Speedpix

Posted on 10/15/1999 by Jim Pickerell | Printable Version | Comments (0)

256

SPEEDPIX


October 15, 1999

In an effort to try to give photographers an online option to the current dominance of

Internet selling by the big agencies, Speedpix, led by United Kingdom photographer Mike

Morrison and international software consultant Joe Clarke, expects to launch a new

on-line site with approximately 5,000 images in February 2000.

This agency guarantees photographers 65% of gross sales if they let Speedpix handle

their images exclusively, or 55% on a non-exclusive basis. It is important to note that

these percentages are of the true gross sale because there will be no sub-agents

involved to take percentages off the top. Speedpix will be a fully digital agency. Their

vision is to sell directly all over the world so there will never be a sub-agent

discount taken off the top before the photographer's percentage is calculated.

Their initial search engine will be in English only, however, they are working on a German

version and expect to have it operational shortly after launch.

They plan to make all sales through secure on-line credit card transactions so the

payments will be immediate with no billing and collection problems.

Based on our experience we think the payment and collection strategy will present some

problems in the near term. While it is certainly easy for online users to pay for

services with a credit card, we believe most photo buyers in the U.S. still prefer to be

billed. Companies like Getty Images are claiming that 25% of their sales last

quarter were "digital sales", but that does not mean that all these sales were full e-commerce

sales.

It is clear that 25% of the Getty clients use digital search to find the image they want

to use. However, Getty does not supply statistics on the percentage of sales that are

billed rather than using automatic payment. Likewise, they don't report the number of

"digital sales" where fulfillment is by film rather than a digital file. Granted the

industry is moving in the direction of full digital and Jonathan Klein, CEO of Getty

Images, predicts the industry will be fully digital in three years. Nevertheless, we

believe Speedpix may be ahead of the curve on this payment issue.

Speedpix does plan to handle some negotiated sales for multiple insertions and exclusive

uses, but it appears that one reason they can offer a higher percentage is that they

do not intend to have a lot of billing and collection

costs. We believe in the near term this strategy will limit the number of potential

buyers willing to work with Speedpix.

Costs of Supplying Images

Speedpix will charge photographers $50 per image for the initial two years after launch

and an additional $5.00 per image per year to be deducted from sales after the initial two

year period. Of the $50 only half must be paid up front. The other $25 will be deducted from

sales.

This second $25 will be recovered by retaining 50% of the photographer's monthly

commissions until the outstanding balance is paid off. The photographer will be obligated

to eventually pay a total of $50 for every image placed on the site whether that image

sells or not.

The keywording charges are included in this fee, but the photographer must also pay

scanning charges or supply an acceptable 30MB file. Speedpix has worked out an

arrangement with a scanning service in London that offers a very reasonable fee for a 30MB

scan. That charge will be approximately $4.50 per image plus shipping and handling charges.

Speedpix intends to store only digital files. Originals will be returned to the

photographer after scanning. They feel that only rarely will customers ask for a file

larger than 30MB. In most cases their first step will be to re-size the file in Live

Picture and apply judicious sharpening in the lightness channel of Lab mode. Only as a

last resort will they attempt to obtain film to deliver to the client.

From a pure quality point of view, they are probably right that this is a perfectly

satisfactory procedure for supplying the client with a usable file. However, this doesn't

take into account the fact that many print users still want film, even when they use a

digital catalog to locate the image.

Pricing of Usage

Potentially the biggest problem with Speedpix is their pricing strategy. They emphasize

that they want a very simplified pricing structure that makes it easy for the user. They

will charge on a per usage basis and say they will have a "comprehensive and easy to use

pricing engine". The following sample price schedule can also be found on their site at

www.speedpix.com.

  Web Use - 700K file   

6 Months   

12 Months   

  Banner or Front Page   

200   

300   

  Other Pages   

100   

150   

  Non Promotional Use   

700K   

7MB   

30MB   

     

100   

180   

300   

  Promotional Use   

     

     

     

  Print Run   

700K   

7MB   

30MB   

  Up to 5,000   

120   

250   

400   

  5,001 to 500,000   

150   

400   

700   

  500,001 to 3 Million   

200   

600   

1100   

  over 3 Million   

240   

800   

1400   

Speedpix arrived at their pricing structure by first analyzing sales figures from

three major libraries and one minor one. A larger percentage of the sales

analyzed were from the U.S. and Germany than from the UK. They then looked

at the low prices charged by RF and set their prices at a point between the two.

Finally, in order to keep the licensing process simple, they have established prices based on

file size rather than size of usage and provided limited circulation breakdowns.

For the non-promotional uses, which includes all editorial uses, they will be adding

a print run breakdown.

Morrison indicates that if these prices seem low, it is because

prices in the industry have been falling in the last few years due

to the pressures of RF.

In our research in the U.S. market we find that prices charged by

the major agencies have been dropping much faster than those of

many of the minor agencies. Many smaller agencies have refused to

play the "match price" game with RF or the larger agencies and have

been able to maintain reasonable prices for usages they license. They have also

discovered that even with higher prices their sales volumes don't tend to

fall off any faster than seems to be the case with many of the

giant agencies.

Photographers need to carefully examine the pricing structure and

proposed pricing philosophy of any agency they join. One basis for

comparison of online prices is to go to PictureQuest and price a

variety of uses. Keep in mind that on this site each agency sets

its own prices for most uses. It is advisable to check the price on images

from different agencies. The PictureQuest system is much more

complex than that proposed by Speedpix, and yet it has a track

record of working very well. Consider whether total simplicity is

an absolute necessity when using the Internet to make sales.

We believe there is still value based on size of usage and and circulation rather than the

size of file delivered. On PictureQuest certain digital uses are priced based on file size

but most print usages are priced based on size of usage and print run. I can't speak

for other agencies but currently Stock Connections' average gross sale for print usages

on PNI is $699 per usage. It is hard to imagine Speedpix's averages being anywhere

close to that given the proposed schedules.

While selling by file size is common in the on-line market, it can produce some disturbing

uses. Many users have found ways to get by with small files for fairly large

reproduction. In some cases they use interpolation. If the image is graphic without a

lot of subtle detail or color changes, art directors can often get very satisfactory

results with a small file. In some cases pixelization is used as a design technique

which enables the art director to use smaller files.

On Web uses there should be a distinction between advertising and editorial uses. Banners

are advertising uses and should command a higher price than other advertising uses. Not

only are there front page uses, but the way Web sites are being designed there are a lot

of lead page uses to various sections that are analogous to "chapter openers" in books.

These should command higher prices than pictures buried deeper in a site. To

fail to ask for different prices for such variations

brings the whole pricing structure closer to RF, regardless of what the strategy is called.

It is important for photographers to recognize that the difference between Royalty Free

and Rights Protected is not so much that RF users can use the same image over and over on

"many different projects", but that they get a lot of usage on a "single project" for one

very low price. The RF producers acknowledge that many disc buyers buy a disc with 100

images -- only use one -- and never use that disc again.

Photographers need to be concerned about the price clients will pay for a full page use or

a large circulations. More money is lost by allowing large uses for too low a price than

by allowing a single user to use the same image in multiple projects.

Simplicity

Speedpix believes that in order for an internet site to be successful the pricing structure

must be extremely simple and the vast majority of the transactions must be fully automatic.

Mike Morrison says, "We will not have local agents anywhere else in cyber space. This is

an internet based service. The concept of needing local agents completely reverses the

advantages of dealing in this way."

At Selling Stock, we believe that the Internet can provide efficiencies and be used

effectively in ways that

are not 100% E-commerce. We believe there remains a place for local agents in such a

strategy, although the services provided by the local agent may be very different from

the services traditionally supplied. The percentages the agent receives for this new

package of services may be much less than what agents have expected in the past, but

because their cost will be less their profit margins could be as good or better.

We believe that some of the models of how the Internet can be used effectively without

being 100% E-commerce are: PictureQuest.com, Workbook.com, Thestockmarket.com, The Image

Bank's private online services, and to a great extent the services being supplied by Getty

Images.

Alternatives

While we have outlined a few concerns with Speedpix, it still may be the best option

photographers have to get their images seen. This may particularly be true if their

images are of a type and style that are more frequently used in Europe than the U.S.

To make a reasonable judgement we need to compare Speedpix with other available options

such as PictureQuest operated by PNI in the U.S.

Most photographers should be looking at a non-exclusive arrangement with any marketer who

is 100% into online marketing. At this stage in the development of the technology it may

not be wise to limit all your marketing to online. Other types of marketing need to be

used simultaneously to maximize sales from your images. Therefore, I will base my

comparisons on the 55% rate.

Speedpix is an agency. The photographer's images are edited and not every image submitted

is placed on the Speedpix site. Photographers interested in placing images on PNI have 65

agencies to choose from. The big question is which agency will pick the most of the

photographer's images?

PNI has over 400,000 images on their site so the client gets a much broader selection

than going to Speedpix's site with 5,000 images. PNI has been selling pictures online for

several years and has over 50,000 registered users. Client can get film from PNI

agencies if they choose. Assuming the client knows about both PictureQuest and Speedpix,

which site are they likely to go to first?

The price photographers will pay to get their images on PNI and the percentage of the

sale they will receive, varies from agency to agency. In some cases the photographer's

will pay nothing to get their images up online, but will only get 30% of the gross sale.

With Stock Connection the photographer pays a one-time fee of $23 per image and the image

may stay up forever with no additional cost. This fee includes the cost of scanning as

well as keywording. PNI handles collection for all sales and takes 40% off the top.

Stock Connection takes 35% of the remaining money so the effective rate to the

photographer is 39% of the gross sale. That is certainly less than 55%, but the issue

is whether the sales volume generated by Speedpix will match the volume likely from PNI.

Currently PNI makes almost no sales outside North America but photographers should

keep in mind that Getty, who is aggressively trying to sell everywhere in the world, says

that 85% of their digital sales in the first six months of 1999 were in North America.

Speedpix may generate more sales in Europe than PNI, but what about their volume in the

U.S.?

Comparative Statistics

Recently, in another story I published some figures on average return to photographer from

different online marketing operations. These figures are worth repeating.

Several Corbis photographers indicate that their share of sales should be between $3.00

and $4.00 per image on-line for 1999. This is up significantly from previous years. On

the other hand, Stock Connection photographers who have images on PNI will probably earn in

excess of $20 per image per year for each image they have on PNI for the whole of 1999.

It should also be noted that only a little more than 1% of the images on PNI are Stock

Connection images. We have no way of knowing whether our returns are better or worse than

the other agencies who obviously represent the vast majority of the images.

Stock Connection photographers also have images on Workbook.com. In the past year our

photographers have received, on average, a little over $15 per image, for that year for

each image they have on this site. Approximately 5% of the images on the site belong to

Stock Connection photographers. We do not know the average return per image for other

agencies.

By way of comparison it is also worth noting what ASMP's MPCA on-line service is

producing. In March of this year Dick Weisgrau told us that MPCA has about 600 qualified

buyers who can view the site and that gross sales are in the range of $60,000 per year.

This means that MPCA photographers are receiving, on average, about $.70 per year, per

image on file.



Copyright © 1999 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.  

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