RM and RF Down At Getty

The Getty Images Q3 2007 numbers show a downward tend in both RM and RF revenue.

Total RM revenue for the quarter was $71.86 million, down almost 10% from $79.79 million in Q2 -- and the lowest quarterly sales since Q3 2004. RM revenue for Q1 2007 was $81.64 million. The highwater mark for RM revenue was $86.18 million in Q1 2006. Thus for almost two years the company has seen a steady and increasingly rapid decline in RM revenue.

RF revenue was down, but not quite as bad as for RM. The quarterly figures for 2007 are: Q1 - $82.91 million; Q2 - $81.75 million and Q3 - $79.79 million. However, included in these figures is the revenue from iStockphoto. More about the effect this is having later. Turning to volumes, Getty Images CEO Jonathan Klein told industry analysts in the quarterly conference call that “volumes … fell in the mid single-digit percentage for rights-managed, including rights-ready, and more than 10% for traditional royalty-free single imagery.

So how can traditional RF volumes be falling more rapidly than RM if the decline doesn’t seem to be reflected in total revenue? The answer is microstock.

Getty lumps its RF revenue from CDs, subscription and microstock (iStockphoto) with the revenue from traditional single image RF. If we go back to Q4 2005 before Getty purchased iStock, revenue from CDs and subscriptions was about $10 million a quarter. If we assume revenues for such uses have been relatively stable (and it may have declined) then we can make an estimate of that portion or RF revenue that can be attributed to microstock based on the numbers Getty supplies.

The iStock revenue in millions for the last five quarters would be: Q3 2006 – $3 ; Q4 - $5.8 ; Q1 2007 - $10; Q2 - $12 and Q3 – $15. This would leave the revenue from traditional RF at: Q3 2006 – $75.23 ; Q4 - $71.45 ; Q1 2007 - $72.91; Q2 - $69.75 and Q3 – $64.79. Getty also had some traditional RF revenue from Punchstock in Q3 2007 that was not part of the previous quarter or 2006 figures.

For three quarters this year RM revenue was down $14.7 million compared with the same period in 2006. RF revenue was up $15.44 million, but a significant part of that growth is from microstock sales. I estimate that in the first three quarters of 2006 iStock’s sales were about $8.5 million and in the first three quarters of 2007 they were $37 million.

Klein said that iStock had 4.6 million downloads in the quarter and that the average price per download was increasing. Assuming my revenue figure is in the ballpark that would make the average fee per download about $3.25 for the quarter and a significant increase over the generally accepted $2 average price at the end of 2006.

Klein acknowledged that the company is “seeing pressure on volume in traditional creative stills. The pressure is specially felt at lower prices and file sizes in royalty-free and in the brochure, print advertising and print collateral usages for rights-managed.

He continued, "The amount of print materials being produced is definitely slowing down and the amount of online image use is growing exponentially. Print has always been the bread and butter of the rights-managed business."

Two years ago, over 80% of Getty’s revenue came from the licensing of Stock Photo revenue (RM and RF imagery combined). In Q3 it was down to $72.6% of total revenue or $151.66 million in sales. This was a 6% decline in total revenue for the category from what it was in Q2 2007.

With revenue falling in its core business category, Getty would hope it could make up the losses in some of its other lines of business. In Q2 2007 Getty had a big jump in editorial revenue as a result of the acquisition of WireImage. However, in this quarter editorial revenue only grew about $600,000 to $36.5 million.

Footage revenue was up about 1% compared with the Q3 2006, but down compared to every quarter since then. Despite these trends, the company expects revenue of approximately $850 million for all or 2007. This would be a revenue growth for the year of about 5.4%. The company is estimating 2008 revenue at about $900 million.