Strategy for Use-Based Pricing Misunderstood

Posted on 8/5/2010 by Jim Pickerell | Printable Version | Comments (3)

In May, we published “Floor Prices For Editorial Use.” It was preceded by a March article on making “All Images Available to All Customers.” Recently, I was interviewed by Photonetcast, and it became clear that my position on the best strategy for licensing rights to images is misunderstood, so it is time for another explanation. Granted, my position is radical, so bear with me.

I believe that:

  1. Pricing based on how the image will be used is a better strategy than pricing based on file size.
  2. The industry should do away with the term “rights-managed,” because it leads us in counter productive directions. It should possibly be replaced with a designation of UP for use pricing.
  3. All stock image uses should be licensed non-exclusively. For the most part, we should do away with the concept of exclusive licensing of stills. (While this is tantamount to heresy for many in the industry, I’ll explain the logic shortly.)
  4. Photographers interested in maximizing their earnings from the images they produce should not establish floor prices below which their images cannot be licensed or attempt to dictate such prices to their agents. Instead, they should be willing to license use of their images to anyone, for any purpose (including personal use), so long as the compensation is proportionate to the value received by the customer from the use of the image.

Eliminate exclusive licenses

Why limit stock sales to non-exclusive only? Because in the long run, the vast majority of photographers will make more money, particularly if the non-exclusive uses are priced based on how the image is used and not on file size. Clearly, a very small percentage of rights-managed images are licensed for exclusive or restricted uses. The vast majority of all images are licensed under non-exclusive royalty-free models (traditionally priced and microstock).

There just are not that many customers who want to license exclusive rights to stock images. If customers want exclusivity, they tend to have the image shot specifically for their purposes. There are people who win the lottery, but most do not. The same goes for photographers waiting for that big exclusive sale. The better bet for a photographer is to invest his or her time and money in something that will generate frequent small amounts of money rather than hoping for the blockbuster.

Remember that less than l% of all the images licensed annually are rights-managed, and way less than 1% of all these rights-managed licenses are for exclusive rights. For nearly all photographers, these odds make gambling on making an exclusive sale simply not worth it.

There are regular stories on other sites where photographers say art directors “ought to” want to buy exclusive rights so the same picture does not end up being used by two competing clients. But art directors do not seem to do what photographers would like. For the most part, customers and art directors know the pictures in their materials are royalty-free and non-exclusive but have decided that the risk of using them is so minimal that they are willing to take it, rather than pay a significantly higher fee for exclusive rights.

There are a handful—literally a handful—of photographers in the world whose work is not only unique (being unique alone does not create value) but is also in such demand that the photographer can benefit from being able to control and limit every use in order to be able to license exclusive uses on the off chance that someone is interested in using one of the thousands he produces. Separate agencies or collections within an agency should handle the work of these photographers, while not forcing the rest of us to operate our businesses for the benefit of these few.

Use-based pricing

Rights-managed images are available for licensing for non-exclusive use, but in order to tightly control each use so the image can be made available for exclusive use down the road it has been necessary to make the licensing of such images much more complicated than necessary to maximize revenue. As a result, the number of potential customers has been severely limited.

This does not mean that microstock is the perfect solution because it prices at levels that everyone can afford. Microstock fails by not charging enough for commercial uses, where customers receive a much greater benefit and value from using images than is the case of the smallest user. What we need is a hybrid or the two systems.

Another limiting factor is the attitude of many photographers. If their image is used for a low price for something like a church brochure or a PowerPoint presentation in a classroom, they believe such a use has somehow depreciated the value of the image and their value as a photographer. With this attitude, photographers will not earn much from stock; they may have a great set of images but very few people will ever know they exist.

This brochure outlines one example of a pricing model that would deal with this issue. These prices are not fixed in stone, and the whole concept is certainly open to modification, but the one underlying principle is that each image should be available to all customers, no matter how small or large, and that the price for the use should be based on the value the customer receives.

Floor pricing

Floor Prices For Editorial Use” intended to address the trend among agencies to license rights for editorial usage for very low prices. It is my hope that all sellers would decide not to sell images for editorial uses below a certain price, no matter how great a volume of images a given customer chooses to purchase. I realize that this is improbable—agencies are unlikely to agree to any minimum—but at least it is an issue that should be discussed.

Agents should recognize that they are not helping themselves by continually lowering prices, and photographers should maintain a dialogue with their agents in an attempt to convince them that some floor pricing, based on usage, is good for everyone. This is not to say that there should not be discounts for customers who purchase lots of images, but in nearly every case of discounting the photographer loses, because the individual photographer is still selling a single image and doesn’t benefit from the volume sale.

At some point, when this continues to happen, photographers will decide that it is not worth the trouble to continue to produce. Many photographers have already passed that point. In fact, for many it is not worth the additional effort required to submit an image that has been produced at the expense of someone else. Thus, in the long range, dramatic discounting does not even benefit the agency, because the agency will end up with no product to sell. Agencies need to set some minimums if they want a continued supply of product, but this seems to be something they are unable to do or understand.

When individual photographers attempt to dictate a price below which their images cannot be licensed, all they do is hurt themselves. They limit the pool of potential customers who might consider using their images. The agency will still sell the work of other photographers to customers who cannot afford the work of the high-priced photographer. These customers might have preferred the photographer’s work. If the lower price was a fair price based on the use, all the photographer did was lose money.

Changing market

Part of the reason that we need a change in strategy is that the market has changed. It used to be that the only customers for professional photography were professional users who created products that were sold to consumers. We are moving very rapidly into an era where the professional photographer has the opportunity to deal directly with individual consumers. The photographer is no longer dependent on the professional buyers alone. In fact, the group of customers that used to be defined as professional buyers constitutes a very small percentage of today’s total users. That does not mean the photographer should give his work away to professional buyers at the same price he charges small business or individual consumers, but it does mean there is a need for a new approach to the market.

Copyright © 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, 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:  


  • Mark Turner Posted Aug 5, 2010
    While your proposal to eliminate exclusive licenses is a bit radical, it's one I can live with. I've sold exactly one exclusive license since 1995 and that was at the height of the internet boom.

    What particularly concerns me is the low-price part of the market. It costs me just as much to create, market, and deliver an image for a $10, $100, or $1000 license fee. I just don't want to bother with the $10 fees because my time is worth more than that. I license images direct from my office and through three agencies. Those agencies would make more money, along with me, if they said "no" to very low cost licenses. I wonder how they can even cover their overhead on some of the licenses that appear on my statements. What's the transaction cost for online delivery of an image when the fee collected is less than $5?

  • John Harris Posted Aug 6, 2010
    Quite so Mark- I'm not at all convinced that the Wal-Marts of photography have themselves made money out of "buying market share" with ever lowering prices. The business model undermines the content.

  • Jim Pickerell Posted Aug 6, 2010
    Mark and John you're not looking at the statistics. There is nothing wrong with the low priced segment if you sell enough volume at a low enough transaction cost to make up for it. The Internet and web transactions have dramatically reduced transaction costs to the point that they are negligible.

    As Tom Grill says in his article "50 X $200 = 200 X $50" ( What he should have said is "20 X $250 = 1,000 X $5" because that is closer to the actual sales ratios when you compare moderately successful RM shooters with moderately successful microstock shooters today.

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