According to a document filed with Companies House in the U.K. (see
here) it appears that Rex Features Limited (owned by Shutterstock) lent
Silverhub Media the money necessary to purchase
Splash. In return Rex Features has received very extensive control over the activities of Silverhub with regard to certain unspecified assets.
The amount of the loan is not specified and it is unclear if loans from Shutterstock are Silverhub’s primary, or only, source of funding.
About a month ago
Shutterstock announced that it had signed an exclusive deal to distribute all of Silverhub’s material from Action Press and The Picture Library. Shutterstock acquired Rex Features at the beginning of 2015 and since then has been trying to expand its reach on the editorial side of the business.
There are rumors that Gary Shenk, CEO of The Branded Entertainment Network, (formerly Corbis), wanted Splash to go to Shutterstock as a way of frustrating the plans of Kevin Smith who started
The Mega Agency recently. Smith founded Splash and
sold it to Corbis in 2011. Later, Smith and some key management staff left Corbis. Industry sources believe that Splash revenue began to decline as a result of Smith’s departure and this didn’t make Shenk happy.
In January 2016 the bulk of Corbis was
sold to Visual China Group in a deal that turned over all content acquisition, as well as sales outside of China, to Getty Images.
At the time the Corbis Entertainment business was retained by Corbis and rebranded the
Branded Entertainment Network (BEN). Splash was included in this deal. Indications at that time were that Gary Shenk, CEO of Corbis and BEN, wanted to continue operating the editorial business. However, now, less than a year later, Splash is effectively part of Shutterstock (via Rex and Silverhub).
Since Shutterstock gets “exclusive worldwide” rights to the Silverhub collection it would appear that Silverhub will not be making any direct sales to customers, or through other distributors.
Silverhub’s role in this arrangement is unclear, but it may be little more than to collect images from creators.
Clearly,
Silverhub’s management team has a lot more experience and credibility on the editorial side of the business than anyone on the Shutterstock team.
It is unclear why Shutterstock didn’t purchase Splash directly from BEN rather than go through this convoluted process.
Splits
In this arrangement it is also unclear how royalty splits to the photographers might be calculated. Since Shutterstock has “exclusive worldwide” rights to the content it is assumed that all dealings with customers will be negotiated by Shutterstock and all payments will go to Shutterstock initially. Presumably, Shutterstock takes a percentage off the top and remits the balance to Silverhub. Silverhub will then deduct the percentage share, it has negotiated with the photographer and pay the photographer the remaining portion.
If Splash, Action Press and The Picture Library continue to be operated as separate companies there may be additional cuts if these three operations are paid a percentage of what Silverhub receives. In that case the managers of Splash, Action Press or The Picture Library will pay a royalty share to the image creators based on the amount they actually receive from Silverhub.
Here’s how the numbers might work. Shutterstock tells investors that they retain 70% of monies collected and pay out 30% to the creator, in this case Silverhub. Silverhub may pay out 50% of what it receives so on a $100 sale, Silverhub receives $30 from Shutterstock and pays out $15 to the creator. If there is a fourth cut and the creator receives 50% of what Splash, Action Press or The Picture Library receives then the creator would receive $7.50 from a $100 sale.
On the other hand, all this may be moot. I’m told that a significant portions of the images Splash represents are paparazzi photos of high profile athletes, entertainers, politicians and other celebrities. In this segment of the industry it is standard for the image creator to negotiate a flat fee with the picture editor at the the time the images are presented. At that point the photographer gets his money and knows exactly how much he will receive for his efforts. If this is the way all the photographers are paid, then the whole royalty concept is irrelevant.