June 19, 2007
By: Jim Pickerell
Expect the business of producing and distributing still stock images to go downhill in the rest of 2007 and 2008. Micropayments and the general oversupply of images in all categories will negatively affect stock photographers trying to make a living. Traditional agents won't suffer as much as photographers, but many will struggle. Extra spending, unless it enables you to significantly increase your market share, is unlikely to boost profits and everyone should look for ways to cut costs.
In October 1991, a "confluence of weather conditions" combined to form a North Atlantic killer storm later referred to as the storm of the century. The movie "The Perfect Storm" tells the story of the Andrea Gail whose crew decided to continue doing the only thing they knew how to do to earn a living despite all the warning signs of potential disaster.
The current "confluence of conditions" in stock photography could lead to a similar disaster for many. The conditions include:
Cannibalization of RF
No Growth in Customers Paying Traditional Prices
Decline in Use of Print for Information or Marketing
Crowdsourcing - The Internet enables non-professionals to participate in the still photography market. Previously, stock agency representation was necessary to show images to customers. To be accepted a photographer was judged on quality and the ability to produce quantity. Micropayment sites have dramatically lowered the barriers to entry. Now tens of thousands of people who want little more than affirmation that someone else likes their images can easily make images available to professional buyers. Many micropayment photographers produce some very good images, but have no intention of making a living from photography.
Micropayment - Buyers are increasingly discovering the micropayment option. Given the number of contributors these sites often show a greater variety of vision than professional sites. Amateurs tend to post what they like to shoot, regardless of whether the subject matter is in high demand. Maximizing revenue is not a major motivating factor for these sellers. Wading through the options may be tedious for buyers, but it hasn't cooled their desire to explore these sites.
For the moment micropayment is the only growth area of the business. In 2006 the number of images iStockphoto licensed grew by more than 100% compared with 2005. In a survey of major U.S. image buyers conducted in June 2006, Piper Jaffray found that 62% of respondents had either used, or would consider using, micropayment images. When the same survey was repeated six months later in December 2006 the percentage had jumped to 77%. It is not beyond imagination that by the end of 2007 100% of buyers will either have purchased a micropayment image, or considered using one.
Micropayment site manager will make money. Few photographers will earn a living wage, but just enough will to give the others hope.
Cannibalization of RF - Getty's results for the last two years indicate that RF sales are declining. Total 2005 RF revenue was $272.91 million. In 2006 -- counting micropayment - revenue was $308.17 million. iStock probably contributed about $20 million in 2006. If we remove that from Getty's bottom line total RF revenue would have been about $288 million, a 5.5% growth. However, Getty acquired Stockbyte in 2006 which should have been responsible for some RF growth.
Compare these numbers with the year earlier results. Total 2004 RF sales were $204.53 making 2005 growth 33% over 2004. While not yet in negative territory the 2006 RF results were certainly a major decline. Don't be surprised if RF sales for 2007 are less than the $308.17 million for 2006.
Oversupply - Supply is increasing much faster than demand. The number of images on the Creative section of Getty's site rose 230% from November 2003 to November 2006. During the same period the number of images licensed rose 22% and much of that was due to acquisitions.
During this same period Getty's average return-per-image dropped from $732.87 to $327. On average photographers received 35% of these numbers. Some "Image Partners" received a lesser percentage. The more images added the more the average return-per-image will decline.
No Growth of Customers Paying Traditional Prices - There is little indication of growth in customers for higher priced products. The only customer growth is for the very low priced products and some of this is a migration of customers who previously purchased higher priced images.
Decline In Readership - The world's second richest man, Warren Buffet, recently pointed out that the young are getting their information from the internet and the old - the ones who read newspapers (and magazines) - are going to their graves.
Decline in Use of Print for Information or Marketing - The stock photo business is based on selling pictures for print uses. As use of printed products declines so will the need for still photos. The Internet will need photos, but prices paid for them will tend to be much lower than for print uses. Also it appears the Internet will be more oriented toward video than stills. Advertiser feel they are paying too much to advertise in print publication and are looking for better ways to spend their money.