Shenk Talks About Corbis

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June 1, 2007

By: Jim Pickerell

In April Corbis announced that Gary Shenk, President of Corbis would become the new CEO effective July 1, 2007 (See Story 948) and that all Corbis officers would begin reporting to him as of the date of the April announcement. Steve Davis, the current CEO is transitioning out of his a day-to-day operational role to pursue new leadership opportunities in the public service and philanthropic world, but he will also continue to serve as a senior advisor to Corbis beyond June 2007.

Recently, Mr. Shenk took time out of his busy schedule to answer a few questions that Selling Stock posed and share some of his thoughts on where Corbis and the industry are headed. At various points in this article I have provided additional information in brackets to amplification to those things mentioned in the interview.

JP - If photographers want their images seen by customers it has become more and more important to get the images on a major portal. Currently there seems to be four ways to do this.

1 - submit images directly to the portal and offer them on a royalty basis,

2 - submit images to a small agency that has an "Image Partner" relationship with at least one major portal, maybe several,

3 - join an elite group of photographers to form a production company such as Blend or OJO that can place the images with several portals,

4 - do contract assignments for one of the three major portals where the photographer is paid a flat fee and the portal wholly owns the production.

Which of these four methods produced the most new images for Corbis in 2006? Please list in order.

GS - We are getting images in exactly the order you listed. We get the most images via process 1, the second most via process 2, and so on. I should footnote that excludes news images. We get a large quantity of news images from two major partners: Reuters and EPA and we get a lot of news images daily from contributors. If I were to include that in this equation then the amount of image partner pictures would go way up, but I am excluding that. Excluding news images the order is 1, 2, 3, and 4.

JP - Is there an advantage for photographers who produce commercial images to offer images as RF rather than RM or does it make a difference?

GS - I think the RM business is still very robust and the amount of value in Rights Managed is still higher than the amount of value in RF so I would encourage photographers not to walk away, by any means, from the RM model, but embrace it. And I would encourage photographer to embrace RF as well. In this industry it's a mosaic of models that is creating the revenue right now. If photographers want to diversify their risk they should play in as many models as the can, but RM is still the biggest category of our industry so they should not walk away from that.

JP - The number of units licensed as RM is not necessarily the biggest, but it may be the biggest in revenue.

GS - Right.

JP - Corbis is starting from a fairly low base in RF revenue compared to RM. Is your RF revenue growing faster than your RM?

GS - Our RF is growing considerably faster than our RM. It still represents a minority of our overall licensing revenue, but it is growing the fastest of all the categories.

JP - How many RM images do you currently have in your online database?

GS - We have about 4.1 million images that are currently online and digitized and approximately 80% are editorial and 20% commercial.

JP - How many RF images do you have?

GS - We have about 500,000 RF images.

[On its web site Corbis has a little less than 500,000 RF images and about 350,000 RM images that are licensed primarily for commercial purposes. All of these images are released. They also have about 1,150,000 images that most people would consider editorial in nature, but which are often used for commercial purposes. Such subjects include travel, culture, etc. These images for the most part are not released. Thus, the company has almost 2 million images that primarily address the commercial market, but a significant portion of them are not released. In addition, there is another body of about 2.5 million editorial images such as red carpet entertainment, historical, fine art, etc. that tend to only be used for editorial purposes.

When a commercial customer wants to license an unreleased editorial image Corbis makes it clear that the customer is accepting all responsibility and liability for using the image in the event there are any problems related to releases. They also offer to assist the customer in clearing the rights for a separate fee. In many cases the customer will ask Corbis to take care of clearing such rights. That is one reason why Corbis' Rights Clearance business has been growing as such a rapid pace.]

JP - How many commercial images do you expect to add in 2007?

GS - Excluding the news we're bringing in between 150,000 and 200,000 images annually.

JP - What percentage of that will be wholly owned? Are the majority of the images you are adding wholly owned?

GS - I'm not going to release that number, but it is a minority.

JP - How important is it for Corbis to have exclusive rights to a particular commercial image?

GS - I think that Corbis competes effectively on a lot of different criteria. We have the best customer service in the business, we have a global brand, we have a web site that works everywhere in the world and people turn to Corbis for a lot of reasons. So even if an image is not exclusive we still are likely to get a customer's business because they like dealing with us on so many different levels. Certainly having an image exclusively gives you something else that a customer has to turn to you for, but you end up paying for it in some way either through guarantees or higher royalties. We always balance that and by no means are we tied to being exclusive with our partners.

JP - And that includes individual photographers?

GS - We often work with individual photographers on an image exclusive basis. We do not try to be the sole representative of a photographer. We don't want the images the photographer submits to us to be on multiple portals, particularly for our better RM photographers. But, we're not in any way locking them up to only shoot for us.

JP - You've indicated that Corbis intends to have a new offering that is competitive with micropayment. When can we expect to learn some more about that?

GS - Before the end of the second quarter which is less than one-month away.

JP - Do you see any advantages to a pricing model similar to Getty's RR?

GS - Yes and no. On the one hand you are always looking for different ways to price that might be more attractive to customers. On the other hand I don't think you can judge the success of that particular licensing model without looking at how the whole of RM plus RR is behaving. If RR is going up and people are licensing more RR, but at the same time RM is decreasing and more than offsetting those gains then I'm not sure that is necessarily a successful model. What we at Corbis are trying to do is maximize the overall revenue for photographers and not create excess customer confusion. I think you have to look at the whole picture and if one model is growing at the expense of others then it is not necessarily a great model.

[Getty's RM revenue (a combination of RM and RR) went up $3.7 million in Q1 2007 compared to Q4 2006. This was one-tenth of one percent of total revenue so it may be too early to make a judgment.]

JP - How important is it to have model released images? Will you accept images with people in them that are not model released?

GS - We will only accept images that are not model released for editorial use. If a photographer wants to have any sales with commercial customers it is critical that they model release the images. It is very beneficial to the customer. If a customer gets wed to a particular image they don't want to have to go track down releases. In our commercial collection almost all of the images are model released and increasingly were requesting that editorial shooter try to provide model releases as well just because it opens up a lot of new markets for them.

When doing a search customers can search only model released images in either the commercial or editorial space. On the front page of our site you can search only model released images and only images on CD.

[Note the comment above about the 1,150,000 un-released editorial images that are sometimes licensed for commercial use. Corbis will assist the customer in clearing rights upon request.]

JP - Some contract photographers say that in order to justify funding expensive productions of images with costly sets and models they need some idea of the current average return per image of subject matter similar to what they intent to shoot. They complain that they can't get such information from the major agencies they are working with and this makes it impossible for them to effectively budget for their shoots. What are you willing to supply in the way of such information?

GS - We started a creative intelligence division that we now operate around the world. We have a team of people based in NY covering the U.S.; in London covering the UK and Europe and in Hong Kong covering all of Asia. We're doing an incredible amount of work trying to assess market trends and what's going to be attractive from a production perspective going forward. So we are making a large investment in money and people in order to be knowledgeable and we are sharing a lot of that with photographers. So much so that when we first started doing it we had a discussion as to whether this information was proprietary. We made the decision to share the information with photographers and now it goes out via our studio plus website regularly.

The other piece of information that I'm sure photographers would want to know is the economic returns of different images that are in different licensing models, different categories, different collections. We think it is unfair to even attempt to try that or set the right expectations because it is very very challenging to do that based on our existing systems - to calculate all for the different returns of images that fall into different categories with some type of predictive effect. We don't want to provide information that is going to be misleading.

That said, one of the things we are doing at Corbis. We've done 27 acquisitions in our history. We're in the process of integrating all those systems with a mass of technology investment that we are doing this year. It is one of those unsexy projects in the industry that has an enormous positive impact on our ability to do business. That is called an ERP (Enterprise Resource Planning) System. Essentially it will allow us to have a lot of desktop information about how our inventory and product is performing in a much more accessible way. Once we have those tools we will reassess whether we can share more financial information with photographers. That system is being implemented this year and will be fully implemented by early next year.

JP - What percent of revenue is for rights clearance? I have heard the figure $30 million. Is that high or in the ballpark?

GS - Your number is actually low. Everyone in our industry talks about lines of business that have exploded but this is one that has truly exploded and leads the way. As everyone knows when traditional image licensing growth rates, particularly RM, have been what they've been in the past, it is very nice to have alternative businesses to drive your growth. In our industry the growth has shifted mostly to non-traditional parts of the industry.

[Corbis' gross revenue for 2006 was $251 million. If Rights Clearance was $30+ million then we come up with some less that $220 for the rest of the business. Video and other lines of business probably represent another $10 to $20 million. This puts still imagery revenue in the range of $200 to $210 million. Over 50% of that ("a majority") is for commercial uses.


Corbis' intent is to move that mix over time to 75% commercial and 25% editorial so it mirrors what Shenk believes is the mix in the marketplace, but right now he would not be more specific than to say that a majority of the revenue comes from licenses for commercial use. Corbis had a little over 10% growth in 2006 compared to 2005.]

JP - Many photographers are seeing their return per image fall and thus are pulling back on speculative production. They are either turning to more wholly owned shoots, or transitioning into lines of business other than stock photography, or at the very least expecting stock photography to be a much smaller portion of their total business. Do you see this trend happening among your photographers?

GS - We're trying to champion revenue-per-image at Corbis. That's one of the key things we focus on and we're taking a very highly filtered look at our collection. Right now we are in the process of trying to edit a lot of the older imagery out of the collection that hasn't been selling and continue to increase the opportunities for new imagery to come into the collection.

There is so much imagery being produced right now. But we still think there is a huge value in delivering quality and a highly filtered search experience. On many sites that are gaining some headlines these days the search experience is awful because there are so many pictures that are being submitted without any filters whatsoever. After long, hard and deep search you may be able to find the picture you need, but most people in the creative advertising market don't have the time or the desire to do that. So we're continuing to take a highly filtered approach to our collection. I would say that RPI at Corbis is moving upward and that continues to be our intent. We haven't seen a huge unwillingness of photographers to fund shoots because we are trying to deliver higher returns for them than they've gotten in the past.

JP - What percent of total industry revenue do you think comes from sales to major advertising agencies?

GS - I think overall 75% of revenue comes from commercial markets such as advertising agencies, graphic design companies or corporations and 25% comes from editorial - publishers, newspapers, magazines. You said major advertising agencies and that is a good question that no one knows the answer to exactly. But still in Corbis' opinion about 75% of the commercial revenue comes from larger, more established agencies that are regular buyers of stock as opposed to small one-off transactions.

JP - Obviously, some of the big publishing firms interested in editorial imagery are major users of Corbis images.

GS - Right. That's good news for our industry because the larger companies are very robust in their demand and in their desire to work with big partners meaning that they want agreements, they have heavy rights requirements, they don't want a lot of risk, they want good customer service. So all of that plays well for the bigger agencies to keep that share of the business. At the same time those customers are all moving to interactive (Internet) use as their number one type of use. Education companies and publishers are looking at interactive as a major format for their product. Advertisers are looking at interactive as the lead advertising concept. I think the agencies will still have huge opportunities to be the dominant supplier to those bigger customers, but we all have to be able to supply their needs in the Internet space.

JP - What percentage of your gross sales are for editorial and what percentage are for commercial?

GS - The majority are for commercial. Corbis' intent is to move to that mix of 75/25 over time so that we mirror the marketplace, but right now, given our editorial history were not weighted that heavily toward commercial, but still the majority of our licensing is commercial.

JP - Thank you for your time.