May 3, 2005
Stock agencies are discovering that there are some very serious unanticipated consequences in having an "Image Partner" relationship with Getty Images.
Getty Images is expected to generate between $720 and $730 million in 2005, not all of it from the license of still images and illustration. I estimate gross world revenue for the licensing of still imagery at about $1.6 billion in 2005. So while Getty may control less than half the market there is no question that they are the 500 pound gorilla when it comes to licensing imagery in this industry. For this reason most stock agencies would like to have their images represented on Gettyimages.com. Currently 53 brands have been accepted as "Image Partners" and more are in the pipeline. At Getty's present rate of adding new images it will not be surprising if more than 40% of the images on their site belong to Image Partners by the end of 2005.
But working with Getty is not all peaches and cream. One agent described Getty's intimidation strategies as "like working with the Mafia." The problem is that you never know where you stand.
When Getty takes on new partners they often encourage them to produce saying things like, "we need more of your type of content" and "we need as much as you can provide" and they will give the agency a relatively high quota for the number of images they are allowed to add in the first year.
With such encouragement the agency goes out and hires staff, expands their facilities and spends money on new production. Often the agency will produce even more than the Getty quota allows because image producers never know which images a distributor might accept. In addition, producers know that if one distributor refuses to accept the images, chances are someone else will.
But, as soon as sales start to take off and the image partner begins to see potential profits down the road, Getty starts flexing its muscles to force the "partner" to modify the agreement in Getty's favor.
One aspect of the agreements for Rights Managed images is that they are either "image exclusive" or "co-exclusive" so that various kinds of exclusive rights can be easily licensed at any time. Getty insists on these terms despite the fact that the vast majority of RM images are licensed for non-exclusive use, not any type of exclusivity.
(In an image exclusive agreement no one other than Getty is allowed to license any particular image or similars from the same shoot. In a co-exclusive agreement the agency is also allowed to license the images directly to its own customers, but it cannot offer those images through any other third-party distributor.)
In the case of Royalty Free imagery there are normally no restrictions on the number of distributors. The same image may be licensed by many different distributors because exclusive or restricted licenses are not available with RF images.
Thus, the image partner assumes (and this has been the normal practice in the industry) that any non-similar image to those that Getty accepts, if it is RM -- and any image if it is RF -- can be offered to other distributors as well as to Getty. Many producers have been doing everything they can to get their images represented by as many distributors as possible in order to maximize the return on their investment.
Getty's New Position
Now Getty wants to change all that. They have been telling some of their 53 "Image Partners" (and if you haven't heard it yet you are probably on the list to get "the talk") that Getty does not want them to put any images on Corbis or JupiterMedia.
The first thing that strikes me is that I'm not sure what Getty is going to do about Comstock and Thinkstock since they are owned by JupiterMedia.
However, for the other "Partners" it has been pointed out, sometimes not to subtly, that if they don't go along with this new policy there are several options that Getty may choose to exercise.
- Getty may lower the partner's annual allocation of images that can be put on gettyimages.com. If one partner is limited in the number of images it can post, while other partners are allowed to put up many more, the odds are that the company being limited will make fewer sales and begin to see a decline in revenue. Every partner wants to be able to put as many images, of acceptable quality, as possible on the site. Any limitation is likely to hurt the partner's business but such limitations are much harder to accept if they're based on the partner's willingness to give Getty more favorable terms rather than the quality of the imagery.
- Getty may change the partner's "search order position". This can dramatically affect the number of the partner's images any customer is likely to see. If they can't see them they won't buy them. (To get a better understanding of this read Story 681.)
- In some cases Getty may bring other brands onto the site that directly compete with the partner in terms of the type of imagery it represents
If these threats are not enough to convince the partner not to do business with Corbis or Jupiter there are two other options available to Getty.
- Getty may insist that the partner agree to accept a lower percentage of sales rather than the percentage stipulated in the contract (already the lowest in the industry). If the percentage is favorable enough to Getty it may choose to not change allocations, search positions or bring in competing brands.
- Finally, if the partner doesn't like any of these options Getty may terminate their contract after giving 90 days notice and remove all their images from the site. This 90 day notice provision makes it almost impossible for an image partner to manage their business because they never know when a drastic reversal of the rules of the game is likely to occur.
One partner said working with Getty is like getting involved with heroin. "They give you a fix and it feels so good. And then once they've got you hooked, and you can't do without them, they start turning the screws."
Keep in mind that there is no rational reason why companies should be prohibited from selling products that Getty refuses to represent through other outlets.
Why Corbis and JupiterMedia?
Corbis has been around for a long time and in-fact some of the brands that are on Getty have been on Corbis for a long time. Why this sudden interest in shutting down some of Corbis' supply?
For a long time Corbis was focused on other things including a strong emphasis toward a segment of the Editorial market where Getty has its weakest offering. Moreover, Getty doesn't seem very interested in going after this market segment because it is likely to be too costly for the return it is likely to generate, and it would probably be impossible for Getty to maintain its 72% margin.
In addition, in the last year of so, after not being much of a threat to Getty for a long time, Corbis has begun to flex its muscles. They have made several small acquisitions, and last fall purchased zefa visual media that provides them strong commercial images suitable for the European market. In addition there are persistent rumors that Corbis will soon acquire at least Photonica, if not all of Amana (Photonica's parent company). Assuming Corbis does acquire Amana they would have jumped from a $140 million company a year-and-a-half ago to a $280 to $300 million company with a lot more diversity and potential.
On top of all this, in January Getty decided for reasons that are not completely clear that they wanted to get rid of Jane Lockwood who held a key position in Getty's Image Partner program since it was established. When they showed her to the door, they expected her to rollover and disappear, but instead she went around the corner to Corbis and Corbis hired her. She took with her an intimate knowledge of the strengths and weaknesses of the image files of every one of Getty's image partners and she is also familiar with all the details of every one of Getty's partner contracts as she helped negotiate them.
Getty is not happy with Corbis!
JupiterMedia is a little harder to figure, but Jupiter owns the subscription market for commercial images that probably generates $30 to $40 million annually. (This does not include the editorial subscription services that that account for most of the licensing of images to newspapers and much of the licensing to magazines.) Getty has said they want to get into the commercial subscription space, but they have no offering right now. More to the point is that Jupiter has has plenty of cash available and Getty want anyone with cash to get a toehold in its market.
In addition, there are rumors that in the near future Jupiter intends to expand both its RM and RF offerings by adding a lot of third party suppliers to its Creatas and PictureQuest networks. That, coupled with aggressive advertising could be a threat to Getty.
In Fairness To Getty
In fairness to Getty they're facing a real problem . For years they have grown by taking market share from everyone else. But that's getting harder to do and usage in this market is not growing and not likely to pick up. Getty has promised investors steady, better than 10% growth. Consequently the only way they can grow in the stock photography segment of their business is to continue to raise prices (they may be getting near a peak) and make absolutely sure that they don't start losing any customers to their competitors.
Thus, it has to be of great concern to them when their major competitors can offer images from the same brands, taken by the same photographers that they represent, even if those images are not the exact same images Getty represents as is the case with the RM offerings available to Corbis and Jupiter. Some of this has been going on for a long time, but with Corbis and Jupiter re-positioning themselves Getty needed to find a way to limit, if possible, the number of images from leading producers that would find there way into the hands of their competitors. However, despite Getty's efforts it looks like there is about to be an explosion of content from the 53 companies Getty represents, and others, appearing on portals that are in direct competition with Getty.
Getty had to try this, but they may have overplayed their hand.
What Will Happen With Adobe?
One of the most interesting questions is why Adobe isn't also on the list of companies Getty's partners can't deal with. For the time being Getty is not worried about Adobe.
Getty's position has been that they don't see Adobe as a serious threat. The investment community seems to believe that any Getty image licensed through Adobe will be "add on" revenue for Getty because Adobe will be opening new markets.
In addition, with Getty's acquisition of Digital Vision probably 80% of the images that will be initially available on Adobe will belong to Getty. Thus, if the analysts are correct it should be a boost because Getty owns most of the content.
However, it is my opinion that virtually all the sales Adobe makes will reduce Getty's sales by a similar amount. Both companies are talking to exactly the same customers. If a customer buys from Adobe that is one less image they will buy from Getty. And since Adobe keeps some percentage of the total revenue collected (we don't know how much), if my theory is correct, every Adobe sale is a loss of revenue for Getty.
Since Getty images are so dominant on the Adobe site Getty will know immediately once Adobe starts gaining traction, and they will be able to analyze the effect on their own sales. If Getty sees Adobe taking sales away from them, they will certainly add Adobe's name to the list of companies that their "Image Partners" are not allowed to deal with. If Getty can force their image partners to stop dealing with Corbis and Jupiter it will be the first step on a slippery slope toward requiring that all suppliers -- both RM and RF -- deal with only one major distributor.
Clearly, Getty is in a very difficult situation. Will they be able to intimidate their Partners into submission? Will Corbis, Jupiter and Adobe fail to get their Image Partner arrangements off the ground because they can't get enough new content? Can the companies that are presently partnered with Getty afford to stay, if they can't depend on what the rules are month-to-month?
It is going to be an interesting few months. Stay tuned.