November 1999 Selling Stock

Posted on 11/10/1999 by Jim Pickerell | Printable Version | Comments (0)

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NOVEMBER 1999 SELLING STOCK

Volume 10, Number 2

published by Jim

Pickerell six times a year. The annual subscription rate is $80.00 to have the printed

version mailed to you. The on-line version is $72.00 per year. Subscriptions may be

obtained by writing Jim Pickerell, 110 Frederick Avenue, Suite A, Rockville,

MD 20850, phone 301-251-0720, fax 301-309-0941, e-mail: jim@chd.com. All rights

are reserved and no information contained herein may be reporduced in any

manner

whatsoever without written permission of the editor. Jim Pickerell is also

co-owner of Stock Connection, a stock agency. In addition, he is co-author

with

Cheryl Pickerell of Negotiating Stock Photo Prices , a guide to pricing

stock photo usages.

Thought For The Month

"I'm not worried about Royalty Free. My agency is under pricing them."

The comment was made at Photo Expo East by a photographer who is major producer of Rights

Protected stock images. He wishes to remain anonymous.

Stories 249 and 258

GETTY BUYS IMAGE BANK

September 21, 1999 - Getty Images, Inc. has entered into an agreement to acquire The

Image Bank from Eastman Kodak Company for $183 million.

The cash acquisition is expected to close in December 1999 and will be financed through a

combination of debt, and the proceeds of an approximately five million share offering by

Getty Images. Currently Getty's total outstanding shares are 35.4 million and the

additional shares will push their number of shares above 40 million. Shares were trading

today around $23.

Getty had $183 million is sales in 1998 and $107.1 million in the first six months of 1999.

TIB's revenues in 1998 were $70 million. Once this acquisition is complete, and assuming no

additional acquisitions, Getty's revenues in 2000 should be in excess of $285 million.

This acquisition puts Getty Images in an unassailable leadership position in terms of gross

revenues in the stock photo industry. The nearest challenger is Visual Communications Group

of London with slightly over $100 million in gross sales. Corbis would now be number three

and I estimate that their gross sales are in the $70 million range.

The Image Bank has an international network of 10 wholly owned and 62 franchisee offices in

40 countries. With this acquisition Getty expands its global distribution network to 56

wholly owned offices in more than 20 countries, and more than 165 agents and licensees

worldwide.

The Image Bank's imagery and brands include:

The Image Bank - contemporary stock photography and film footage with 10

million images and 5,000 hours of footage. TIB has more than 1,500 photographers and

illustrators and over 200 cinematographers. The library of TIB's Film Division is 100%

digitized and searchable.
Archive Photos - the largest collection of archival still imagery in North

America with 20 million images. Archive Film - 10,000 hours of archival footage.
Swanstock - A fine-art library of 100,000 images.
Artville - 16,500 royalty-free illustrations and photographs.

TIB And Getty Sales Analysis

The information Getty Images is required to file with the Securities and Exchange

Commission in conjunction with its acquisition of The Image Bank provides some interesting

insights into the two companies.

The surprises after reviewing the figures include:

Image Bank's 1998 gross sales of still images (photos and illustrations) was only

$45,997,513. This includes the sales of Archive, Swanstock and Artville as well as the TIB

division. If we were to separate out just the sales of the original TIB (without

acquisitions) the gross sales of still images would probably have been less than $40

million.
TIB experienced a decrease in still photo and illustration revenue for the first six

months of 1999 as compared with the previous year.
Gross sales for The Image Bank's film division (including Archive Films) was

$24,835,272 or 36% of company's total business.
Getty's sales in Europe represented 51% of their total sales in 1998.
Getty's sales in the "Rest of the World" (excluding Europe and North America) was

only 2.6% of their gross sales in 1998.

The following is a breakdown of Getty's Sales by areas of the world and in millions of

dollars. I have also provided Image Bank's 1998 sales for comparison.

Getty's Sales broken down by areas of the world.

Year

Europe

Percent

North America

Percent

Rest Of World

Percent

Total

1996

$32,115,000

37.7%

$36,069,000

42.4%

$16,830,000

19.8%

$85,014,000

1997

$37,505,000

37.2%

$48,266,000

48%

$15,026,000

14.9%

$100,497,000

1998

$94,823,000

51%

$85,339,000

46.4%

$4,922,000

2.6%

$185,084,000

The Image Bank sales broken down by areas of the world.

Year

Europe

Percent

North & South America

Percent

Asia/Pacific (ROW)

Percent

Total

1998

$29,932,759

32%

$58,862,836

63.5%

$4,323,163

4.5%

$92,418,758

The Getty figures above are the gross paid to Getty and do not reflect the

total gross sale when a sub-agent was involved. (The sub-agent percentage is

taken off the top before the Getty net is calculated.) On the other hand Getty

has wholly owns offices in most of the major countries and thus only a very small

percentage of their sales are made through sub-agents. As a result, these figures may

closely represent the actual gross sales of the imagery.

The TIB figures represent the total gross sales made to clients. Sub-agents,

not wholly owned by TIB, retained $22,424,538 or 24.26% of the gross fees collected.

This is not counted as part of TIB's gross income. Thus TIB's actual

gross income was $69,994,220. (The difference between the $69,994,220 and

$70,833,000 reported later in the SEC filing are probably the results of a

rounding error.)

The vast majority of TIB's cinematography sales were in the U.S. If we substract

the $24,835,272 from $58,862,836 (sales in North & South America) we come up

with an approximate number for still photo sales in North America of

$34,027,564. The following chart is probably more representative of the breakdown

of still photo sales in various parts of the world.

Year

Europe

Percent

North & South America

Percent

Asia/Pacific (ROW)

Percent

Total

1998

$29,932,759

44%

$34,027,564

50%

$4,323,163

$68,283,486

Still vs. Cine

TIB 1998 revenues were divided between still photography and cinematography with

the still division representing 64% of the income and cinematography

representing 36%.

Still Photography	Percent	Cinematography	Percent	Total
$45,997,513	64%	$24,835,272	36%	$70,832,785

Photographer Royalties

The share of royalties received by creators is illustrated in the following chart.

To make this analysis it was necessary to make a couple assumptions about the information

provided in the SEC filing. I have assumed that all

cinematography sales were made by wholly owned offices and that no

sub-agent percentages were taken from the gross sales of any of this work.

I have also assumed that all sub-agent deductions from the gross sale price

were the result of sales of still images or illustrations, not cinematography.

The percentage figures are based on the total gross sales of still images and

illustrations, including sub-agent fees, not just the amount the parent company receives.

Also note that the $29,624,090 is the total royalties paid to creatives. The

total sales of still images was $68,283,468 and the total of cinematography was

$24,835,272.

Still Photography	Percent Gross Sale	Cinematography	Percent Gross Sale	Total
$20,540,893	30%	$9,083,197	37%	$29,624,090

Dramatic Increases In European Sales

Getty had a dramatic rise in 1998 in the proportion of sales that were made in Europe.

Anyone looking at the Tony Stone Images catalogs that have been produced in the past two

years might have predicted such a rise. Certainly, U.S. photographers have been complaining

that the type of imagery that appeals to U.S. buyers has not been accepted for new catalogs

or the files. The Getty results would tend to support that contention.

One of the problems we have in making this analysis is that Getty had not reported numbers

for various brands. We would like to compare Tony Stone Images with The Image Bank, but we

are not sure that the Getty averages are reflective of the Tony Stone Images brand.

In 1998 Getty acquired PhotoDisc and Allsport. While a large percentage of Allsport's sales

may be outside the U.S. the gross sales of this division would not seem to be large enough,

in comparison with PhotoDisc and Tony Stone Images, to account for such a major shift in

Getty earning. PhotoDisc's sales are entirely digital and Getty has reported that 85% of

all its digital sales are in North America. Thus, since PhotoDisc is weighted toward North

America, I believe TSI sales were probably weighted toward Europe.

Rest Of The World

It is interesting to note Getty's dramatic fall in sales in the Rest Of The World

(everything but Europe and North America). One reading of this could be that the ROW buyers

are much more interested in the type of imagery produced and used in North America than

that used in Europe. If we divide the world into two categories -- Europe and Everything

Else -- the figures and the shift are even more dramatic. We believe that TIB's results are

actually more representative of the world's overall buying patterns of stock photography.

Part of the reason for the drop in sales was the 1998 financial crisis in Asia. But, it is

questionable as to whether that could be the entire answer. TIB reports that their 1997

sales in Asia were much higher than 1998, but they did not provide comparative numbers.

Agency	Year	Europe	Percent	Everything Else	Percent	Total
Getty	1996	$32,115,000	37.7%	$52,899,000	62.3%	$85,014,000
Getty	1997	$37,505	37.2%	$63,292,000	62.8%	$100,497,000

Getty	1998	$94,823,000	51%	$90,261,000	49%	$185,084,000
TIB	1998	$29,932,759	44%	$38,350,727	56%	$68,283,486

TIB's sales in Asia come close to matching Getty's in actual dollar value, even though

overall, TIB is a much smaller agency. This would indicate that there is a demand in Asia

for stock images, but that Getty's editing or their marketing strategy in this part of the

world may leave something to be desired.

TIB seems to be leveraging their advantage in the Asian region by opening an editing office

in Hong Kong in 1999 to edit the work of all Asian producers.

TIB's sales for the first six months of 1999 increased 7.7% to $38.1 million from 35.4

million for the first six months of 1998. These increases were primarily attributable to

the inclusion in 1999 of revenue from Artville which was acquired in October 1998, as well

as continued growth in film sales. This increase was partially offset by a decrease in

The Image Bank's stock photography revenues.

At the end of 1998 the fees owed to photographers and cinematographers by TIB for jobs

billed, but not yet collected were $11,654,009. This is a little more than 1/3 of the

monies paid to photographers in 1998 ($29,624,090).

Things To Watch

Will Getty push TIB toward a more European focus, or let it function as an alternative?

It would seem logical to combine sales offices, particularly in smaller countries. Will the

TIB offices remain, or will Getty give preference to the TSI offices that don't seem to be

generating as much income?

Will Getty allow TIB's editing philosophy to flourish, or will they try to drive them

toward the Tony Stone Images editing philosophy? Interestingly, in the past year or two,

photographers report that TIB has been loosening up on their editing while TSI's editing

has been getting tighter and more focused on Europe.

Many TSI photographers have suggested that, at the very least, TSI should have one set of

editors pulling images for the U.S. market and another for Europe. London should not have

total veto power over everything. So far this idea has fallen on deaf ears at TSI.

Now, that Getty can analyze TIB statistics in detail, maybe they will change their

approach. It is also interesting to note that TIB has recently decentralized their editing.

U.S. photographers are now submitting to New York and European photographers are submitting

to Paris as has been the case for a number of years. But, in 1999 an editing office was set

up in Hong Kong for Asian photographers and there are plans to set up an editing office in

Brazil in 2000 that will review the work of South American photographers.

Will Getty do more to push the work of TIB photographers than those with Tony Stone Images

because Getty will retain a higher percentage of the gross sale from this work? Such a

strategy would be difficult to implement, but there is certainly an incentive. TSI

photographers were receiving an average of about 38% of gross sales under the old contract

and as more and more of the 40% on digital sales kicks in that average should drop to 35%

to 36%. Given their structure TIB's average is 30%. The extra 5% difference that Getty

would gain by selling a TIB image rather than a TSI image is a strong incentive.

Individuals who would like to examine the 117 page SEC filing in more detail can find in

at: [www.sec.gov/cgi-bin/srch-edgar]. When this screen comes up input "Getty" and then look

at the S-3 filing on 9/29/99.

Digital Delivery

Recently, in London, Mark Getty stated that in five years all of Getty's image delivery

will be digital. Jonathan Klein has been quoted in several places saying, "We see our

entire business on the Web in three years."

One TSI photographer reports that currently the percentage of digitally fulfilled sales

appears to be very small. Since last October less than 1% of his sales have been digitally

fulfilled. Many sales are researched and contracted for on-line, but clients still

request delivery of film in the traditional way. Of course, the sales of PhotoDisc and

EyeWire are 100% digitally fulfilled.

Getty Growth

Analyst Keith Benjamin at BancBoston Robertson Stephens says that Getty is projecting sales

of $227 million in 1999 and $360 million in 2000. The $360 million will include The Image

Bank which will not be a part of Getty's 1999 sales.

However, if TIB's gross sales of around $70 million are added to Getty's 1999 projections

the total is less than $300 million. To reach $360 million, a 20% growth in sales, Getty

will probably need to make a number of acquisitions in 2000. It seems highly unlikely that

the growth of the companies they currently own will reach that level.

Following the acquisition of The Image Bank, Getty Images will have in excess of 60 million

images and more than 30,000 hours of footage. Getty has approximately 1,600 employees

worldwide and TIB has about 500.

Story 251

TASINI DECISION OVERTURNED

September 28, 1999 - Freelance writers have won a major victory with a ruling by the

U.S. Court of Appeals in the Second Circuit of New York. The court overturned the lower

court decision in Tasini et al. v. New York Times et al.

The decision says that the "collective works" privilege in 201(c) of the 1976 Copyright Act

does not protect the Times and other publishers from copyright infringement claims. The

publishers had claimed that the 201(c) privilege allowed them to make "any revision in a

collective work" that they had originally published without being required to additionally

compensate the creator of the original work.

In his written decision Chief Judge Ralph K. Winter said, "there is no feature peculiar to

the databases at issue in this appeal that would cause us to view them as 'revisions'."

Judges Rosemary S. Pooler and Senior Judge Roger J. Miner joined in the opinion.

"Because it is undisputed that the electronic databases are neither the original collective

work -- the particular edition of the periodical -- in which the Authors' articles were

published nor a later collective work in the same series, appellees rely entirely on the

argument that each database constitutes a "revision" of the particular collective work in

which each Author's individual contribution first appeared. We reject that argument."

"We emphasize that the only issue we address is whether, in the absence of a transfer of

in which they own no rights. Because there has by definition been no express transfer of

rights in such cases, our decision turns entierly on the default allocation of rights

provided by the Act. Publishers and authors are free to contract around the statutory

framework," Judge Winter concluded.

The decision greatly narrows what might qualify as a "revision." While certain uses could

still be considered revisions, for all practical purposes the vast majority of digital uses

that have been made in the last few years would no longer qualify, and would require

separate specific licensing for the digital use.

Many publishers have been arguing that the "Tasini" ruling has given them the right to

re-publish, in a variety of digital formats, anything that appeared in their print

publications. This decision make it clear that those uses were infringements.

Publishers are likely to aggressively add clauses to their contracts that expressly

transfer electronic rights, as well as print rights, on the images they purchase. Many

will require the creator to agree to the transfer of both rights before they use the

material in either format.

It is extremely important that photographers and agents read all new agreements and

purchase orders carefully. You should precisely and narrowly define the rights you are

transferring. Also, be sure to charge an appropriate amount for these additional rights

when they are transferred.

If it also time to begin aggressively pursuing unauthorized on-line use of images supplied

for print use only. As a first step we recommend sending a "Settlement Offer" (not an

invoice) for three times the normal fee for any unauthorized use you discover.

Many publications have been very sloppy in checking rights before they put images on-line.

A few settlements may convince them to be more careful and to negotiate rights before using

images.

Story 256

SPEEDPIX

In an effort to try to give photographers an online option to the current dominance of

Internet selling by the big agencies, Speedpix, led by United Kingdom photographer Mike

Morrison and international software consultant Joe Clarke, expects to launch a new on-line

site with approximately 5,000 images in February 2000. Speedpix's URL is:

www.speedpix.com.

This agency guarantees photographers 65% of gross sales if they let Speedpix handle their

images exclusively, or 55% on a non-exclusive basis. It is important to note that these

percentages are of the true gross sale because there will be no sub-agents involved to take

percentages off the top. Speedpix will be a fully digital agency. Their vision is to sell

directly all over the world so there will never be a sub-agent discount taken off the top

before the photographer's percentage is calculated.

Their initial search engine will be in English only, however, they are working on a German

version and expect to have it operational shortly after launch.

They plan to make all sales through secure on-line credit card transactions so the payments

will be immediate with no billing and collection problems.

Based on our experience we think the payment and collection strategy will present some

problems in the near term. While it is certainly easy for online users to pay for services

with a credit card, we believe most photo buyers in the U.S. still prefer to be billed.

Companies like Getty Images are claiming that 25% of their sales last quarter were "digital

sales", but that does not mean that all these sales were full e-commerce sales.

It is clear that 25% of the Getty clients use digital search to find the image they want to

use. However, Getty does not supply statistics on the percentage of sales that are billed

rather than using automatic payment. Likewise, they don't report the number of "digital

sales" where fulfillment is by film rather than a digital file. Granted the industry is

moving in the direction of full digital and Jonathan Klein, CEO of Getty Images, predicts

the industry will be fully digital in three years. Nevertheless, we believe Speedpix may be

ahead of the curve on this payment issue.

Speedpix does plan to handle some negotiated sales for multiple insertions and exclusive

uses, but it appears that one reason they can offer a higher percentage is that they do not

intend to have a lot of billing and collection costs. We believe in the near term this

strategy will limit the number of potential buyers willing to work with Speedpix.

Costs of Supplying Images

Speedpix will charge photographers $50 per image for the initial two years after launch and

an additional $5.00 per image per year to be deducted from sales after the initial two year

period. Of the $50 only half must be paid up front. The other $25 will be deducted from

sales.

This second $25 will be recovered by retaining 50% of the photographer's monthly

commissions until the outstanding balance is paid off. The photographer will be obligated

to eventually pay a total of $50 for every image placed on the site whether that image

sells or not.

Keywording charges are included in this fee, but the photographer must also pay scanning

charges or supply an acceptable 30MB file. Speedpix has worked out an arrangement with a

scanning service in London that offers a very reasonable fee for a 30MB scan. That charge

will be approximately $4.50 per image plus shipping and handling charges.

Speedpix intends to store only digital files. Originals will be returned to the

photographer after scanning. They feel that only rarely will customers ask for a file

larger than 30MB. In most cases their first step will be to re-size the file in Live

Picture and apply judicious sharpening in the lightness channel of Lab mode. Only as a last

resort will they attempt to obtain film to deliver to the client.

From a quality point of view, Speedpix is probably right that this is a satisfactory

procedure for supplying usable files to the client. However, this procedure failes to take

into account the fact that many print users still want film, even when they use a digital

catalog to locate the image.

Pricing of Usage

Potentially the biggest problem with Speedpix is their pricing strategy. They emphasize

that they want a very simplified pricing structure that makes it easy for the user. They

will charge on a per usage basis and say they will have a "comprehensive and easy to use

pricing engine". The following sample price schedule can also be found on their site at

www.speedpix.com.

Web Use - 700K file	6 Months	12 Months
Banner or Front Page	200	300
Other Pages	100	150

Non Promotional Use	700K	7MB	30MB
	100	180	300

Promotional Use
Print Run	700K	7MB	30MB
Up to 5,000	120	250	400
5,001 to 500,000	150	400	700
500,001 to 3 Million	200	600	1100
over 3 Million	240	800	1400

Speedpix arrived at their pricing structure by first analyzing sales figures from three

major libraries and one minor one. A larger percentage of the sales analyzed were from the

U.S. and Germany than from the UK. They then looked at the low prices charged by RF and set

their prices at a point between the two.

Finally, in order to keep the licensing process simple, they have established prices based

on file size rather than size of usage and provided limited circulation breakdowns. For the

non-promotional uses, which includes all editorial uses, they will be adding a print run

breakdown.

Morrison indicates that if these prices seem low, it is because prices in the industry have

been falling in the last few years due to the pressures of RF.

In our research in the U.S. market we find that prices charged by the major agencies have

been dropping much faster than those of many of the minor agencies. Many smaller agencies

have refused to play the "match price" game with RF or the larger agencies and have been

able to maintain reasonable prices for usages they license. They have also discovered that

even with higher prices their sales volumes don't tend to fall off any faster than seems to

be the case with many of the giant agencies.

Photographers need to carefully examine the pricing structure and proposed pricing

philosophy of any agency they join. One basis for comparison of online prices is to go to

PictureQuest and price a variety of uses. Keep in mind that on this site each agency sets

its own prices for most uses. It is advisable to check the price on images from different

agencies. The PictureQuest system is much more complex than that proposed by Speedpix, but

it has a track record of working very well. Consider whether total simplicity is an

absolute necessity in E-commerce.

We believe there is still value in pricing based on size of usage and circulation rather

than the size of file delivered. On PictureQuest certain digital uses are priced based on

file size but most print usages are priced based on the size of the usage and print run. I

can't speak for other agencies but currently Stock Connections' average gross sale for

print usages on PNI is $525 per usage. It is hard to imagine Speedpix's averages being

anywhere close to that given the proposed schedules.

While selling by file size is common in the on-line market, it can result in some

disturbing uses. Users have found ways to get by with small files for fairly large

reproduction. If the image is graphic without a lot of subtle detail or color changes, art

directors can often get very satisfactory results with small files. Pixelization is also

used as a design technique and this allows art director to use smaller files.

On Web uses there should be a distinction between advertising and editorial uses. Banners

are advertising uses and should command a higher price than other advertising uses. Not

only are there front page uses, but the way Web sites are being designed there are a lot of

lead page uses to various sections that are analogous to "chapter openers" in books. These

should command higher prices than pictures buried deeper in a site. To fail to ask for

different prices for such variations brings the whole pricing structure closer to RF,

regardless of what the strategy is called.

It is important for photographers to recognize that the difference between Royalty Free and

Rights Protected is not so much that RF users can use the same image over and over on "many

different projects", but that they get a lot of usage on a "single project" for one very

low price. The RF producers acknowledge that many disc buyers buy a disc with 100 images --

only use one -- and never use that disc again.

Photographers need to be concerned about the price clients will pay for full page uses or

large circulations. More money is lost by allowing large uses for too low a price than by

single clients using an image in multiple projects.

Simplicity

Speedpix believes that the pricing structure must be extremely simple and that most of the

transactions much be fully automatic for an internet site to be successful.

Mike Morrison says, "We will not have local agents anywhere else in cyber space. This is

an internet based service. The concept of needing local agents completely reverses the

advantages of dealing in this way."

At Selling Stock, we believe that the Internet can provide efficiencies and be used

effectively in ways that are not 100% E-commerce. We believe there remains a place for

local agents in such a strategy, although the services provided by the local agent may be

very different from the services traditionally supplied. The percentages the agent receives

for this new package of services may be much less than what agents have expected in the

past, but because their cost will be less their profit margins could be as good or better.

We believe that some models of how the Internet can be used effectively without being 100%

E-commerce are: PictureQuest.com, Workbook.com, Thestockmarket.com, The Image Bank's

private online services, and to a great extent the services being supplied by Getty Images.

Alternatives

While we have outlined a few concerns with Speedpix, it still may be the best option

photographers have to get their images seen. This may particularly be true if their images

are of a type and style that are more frequently used in Europe than the U.S.

To make a reasonable judgement we need to compare Speedpix with other available options

such as PictureQuest operated by PNI in the U.S.

Most photographers should be looking at a non-exclusive arrangement with any marketer who

is 100% into online marketing. At this stage in the development of the technology it may

not be wise to limit all your marketing to online. Other types of marketing need to be used

simultaneously to maximize sales from your images. Therefore, I will base my comparisons on

the 55% rate.

Speedpix is an agency. The photographer's images are edited and not every image submitted

is placed on the Speedpix site. Photographers interested in placing images on PNI have a

choice of 65 agencies. The big question is which agency will choose the most of the

photographer's images?

PNI has over 400,000 images on their site so the client gets a much broader selection than

going to Speedpix's site with 5,000 images. PNI has been selling pictures online for

several years and has over 50,000 registered users. Client can get film from PNI agencies

if they choose. Assuming the client knows about both PictureQuest and Speedpix, which site

are they likely to go to first?

The price photographers will pay to get their images on PNI and the percentage of the sale

they will receive, varies from agency to agency. In some cases the photographer's will pay

nothing to get their images up online, but will only get 30% of the gross sale.

With Stock Connection the photographer pays a one-time fee of $23 per image and the image

may stay up forever with no additional cost. This fee includes the cost of scanning as well

as keywording. PNI handles collection for all sales and takes 40% off the top. Stock

Connection takes 35% of the remaining money so the effective rate to the photographer is

39% of the gross sale. That is certainly less than 55%, but the issue is whether the sales

volume generated by Speedpix will match the volume likely from PNI.

Currently PNI makes almost no sales outside of North America. Photographers should keep in

mind that Getty, who is aggressively trying to sell everywhere in the world, says that 85%

of their digital sales in the first six months of 1999 were in North America. Speedpix may

generate more sales in Europe than PNI, but what about their volume in the U.S.?

Comparative Statistics

Recently, in another story I published some figures on average return to photographer from

different online marketing operations. These figures are worth repeating.

Several Corbis photographers indicate that their share of sales should be between $3.00 and

$9.00 per image on-line for 1999. This is up significantly from previous years. On the

other hand, Stock Connection photographers who have images on PNI will average in excess of

$20 per image for images on the site for the whole of 1999.

It should also be noted that only a little more than 1% of the images on PNI are Stock

Connection images. We have no way of knowing whether our returns are better or worse than

the other agencies who obviously represent the vast majority of the images.

Stock Connection photographers also have images on Workbook.com. In the past year our

photographers have received, on average, a little over $15 per image, for that year for

each image they have on this site. Approximately 5% of the images on the site belong to

Stock Connection photographers. We do not know the average return per image for other

agencies.

By way of comparison it is also worth noting what ASMP's MPCA on-line service is producing.

In March of this year Dick Weisgrau told us that MPCA has about 600 qualified buyers who

can view the site and that gross sales are in the range of $60,000 per year. This means

that MPCA photographers are receiving, on average, about $.70 per year, per image on file.

Story 254

PNI AND CINEBASE TO MERGE

October 12, 1999 - Picture Network International, Ltd. (PNI), a Kodak Company, and

Cinebase Software Inc. have signed a letter of intent to merge and create a new company

which will be a leading provider of media asset management services. Still photographers

will be interested in this merger because PNI is also in the business of licensing rights

to still images and Cinebase will add a video and film content aspect to these licensing

services.

PNI is parent of PictureQuest which has an on-line database of more than 400,000 images

from 65 stock agencies and stock photo suppliers. Cinebase is actively investigating the

potential of acquiring stock footage for licensing to leverage their technology.

PNI also provides a media hosting services through MediaQuest which enables companies to

manage their own digital assets. PNI customers for this service include Discovery

Communications, Intel, McDonalds, Bechtel, Paramount Motion Pictures and others.

Cinebase is a leading provider of digital asset management of video and film content to the

entertainment, government, corporate and advertising markets. Cinebase -- with such clients

as Nike, McDonald's, Young & Rubicam, E! Entertainment, Warner Bros., the National Library

of Medicine, the National Imaging and Mapping Agency, and over 30 others -- have

established themselves as the leader in media management during the creation, production

and approval processes.

While exact figures are not available it is believed that the MediaQuest side of PNI's

business represents a much larger share than the PictureQuest licensing side. Clearly, the

major focus of the new company will be in providing hosting services, not in licensing

rights. Nevertheless, the licensing side of the business should benefit from some of the

synergies with hosting clients.

Robert Griffin, present CEO of PNI will be the new president and CEO or the combined

company. Kodak will remain a significant shareholder in the combined entity. Joerg Agin,

President of Entertainment Imaging, the Eastman Kodak Company said, "The new entity will

remain a Kodak strategic partner and we believe that its success will prove valuable to

Kodak as the use of digital media becomes even more widespread."

PNI and Cinebase characterized the transaction as a "merger of equals" and promised details

on management, headquarters, naming, and other information at a later date. PNI moved its

offices to a new location in Fairfax, Virginia at the beginning of October.

What Does It Mean For Still Photographers?

Clearly, the primary focus of this company will be in providing hosting and asset

management services for Fortune 1000 companies. However, the PictureQuest arm of the

company which is one the principle channels to internet customers for small and medium

sized stock photo suppliers is also likely to be strengthened.

The merger should benefit PNI's photographers and agencies by providing increased resources

for marketing and a higher level of visibility among the business customer base.

Recent acquisitions and consolidations by Getty Images and other large players have limited

the opportunities for many photographers to get their images into competitive online

marketing.

The enlargement and strengthening of the PNI business model gives new hope to small stock

agencies and individual photographers. It enables small suppliers to participate on a major

online database that is well promoted and managed and still maintain many of the

distinctives of their unique services. Photographers who have found that they can't get

Getty, Corbis or the other majors to show their best work now have other options.

Story 260

INFRINGEMENT AT GLENCOE

Textbook publisher Glencoe/McGraw-Hill has produced a series of science books for middle

schools for which they have not cleared copyright or made proper payment. This series is

called Science Voyages 2000 and includes three texts for 6th, 7th and 8th grades

(red, green and blue). The ISBN numbers for these books in order are: 0-02-828629-4,

0-02-828579-4 and 0-02-828669-3.

The books have a publication date of May 2, 1999 and are currently available for purchase.

We have been unable to find any stock agency, credited in these book, who has even received

notification that the books have been published, let alone payment for the usages.

At this point Glencoe is clearly in violation of federal copyright law for every image in

these books since they did not request a license prior to publication.

In September we reported on our on-line site (Story 253) that Glencoe had a similar problem

with the 1998 revision of Biology: The Dynamics of Life. Science Voyages is not a

single oversight, but a pattern.

It is the standard custom in the photo industry when publishers have not properly cleared

The usual fee for a retroactive license is ten (10) times the fee that would have been

charged for a 'normal' license requested and paid for prior to publication."

We were able to contact Alexander Mlawsky, Vice President and Director of Art, Design &

Production at Glencoe. He refused to comment on any of the issues regarding this series

except to say, "This was not an oversight. We are in the process of notifying suppliers."

In this situation, it is recommended that all photographers and agencies who have images in

one of these three books should invoice for a "retroactive license."

Science Voyages has another unusual problem. Many of the images are credited to Morgan

Cain & Associates, a research firm in Tucson, Arizona that handled trafficking to the

printers of pictures acquired by Glencoe. Morgan Cain did not do any of the basic research

on this project and did not receive any images directly from stock agencies or

photographers. John Meyer of Morgan Cain has no explanation for how the pictures could

have been credited to his company because they had absolutely nothing to do with preparing

the photo credits that appeared in the books. Normally, images must be credited to the

photographer and/or agency who provided the images.

In order to determine the number of images you have in these books sellers should obtain

copies and check the actual usage. It is likely that Glencoe's records are incorrect.

When credit is incorrect, sellers should bill three (3) times the normal usage fee for

improper credit.

To order copies of the books you may call Glencoe's main office in Westerville, OH at

1-800-848-1567. Ask for the sales or marketing department. It is also a good idea to ask

for a copy of Glencoe's most recent catalog and try to get on their mailing list for future

catalogs, if you are a regular supplier.

Dynamics of Life

The problems with Biology: The Dynamics of Life relate to reuse fees. Most of the

images were first used in the 1995 edition, but Glencoe published a revision in 1998 and

failed to notify suppliers. Many suppliers have just recently learned of this revision.

In addition to the Student Edition there are other versions listed in the Glencoe catalog

for which there should have been payment. There is a Teachers Edition, a Spanish language

translation and a CD-ROM edition in English.

The description of the CD-ROM edition in the catalog says "every illustration and image" in

the student edition is included on the CD-ROM. This is part of a 6 disc series and has a

list price of $539.94.

There is also a 2000 edition of Dynamics of Life which is now available. Some sellers have

been paid for new images included in the 2000 edition, but not for the pick up images from

previous editions.

In an effort to try to settle this matter Glencoe has finally started sending some agencies

checks to cover the usage in the 1998 edition. Along with the check comes a letter that

says, "We propose to pay you at 100% of your new image fee, instead of a reuse charge of

75%. By cashing this check, you acknowledge receipt of full payment for all rights

necessary to use these photos in the 1998 edition and the full resolution of this matter."

Sounds like they are giving more in recognition of their late payment doesn't it. In fact,

the amount offered is about what sellers would have charged for the "student edition"

alone. Glencoe's language implies that this payment covers "all" uses connected with the

1998 edition. One agent calculated the amount owed for all the various uses connected with

the 1998 edition, and invoiced for more than seven (7) times the amount Glencoe offered

with their check.

Another irritation about this letter and check is that the letter was dated September 24th,

but not mailed until almost a month later because it arrived at least one agency on October

21st. Anything to delay payment a little longer.

There is also a connection between Glencoe and National Geographic. NGS prepares a mini

chapter which is bound in the center of most, but not necessarily all, of the Glencoe

science books. NGS is offering to pay photographers for a 40,000 press run for a Spanish

language usage in this book. It is unclear whether the NGS chapter will also be inserted

in the English language edition of this book.

Glencoe is claiming that the combined total press run of the English and Spanish language

versions is UNDER 40,000. We don't know who is making the mistake here, but it defies

belief that National Geographic would pay for more usage than necessary.

What About Other McGraw-Hill Divisions?

Clearly, it seems that the different divisions at McGraw-Hill do not talk to each other and

that each division has different policies and practices.

For example, in October we reported that McGraw-Hill is now asking for:

grants to McGraw-Hill the following non-exclusive rights for inclusion of the Licensed

Materials in the Program materials: i. the right to edit and use the permission material in

the Program Materials and in connection with the Program, including use in minor revisions

(concerning no more than 25%) of the Program..."

While this request raises some deep concerns, so far it has only come from the College

division of McGraw-Hill which includes Burr Ridge, IL and Dubuque, IA. This may not be the

policy of all McGraw-Hill companies.

What To Do?

You can no longer depend on this publisher -- and maybe any publisher -- to tell you

when they have published your work. You can't wait to be notified.

When you deliver images to a book publisher you must get the tentative publication

date as well as the working title of the publication.

Get the publisher's catalog and keep checking to see when titles appear for which you

have supplied images. Buy a copy of the book. One photo seller reports he purchases every

book in which his images are published to validate his usages. He invariably finds at

least one error the publisher has made in its favor. At $60 to $70 these books are

expensive, but this sellers says the additional money he makes from spotting errors nets

him at least $20,000 a year.

You must follow up. Business practices are not the same as they were a decade ago.

You can no longer trust the publisher to supply you with the information you need to

properly invoice.

Invoice for retroactive licenses.

November 1999 Selling Stock

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