Corbis Buys Digital Stock

Corbis Corporation acquired Digital Stock Corporation in early February. We believe Digital Stock is the world's second largest provider of royalty-free digital images.

At one point a few months ago Getty-Images was discussing the possible purchase of Digital Stock for around $25 to $30 million. We expect the Corbis purchase was in that ballpark.

"Today's acquisition represents an aggressive move by Corbis to broaden its content and customer

base to include

advertising, graphic design, corporate

communications, pre-press, publishing, multimedia and web site design markets."

Digital Stock becomes an operating division of Corbis' image licensing business and will maintain

its current operations

in Encinitas, CA.

"Corbis recognizes that there is a broad spectrum of both content and customers," said Leslie

Hughes, vice president and

managing director of Corbis

Images. Ms. Hughes recently joined Corbis from The Image Bank.

"With the acquisition of Digital Stock, Corbis is putting in place an important piece of the total product spectrum. By marrying our world-class image collection with our sophisticated technology, Corbis is uniquely positioned to provide digital solutions for visual content users across a wide range of needs, from royalty-free commercial offering for the corporate art director to unique works from major artists and museums for the publisher."

The move marks a major change in direction for Corbis.

The most significant part of this move is that Corbis, for the first time, has acquired imagery

that is likely to be of

interest to the advertising and

graphic design community. Up to now, Corbis has focused exclusively on the editorial and consumer

side of the business.

When acquiring content they

focused on shooters that had a specialty in editorial. When they found a photographer who had both

advertising and

editorial imagery, the Corbis

editors usually totally ignored the best selling advertising images and went only for those that

were editorial.

Some Corbis photographers have expressed concern that Corbis may try to take images already placed

in the Corbis database

and put them on RF discs. We

think that concern is unfounded except in cases where Corbis totally owns the images. Their

contracts with photographers

do not allow such use. In

addition, the vast majority of imagery in the Corbis file is not of a type that would be of

interest to Digital Stock

clients.

The more interesting questions are:

• As a first step in acquiring content of interest to the Advertising and Graphic Design

  community, why did Corbis

  choose the RF route rather

  than purchasing a traditional agency that focuses on "rights control"?

• Will Corbis start looking at some of the "Rights Control" agencies as possible acquisitions?

• Will Corbis make effective use of the DS client database to determine who is using images?

  Will they finally

  understand that the client base for

  DS is totally different from the client base for their editorial images?

• Will Corbis focus on low end sales to advertising, or will they figure some way to market these

  images to a higher

  market at a better price?

• Will the fact that the two largest RF providers are now owned by companies that have an

  interest in licensing "rights

  controlled" uses alter the

  pricing structures of RF? Will Corbis push the price up when they begin selling individual DS

  images on-line? Currently,

  the standard is $69.95 set

  by PhotoDisc and $80 by Adobe. The Corbis prices and the Publishers Depot prices are much higher

  with more limitations on

  usage. If Corbis markets DS

  images at its current "rights controlled" prices, and can do that with moderate success, then

  Getty-Images and PhotoDisc

  will have an interesting

  dilemma.

• Will Getty feel so committed to their price structure that they are willing to leave $30 or $40

  on the table every

  time they make a sale? That

  doesn't sound like a business plan stockholders would endorse. Even the higher prices we are

  talking about are still well

  below the average prices

  charged by stock agencies for such usages. One would think that few clients would be discouraged

  from buying RF images if

  the price were $100 or $110

  rather than $70.

If RF prices for individual on-line sales can be pushed up somewhat it could benefit all sellers.

Given the ownership of

these companies, I believe

such a strategy is within the realm of possibility. On the other hand, it is equally possible that

these companies will try to drive each other out of

the market with a "rush to bottom" on price. One of the most important things to watch relative

to this purchase is what happens to on-line pricing.

Another Note

Every press release talks about Corbis' "great technology" but it sure isn't hassle-free compared

to other sites on the

web.

At Corbis, to even look at images and see if they have anything of interest, you have to fill out a

credit application giving bank references and trade

references. This does not encourage people to look. Sure, this information may be necessary at

the point a customer is ready to buy, but not to look at thumbnails.

fax 301-309-0941, e-mail: jim@chd.com.