If the figures in “Getty Images: Why Are Photographer Revenues Dropping?” are reasonably representative, there are at least two major and closely related issues to be considered: the downward trend of royalty-free pricing and oversupply.
Prices charged for royalty-free uses in the U.S. are about half of those in non-U.S. territories. My guess is that this has a great deal to do with the availability of microstock. If so, expect non-U.S. royalty-free prices to undergo a similar drop in the near future.
I believe that, for a long time, there has been a wider use of microstock in the U.S. than in non-U.S. territories. Currently, more traditional buyers in the U.S. find microstock satisfactory for their purposes than is the case with overseas buyers. Thus, these customers either use microstock or tell Getty Images that they will not bother to search the Getty site unless they can get the images found on that site at near microstock prices. This is particularly true of the bulk uses, which represent a huge percentage of total sales. Getty can still get traditional royalty-free prices from the few customers that are not large enough to have any leverage, but these customers are becoming an increasingly small percentage of total users.
I believe that non-U.S. customers, and European customers in particular, have not quite caught up to the States in recognizing the advantages of using microstock or in using this negotiating strategy with traditional sellers. But they surely will not be far behind.
It is interesting to note that the average royalty microstock photographers currently receive is about $1.45 on an average gross sale of about $7.25. Some exclusive microstock photographers get 40% of the gross sale instead of 20%, thus receiving a royalty in the range of $2.90 per image licensed. According to this data, one third of traditional royalty-free images are being licensed for about the same or less than the current average price of a microstock license.
Despite this fact, traditional royalty-free producers refuse to allow their images to be licensed to the community of small business customers and consumers that Selling Stock has estimated to be at least 25 times larger than the commercial customers who have been willing, up till recently, to purchase images at traditional royalty-free prices.
If we assume that traditional commercial customers are already getting one third of the images they need from companies like Getty Images at microstock prices—and I am not including Getty’s iStockphoto sales at all in this calculation—then for every image sold today at traditional prices, it would be possible to sell significantly more than 25 times that number at microstock prices, if traditional sellers were willing to directly address those small business customers and individual consumers who are the core of the microstock market.
Of course, if traditional sellers were to decide that they wanted to address this market, they would have to figure out how to communicate with microstock customers and let them know that a new source of imagery exists. So far, traditional sellers have been unwilling and unable to do this. Rather, they have struggled to hang onto the old business by lowering prices, but they have not reached out in any way to small business users or consumers. These new customers do not even know that Getty Images, Corbis, Alamy or, heaven forbid, smaller stock photo companies focused entirely on selling to large commercial customers exist.
The second issue is oversupply and the difficulty of getting images where they can even be seen by commercial customers. There is no easy solution to this problem. As long as more photographers are producing more images, and it is relatively easy to show those images to the buying public, the images will be placed where they can be seen by potential customers.
Any photographer who is trying to earn his living producing stock images must recognize that:
1 – As long as there are people who want to earn some money from the images they produce, the supply will increase at an ever more rapid rate than now.
2 – A significant percentage of producers do not take production costs into account because they receive satisfaction from producing the image and seeing it used by someone. The revenue it generates is of secondary, not primary importance. This has a major effect on those trying to realize a profit from the production of stock images.
3 – There is no way to effectively put a break on supply. If one distributor stops accepting images, others will pop up to take the overflow.
4 – If supply grows faster than demand, as it seems destined to do, prices will continue to fall.
5 – While at the lower price point, demand has grown faster than supply in recent years, there is no indication that this trend will continue indefinitely. In fact, demand already appears to be leveling off.