71VOLUMES, PRICES, REVENUE UP AT CORBIS
September 1, 2006
Corbis has reported its revenue numbers for the first half of 2006 and CEO Steve Davis told Wall Street analysts that we have "just had the best two quarters in history."
As a privately held company Corbis is not required to publicly divulge any revenue figures, but for the past two years has chosen to supply certain information to the investment community on an annual basis. This was the first time they have supplied numbers on a semi-annual basis. Chief Financial Officer Sue McDonald reported that in the first-half of 2006 Corbis generated approximately $127 million in revenue up 16% from the same period in the pervious year on a currency neutral basis and approximately 12% on a pro-forma currency neutral basis. Revenue adjusted for currency fluctuations was up 13.8%. Thus, gross revenue for the first six months of 2005 was about $111.6 million and the second six months would have been about $116.6 million for a total of $228 million for all of 2005. Projecting first-half results forward for the full year Corbis should have gross revenue in 2006 in excess of $254 million or up 11% for the year.
About 90% of 2006 revenue so far came from image licensing, which includes footage. The other 10% of revenue is from what they call "Creative Resources" which includes: Rights Services, Rights Representation, Photographer Representation (for assignments) and Media Management (digital asset management). Thus, Creative Resources revenue was about $13 million for the six months, double what it was in the previous year and the company expects this segment of its business to gross about $30 million for all of 2006.
Approximately 20% of image licensing revenue, or $23 million, was generated by RF sales and 80%, or $91 million, by RM sales. In the first half of 2005 RM accounted for 82% of revenue and RF 18%. Thus, RM revenue grew about 8% over the same period in 2005 and RF revenue grew approximately 22%.
The company has seen overall increases in prices of about 10%. A volume increase of about 5% in RF was offset by slight declines in volumes of RM. The average price for a RM single image was approximately $271, up 9% from the prior year and RF averaged $208 up approximately 17%.
Part of the growth in RF revenue can be attributed to the fact that Corbis has added 80,000 RF images to its collection so far in 2006 providing customers with a much more attractive offering. Before the end of 2006 the company expects to have added a total of 120,000 new RF images for the year. As a result of this new imagery, Corbis has also been able to push its RF prices up significantly compared to Getty which has only been able to increase prices about 1% compared to Q2 2005.
It is interesting to note the differences in average price per image of competing companies.
While the average price for RF sales is relatively close for all three companies there is a wide separation in the average price for RM sales. This can be explained by the product mix of the companies and the proportion of RM sales that are for editorial uses compared with those for commercial/advertising uses. A huge proportion of Alamy's sales are for editorial uses driving their average price per image very low. Corbis has a strong editorial file but also has a much better balance between editorial and advertising sales. Thus Corbis' average price is much higher than Alamy's. Getty's average is higher still given their focus on the commercial buyer, and the fact that a relatively small proportion of their RM imagery is of interest to the editorial buyer.
It is also interesting to note that while the average price-per-RM-image for Corbis went up 9% year over year, the average price for Getty dropped about 1% and for Alamy 8%.
The fact that the Corbis' average is going up while the others are going down is an indicator that Corbis is licensing a greater percentage of its total sales to commercial/advertising users, as opposed to editorial users, than was the case a year ago. Average prices for commercial uses are much higher than for editorial use. The spread in price between Corbis and Getty would indicate that Corbis has a lot of potential to grow average price-per-RM-image if it can continue its penetration into the advertising market. Getty, or the other hand, seems to have reached a plateau and Alamy appears to be licensing an increasingly higher percentage of low priced editorial uses relative to commercial/advertising.
As a proportion of total sales, Corbis is stronger than Getty in Europe and weaker in the Americas and Asia. This is probably a reflection of the fact that the European market tends to be a bigger user of non-news editorial imagery (of which Corbis has a very strong collection) than "creative" imagery where Getty's strength lies. In the Americas the proportions of non-news editorial images used compared to creative concept images is the reverse of Europe.
Davis pointed out that there is a blurred line between commercial and editorial buyers and that 40% of their revenue from "commercial" customers comes from these customers licensing images that would by most standards be considered "editorial". "Corbis' initial model of putting all its content under one brand, and creating a portal model that way was based on the notion that there would be an enormous amount of cross-over sales," he continued.
Davis did not characterize the company as "profitable" but said that, excluding certain expenses like costs associated with improved technology, "the direct operations for Corbis are beginning to generate cash, a milestone we have been targeting for some time." He also indicated that the company expects to invest more than $10 million in technology improvements during 2007.
When asked about Getty's new Rights-Ready licensing model Davis said that, "It's interesting because like Getty we work hard to identify opportunities to really innovate and grow and there is no question that one of those opportunities is delivering improvements in our licensing model both in the pricing and the rights and restrictions. We're watching with great interest Getty's launch of their new model. However, frankly, based on our research and early customer discussions, we feel that Getty's new offering is neither right nor ready." But, both Corbis and Getty do need to find ways to improve the value we provide to clients. Ultimately, there are a lot of opportunities for us to simplify the purchasing path.
In response to a question about the micro-payment stock model that has been receiving so much attention recently Davis said, "We will be playing in that space at some point, but we have nothing to announce at this time." However, he believes there is enormous room for innovation in this category. With this business model he believes it is better to step back and watch what others do rather than trying to be first-to-market in the space.
He also indicated that he does not see micro-payment as a threat to the industry and absolutely believes it is net additive. He also believes it will not become a primary driver for the way people get images because there are too many inherent structural limitations to the model.
Wholly-owned imagery provides a relatively small proportion of Corbis' total revenue, but Davis gave three reasons why the company would continue to expand its wholly-owned content, particularly in the creative space.
1 - To make better use of the company's creative intelligence during production so the resulting images better match market needs,
2 - Owning compared to paying royalties helps the overall economics of the company, and
3 - It provides more flexibility to respond to new marketing and pricing initiatives.
In calendar 2006 Corbis expects to have created 50,000 new wholly-owned RF images. However, Davis emphasized, that wholly-owned would remain a selective, but not dominant, strategy for certain kinds of content, because it will always be the case that some of the best creative material in the world will only be available on a royalty basis.
Corbis has also seen 19% growth in its Corbis Outline collection of celebrity portraiture on a year-over-year basis.