3
STOCKBYTE TO BE ACQUIRED
March 18, 2006
Rumors have it that any day Stockbyte should announce its sale for a record multiple for a Royalty Free stock photo company. The betting is that the Getty Images will be the buyer and the price will be at least $200 million. Estimates are that Stockbyte's gross annual revenue is in the range of $50 million.
Another likely bidder is Corbis, but I think the price will be too high, not because Bill Gates can't afford it, but because as Gary Shenk, Senior VP of Images at Corbis, told me earlier this week, "At current valuations it is better to spend money to create wholly owned content than to acquire companies."
For $200 million you can create a lot of wholly owned content and if you are taking a longer view, as Corbis seems to be doing, you can afford to build a little more slowly rather than feeling that you absolutely must have this body of work and revenue now.
On the other hand, it would be quite a coup if Corbis were to outbid Getty on this one. It would provide strong evidence that Corbis is serious about improving their position relative to Getty. There is no question that the quality of the imagery if excellent, and it is likely it would immediately more than double Corbis' RF revenue from the $33.2 million it sold in 2006. It would significantly broaden Corbis' offering in the area where their collection is weakest, and an area they have targeted for growth in 2006. This would give Corbis a tremendous kick start toward its goal of adding at least 180,000 new RF images to its site in 2006. Corbis' marketing arm would benefit tremendously from having the Stockbyte collection as it tries to grow RF revenue in 2006. It would also be a nice little bonus to force Getty to cease marketing Stockbyte imagery given Getty's policy of not representing brand owned by its two major competitors.
Consequently, I'm not going to count Corbis out on this one until the final announcement.
Certainly, Alan Meckler would also love to have Stockbyte. It would be a strong addition to his JupiterImages brand. But, I think the final price will be much more than Jupitermedia will be willing to pay. In fact, Meckler might be in the best position of the three majors to see long term growth from this collection given the RF position Jupiterimages already has.
Part of the problem for Getty is that sales of the Stockbyte collection are likely to cannibalize sales of other Getty Images brands.
Clearly, the reason Getty will pay this price is not that it needs the imagery, but rather that it needs to keep its two competitors from getting it.
But at what price? It will be interesting to see how the stock market reacts to such an investment. Will investors only look at the increased revenue and the increased margins that so much wholly owned imagery will give Getty, or will they consider Getty's cash position and whether this is really a precursor to long term growth?
Whatever happens, Jerry Kennelly will be smiling all the way to the bank.
For a little history on Jerry Kennelly and Stockbyte see Story 754.