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ZEFA AND MASTERFILE FORM STRATEGIC ALLIANCE
June 14, 2002
visual media international gmbh (vmi), the parent company of "zefa" Dusseldorf, has
entered into a strategic alliance with Masterfile Corporation in Toronto that has major
implications for the industry.
Masterfile will be represented exclusively by vmi in Germany and Italy while the zefa
collection will be marketed by Masterfile in North America. Full marketing of the
www.zefausa.com site is expected to be launched in a couple weeks. The Masterfile site has
been operating under vmi's management in Germany and Italy since March. The collections
are comprehensive, timely, yet quite different stylistically. Both companies are creating
dedicated divisions for the management of this alliance, but there is no change in the
ownership of either vmi or Masterfile.
In North America there will be two sites -- www.masterfile.com and www.zefausa.com. The
Masterfile site currently has about 80,000 images on it and the Zefa site will begin with
about 35,000 images. (Zefa currently has about 60,000 images on their German site, but
some of these images are currently represented by other agencies in the U.S. market.)
The Masterfile sales staff is empowered to license rights to images from both sites.
All the Masterfile.com images are available in all the local markets where Masterfile has
an authorized sales representative. All this is accomplished by simply coding each image
so it only comes up on the sites where it is authorized to be licensed.
Some of the Zefa images will be integrated into the Masterfile site and Zefa will also
integrate some of the Masterfile images, but both companies intend to maintain the
distinctive editing style of their two different sites. They see the two sites as
complementary, not competitive. Tomas Speight, CEO of vmi said, "By marketing the
collections jointly we believe it will create more interest for both collections than if
each collection was marketed by itself."
Each site will have a convenient link to the other brand in an effort to make customers
aware of both options.
A unique feature about this agreements, compared with many agency relationships, is that
the brands will maintain their separate identities and have separate phone lines. The
contract between the two companies is for five years with sales quotas and other
conditions that must be met, or the contract goes into default. If the contract is
defaulted for any reason the image providing brand can transfer the marketing and service
of their images to another company and still maintain their own brand identity and the
existing lines of communication with the customers.
"Combining the highly acclaimed collections of zefa and Masterfile with the excellent
personal service that both companies are known for will provide professional photography
users with an impressive choice of new images and a great alternative to the
mega-agencies", states Steve Pigeon, President of Masterfile. "The market positions of
both Masterfile and zefa will be strengthened as a result."
Revenue
Masterfile's gross annual revenue worldwide is about $16 million with about 60% of that
coming from sales in North America. Despite the fact that Masterfile is located in Canada
about 90% of their North American sales are in the U.S. Currently about 70% of there
revenue worldwide comes from images found on the web site and 87% of their North American
sales are from web images.
vmi's gross annual worldwide revenue last year was about $30 million and they are on track
to do about $37 million in sales in 2002. Probably less than 5% of their current revenue
comes from U.S. sales so setting up a full scale U.S. sales operation offers them great
potential for growth. About 50% of their sales in Italy and 60% of their German sales are
from images found on the web.
Both companies are phasing out their analog files and expect that by the end of 2003 they
will have returned to photographers most of the originals that haven't been scanned. While
they are still scanning some of the existing file images, most of their current scanning
is focused on new images.
Photographers Perspective
Over a year ago Zefa had indicated that they would be setting up a U.S. office with U.S.
management and editing in an effort to increase their market share in the U.S. market.
Many U.S. photographers seeking new representation, and with images of a style likely to
sell well in the U.S., have been anxiously awaiting this move. This alliance with
Masterfile, rather than setting up an independent office, alters the potential for these
photographers somewhat.
U.S. photographers, represented by Zefa, will now get about 30% of the fee collected for
any image licensed in the U.S. Masterfile gets an agency percentage off the top and
Zefa splits the remaining percentage 50/50 with the photographer. (The sub-agency
percentage is usually in the range of 40%, but the actual number in this case is
confidential. Zefa is authorized to disclose this percentage to its artists.)
This would mean that from a pure percentage point of view U.S. photographers might be
better off to try to be represented by Masterfile rather than Zefa. Of course, because of
the difference in style of the two brands it is possible that a photographer's style of
shooting might be a better fit with the Zefa offering, and thus he or she might get more
images accepted.
The photographers contracted to Zefa are likely to see significant benefit from this
arrangement as, for the first time, it gives their images strong visibility in the major
U.S. market. "For zefa this is a critical step towards a strong brand presence in the
North American market place," says Erwin Fey, Chairman of vmi. "With Masterfile we have
found the ideal partner to serve the USA and Canadian creative communities. Our
extraordinarily creative collection will now be fully available to customers across the
Atlantic."
Masterfile photographers are unlikely to see a major jump in sales as the marketing of
their images were already being handled by Zefa in Germany and Italy, but the Masterfile
brand was not being promoted as a separate and independent brand as is now the case since
March.
Both companies accept new images on an image-exclusive basis. The photographer is free to
market elsewhere any image these companies don't accept. Masterfile requires the "right of
first refusal" from its photographers. Zefa does not have this requirement.