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NEW TRENDS EMERGE
April 11, 2003
Some new trends in the way stock archives manage their businesses emerged in discussions at
the PACA (Picture Archive Council of America) annual meeting held in Montauk, Long Island
this year.
After many private discussions with stock agents, and attending the seminars, I came to the
realization that the stock photo industry in North America seems to be on the verge of a
major shift away from the traditional agency model to a two-tier production and marketing
system.
Ari Kopelman of Solus Images observed that in this business model "some companies are
concentrating their efforts on distribution and marketing and looking to a greater degree to
3rd party suppliers for their content. At the same time other companies are focusing on
collecting and preparing images for online marketing and then turning them over to one or
multiple distribution companies for marketing." There was a clear sense that it is no
longer necessary for an agent to do it all.
First, let me define the "traditional agency" model so we can understand the changes. An
agent (or Archive owner given PACA's new name) gathers images from many photographers and
organizes them so they can be presented to potential customers for consideration and
purchase. Then the agent markets the collection to as many potential buyers as possible. Of
course the collection is always expanding. When a customer chooses an image the agency
negotiates a fee for the usage, handles collection, retains a percentage of the fee for its
services and pays the rest to the photographer. The agent usually does not accept everything
produced by the photographers it represents, but only represents a portion of the work that
the agent believes has the best chance of selling. Often the agent gives the photographer
guidance as to what to shoot based on the agents experience in the market. And in some
cases, in order to expand its market reach, the agent will make arrangements with other
sub-agents to handle the marketing of its images in other territories.
Traditionally all these services have been provided by a single organization. The shift that
seems to be taking place is that this traditional role will be divided in two. Some
companies will focus on marketing and operating search engines. Others will focus on content
creation and gathering.
Search Engine Operators - These companies build large databases and concentrate
on the marketing side of the business. They will minimize their direct relationships with
the photographers who produce the images and look to "content aggregators" to provide them
with "collections of images" that expand the depth and breath of their collection. These
companies attempt to develop a file with great depth and breath. They focus their marketing
efforts on reaching as many stock photo users as possible, but in order to maximize sales
they also need a file that has a very wide range of photographic solutions to various
customer problems. They also attempt provide excellent customer service.
Content Aggregators - These companies concentrate on building relationships with a
small group of photographers, editing their work, and preparing the selected images for
delivery to one, or several, of the "search engine operators" who will handle the marketing
and sale of their images. They may also work directly with a relatively small group of
customers, but they rely on the portals to help them reach the mass market.
Thus, we have a two-tier system for getting the images to market. In each case the agency
concentrates their efforts on that aspect of the business they do best. However, it should
be noted that at this stage of development there are very few companies that fall cleanly
into either of these models.
At first glance one might think - "That's not new, many portals have been doing this for a
long time." What's new is that both large and small companies are beginning to recognize
that they don't have to do it all and that their business may be more profitable if they
concentrate on the aspect of the business that they do best and turn over other aspects to
someone else.
Search Engine Operators
Many "Search Engine Operators" (SEO) will continue to accept some images directly from
photographers and handle all the tasks of editing and preparing images to go online.
However, in many cases they are aggressively trying to add more images to their databases
from 3rd party suppliers and placing less emphasis on taking new images directly from
photographers. This is particularly true when the 3rd party supplier has a strong file in a
particular niche.
The advantages for the SEO are obvious. There are big cost savings if they no longer have
to deal with lots of individual photographers, guiding them as to what to shoot, and then
editing, scanning and keywording their images to get them ready to go online. Instead, they
require the 3rd party suppliers to deliver the images to their specifications fully ready
for uploading. In addition to saving money they benefit by getting images from a variety of
editing perspectives. Editors of specialized collections are likely to have a better
understanding of the needs of buyers of their niche material. This strategy allows the SEO
to create a file with great depth and breath of imagery for very little additional costs.
The SEO's that are moving in this direction are not just small independent portals. Getty
Images is adopting this approach as well. Getty will add a lot more third party content to
its site as a way of bringing depth and breath to its collection. They will also accept more
"Photographer's Choice" content from their contract photographers with three more submission
periods scheduled for 2003. Getty will continue to accept new images from its contract
photographers in the same manner as it has in the past, but it seems likely that less
emphasis will be placed on obtaining new images in this manner given the cost advantages of
the other strategy.
One of the founding principles of Getty Images was the Tony Stone philosophy that great
editors could select the subject matter that will be in highest demand. By tightly
controlling the editing Getty has been able to capture a major share of the top of the
market. (I estimate that it is close to 40% although Getty says the market is much larger
and thus their percentage share is much smaller.) In the hay day of Tony Stone, even though
the company was very successful, Stone sales were always way less than 10% of the market
meaning that while they had great images that sold in high volumes more than 90% of the
customers wanted something else.
Getty may have the bulk of the market, but there are other buyers out there who still need
images that are different from what Getty is offering - different from what Getty's editors
have chosen. The demand for some of this other imagery may not be as high as for the images
Getty is currently selling, but given the distribution platform they have developed, if they
can acquire rights to sell other imagery at a low enough cost they can still make a profit
by representing it. And this would enable them to provide a greater service to more
customers. 3rd party suppliers are a perfect answer to this problem. The same strategy
that works for Getty works for other portals as well, and the industry is going to see many
more portals springing up, expanding and adopting this strategy.
A key to success for any SEO is in the percentage of the gross sale they must give up. For
Getty, given the dominance of its platform, and the sales they are able to deliver, it
appears that they are able to negotiate deals to retain about the same percentage of the
gross sale as would be the case if they had to do all the editing, scanning and keywording.
This is a definite win for Getty.
To offer an example of how dominant the Getty platform is, it is rumored that in the last
six months of 2002 Digital Vision earned approximately $8 million on sales of their images
through the Gettyone site. It is believed that Getty retains 60% of the fee from such sales
so the gross sale price of DV images for the six months would have been around $20 million.
On a smaller scale I talked to a photographer who placed five images in the first
"Photographers Choice" offering at a total cost of $375 ($75 per image). In the first
three months four of the five images sold multiple times for gross revenue of over $5,000.
The photographer gets 40%, but that's not a bad return for three months.
Content Aggregators
On the other hand a "Content Aggregator" (CA) focuses its efforts on collecting and
preparing images to go on other portals rather than trying to maximize sales through its own
web site. In this way it avoids the huge costs of mass marketing necessary to reach a broad
base of customers with its message. They may sell directly to a few customers who have a
special need for the agency's niche images, but the CA counts on the broad marketing
campaigns of the portals to generate the bulk of its revenue.
Companies that end up focusing on Content Aggregation will usually not have a large enough
volume of images to fill the broad range of needs of many customers. As a result, even
though certain customers might like to do business with the small supplier they are often
forced to go somewhere else to find the imagery they need for specific projects. By offering
their images for licensing through a variety of portals the CA to expands its reach at
little additional cost.
The CA's will also find it easier to expand their marketing globally than was the case in
the past. It is no longer necessary to provide dupes or even high-resolution files to every
sub-agent who represents the work. They can supply thumbnails and previews of their images,
and maintain one central database of high-resolution images for delivery purposes. When a
sub-agent needs access to a high-resolution file of a particular image it simply taps into
the central database and using a password downloads the file it needs.
This system also provides a higher level of security for the Content Aggregator. The company
knows exactly which images are being downloaded and when. Thus it is able to track sales
easily, and if payment problems develop the selling agent can be immediately cut off from
access to the high-resolution images in the future.
Photographers
Because there are now two middle-men in the chain instead of one, the percentage of the
gross sale that the photographer receives will drop in many cases. But there is a very good
chance that the total revenue from any given image placed in the market in this manner is
likely to go up. In most cases the Content Aggregator will be able to place a greater
number of images with multiple sources than most photographers have been able to get to
market in the past few years. Since more people will be able to find the photographer's
images than was the case when the photographer was dealing with one small or medium sized
agency the photographer should have the potential to earn more revenue, even if he receives
somewhat less for each transaction.
When it comes to overseas sales the photographer will probably get the same percentage of
the gross sale as he has always earned. In cases where a sub-agent was involved in the past
there will still be only two middle men (the Content Aggregator and the Sub-Agent) between
the photographer and the customer. One advantage is that many smaller companies with
specialized content that couldn't justify the costs in setting up sub-agent relationships
before we had digital delivery will now find it easier to develop such relationship.
Digitally Created Images
Another thing that became clear at the PACA meeting was the general willingness of agencies
to accept digitally created images. Given the workflow advantages for the agencies, in the
near future many photographers may find agencies are more willing to accept digitally
created images than those created on film. Jeff Schewe of the APA said that files from
digital cameras are acceptable to high-end advertising clients for major campaigns, if they
are shot with cameras that produce a 6 mega pixel RAW file or larger and the files are
processed correctly. There seems to be general recognition that digitally created images can
often produce better results than scanning film, if monitors are properly calibrated and
attention is paid to the color space in which the image is created.
At the PACA meeting with the help of representatives from EP and APA a preliminary set of
digital standards for how photographers should prepare and deliver digital files to their
agency was developed. A set of minimum standards for what customers should be able to
expect of files delivered to them by stock agencies was also proposed. It is expected that
these proposed standards will be finalized and published in the near future.