function to our London facility. All other production functions and the
    staff that perform them remain in Seattle." PR also said, "None of the staffing reductions impact
    our ability to serve our customers or our potential to grow."

    Seattle was doing around 2700 scans a month unless they had a big batch of clipping paths which
    reduced output. Seattle handled clipping path work for all brands, worldwide.

    No other scanning was being done in the U.S. When Getty bought a new company they closed down the
    scanning operation. Eyewire in Calgary, Canada had a major scanning operation when they were
    purchased, but it is our understanding that operation was closed down when Getty started moving
    the Eyewire operation to Seattle.

    Sources tell us that previous to the recent firings Seattle had: 4 scanner operators, 3 scanner
    assistants, 7 retouchers, 1 manager, 1 director, 3 editors, 4 keyworders, 1 art director and 4
    people mastering.

    All that are left are: 2 retouchers doing clipping paths and 4 people mastering. Presumably, this
    work load will be picked up by London.

    In addition to all PhotoDisc scans, this department did most of the re-scanning of the TIB
    images. The majority of London's work has been for Stone and Hulton. London also picked up some
    of the extra from TIB, VCG and Allsport, all of which had no separate production facilities.

    We have been unable to find out how many staff doing scanning and retouching are in the London
    department. One photographer who has shot for both PhotoDisc and Stone has pointed out that his
    PhotoDisc images always got up online very quickly after they were shot. His work for Stone has
    taken months, if not more than a year, after he shot it to get online.

    Sources tell me that London has always complained that Seattle was not efficient enough. Seattle
    says London hasn't maintained their high quality standards. I understand London makes a lot of
    scans from dupes. Seattle insisted on scanning originals. London says they can do 40 scans
    per-person per-shift. The person doing the scanning does all the retouching. Seattle had assigned
    different people to scanning and retouching in order to maintain a high level of quality.

    Keep in mind that in the drum scanning process it is necessary to spend a lot of time carefully
    putting the images on the drum and in cleaning the oil off the images after the scanning process
    is finished. It is hard to see how a person involved in this process can jump back and forth to
    retouching and do either job effectively. However, it is not clear how London manages its work
    flow.

    It appears that the annual salaries of the people fired were in the range of $30,000 to $45,000.
    The two managers may have received more. If the intention is to replace these people in the UK,
    salaries there seem to be somewhat lower, but not much. Thus, it seems unlikely that there will
    be much, if any, of a cost savings, if Getty plans to continue scanning the same number of images
    in one location that they were formerly doing in two.

    My Observations

    It is very likely that, regardless of anything the new photographer contract might indicate,
    fewer new images will be scanned and uploaded to the site than has been the case in the last year
    or so. Photographers who have been hoping that more of their old images will be put on the site
    once the contract is signed should temper their optimism.


    Photographers who want to get new images online should probably deliver images scanned to Getty's
    specifications rather than just supply film.

    Given the reduced staff it looks like most of the re-scanning of TIB images will stop. The chance
    that many more of the old FPG or VCG images will get scanned in the near future seems slim.

    Getty may have 2,000 employees, but one small area of operations can have a dramatic effect on
    the fortunes of the entire company. If they were manufacturing cars and suddenly there was no way
    to get starter motors, the whole assembly line would be dead.

    If Getty is going to continue to scan as many images as they have in the past then they have
    probably increased their costs in the short term rather than decreasing them -- given the cost of
    severance and re-training. If the purpose of this move was to save money then their intent has
    got to be to scan fewer images.

    Getty may have determined that they have more than enough images in their already scanned
    database to meet customer needs. Thus it wastes resources to continue to scan new images. If this
    is the decision, then Getty doesn't need as many photographers shooting new images.

    The conundrum here is that if they don't need new images why is Klein putting forth extra effort
    to get SAA photographers to sign the new contract? Could it be that the strategy is not to get
    new images, but to hold out hope to the SAA photographers, so they will not move to offer their
    work to the competition?


  • Copyright © 2001 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 301-251-0720, 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.  

    Comments

    Be the first to comment below.

    Post Comment

    You must log in to post comments.

    Stay Connected

    Sign up to receive our FREE weekly email listing new stories posted.

    Follow Us

    Free Stuff

    Recent Stories – Summer 2016
    If you’ve been shooting all summer and haven’t had time to keep up with your reading here are links to a few stories you might want to check out as we move into the fall. To begin, be sure to complet...
    Read More
    Corbis Acquisition by VCG/Getty Images
    This story provides links to several stories that relate to the Visual China Group (VCG) acquisition of Corbis and the role Getty Images has been assigned in the transfer of Corbis assets to the Gett...
    Read More
    Finding The Right Image
    Many think search will be solved with better Metadata. While metadata is important, there are limits to how far it can take the customer toward finding the right piece of content. This story provides...
    Read More
    Where Is The Stock Photo Industry Headed?
    For new readers, or those who may have missed some of what I have written over the last few months, the following are a list of stories worth looking at to get a sense of where the industry is headed.
    Read More
    Photography As A Career
    It’s that time of year when high school seniors are waiting for college acceptance letters and thinking about future careers. If you know someone who is thinking about photography as a career you mig...
    Read More
    2014 Stories You May Have Missed
    For many the end of the year is a time to review past experiences and consider whether it makes sense to chart a new course in the year ahead. Stock photography has changed dramatically for professio...
    Read More
    More Stories In 2014 You May Have Missed
    Every so often I put together a list of the most important stories we’ve published in the recent past. If you are engaged in the business of stock photography the links below are to stories that we’v...
    Read More
    Getty: A Three Month Review
    In all the excitement about 35 million FREE images it is worth looking back at some of things that have been happening at Getty Images in the last three months. After watching revenue decline for the...
    Read More
    State Of Stock Photo Industry: 2013
    If you’re looking for an overview of the state of the stock photo industry as of October 2013 the stories listed below are a good place to start. Regular readers of Selling-Stock will have seen all t...
    Read More
    Education Market Shifts To Digital
    If supplying pictures for educational use is a significant part of your business plan you need to be aware of how the market is trending toward digital delivery and how that is likely to affect the p...
    Read More

    More from Free Stuff