278
JANUARY 2000 SELLING STOCK
Volume 10, Number 3
©2000 Jim Pickerell - SELLING STOCK is written and
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
"Finding photos has become more cumbersome and time intensive for clients. They
are required to do more work. As a result, they either go to RF which is more
hassle-free, or call fewer image sellers." - Gary Elsner
Story 276
SUPERSTOCK LAUNCHES EXPRESS PRICING
January 7, 2000 - In an effort to make the process of purchasing stock more hassle-free for
the buyer SuperStock has instituted a new pricing strategy they call
Express Pricing.
According to Gary Elsner, new President and CEO of SuperStock, "Express
Pricing combines the best of both worlds -- the fixed pricing and liberal
terms that make royalty-free attractive, plus the rights protection,
personal service and high-quality imagery of a stock photo agency."
SuperStock set out to develop a marketing strategy that would
differentiate them from the rest of the players in the industry. Express
Pricing was the result. They have established a list of just 18 prices
that cover the most popular stock photo usages. They believe clients
will use Express Pricing for 80% of the images they license.
SuperStock will launch a new print catalog, a major advertising campaign
and an updated 30,000 image web site at www.superstockimages.com in
January.
Price Schedules
ADVERTISING & PROMOTIONAL USE
|
|
|
Duration of License
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Collateral: Brochure, direct mail piece, annual report, etc.
|
|
|
|
|
Inside Use
|
$ 350
|
One Year
|
|
Cover Use
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$ 750
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One Year
|
Magazine Advertising, consumer or trade
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|
|
|
|
1 to 4 insertions
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$ 750
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One Year
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5 to 12 insertions
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$1500
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One Year
|
Newspaper Advertising
|
|
|
|
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1 to 4 insertions
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$ 600
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One Year
|
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5 to 12 insertions
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$1200
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One Year
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Web Site
|
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$ 325
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One Year
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Billboard
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$ 800
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One Year
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Point of Purchase
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$ 450
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One Year
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TV Commercial
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$ 850
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One Year
|
EDITORIAL USE
Book, text and trade
|
Inside use
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$ 135
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One Edition
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Magazine and other pubs
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Inside use
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$ 125
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One Issue (print or electronic) |
Editorial Programming |
|
$ 175 |
Life of Show |
Editorial CD |
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$ 75 |
One Edition |
MISCELLANEOUS
Credit or Phone Card |
$ 700 |
Three Years |
Display or Mural |
$ 400 |
Three Years |
Packaging |
$ 750 |
Three Years |
Multimedia Presentation |
$ 125 |
One Year |
Digital Delivery Fees
File sizes based on 300 dpi. Digital files are delivered as either
uncompressed TIFFs on CDs via courier or
compressed JPEGs via on-line download.
Reproduction Uncompressed Compressed
Size TIFF JPEG Price
Half page,9"x6" 20 MB 5 MB $ 40
Full page, 9"x12" 40 MB 10 MB $ 80
Two page, 18"x12" 80 MB 20 MB $120
Terms
Licenses are for the period of time designated for the use category.
Licenses are for U.S. distribution only (except Web usage). Licenses are
non-exclusive. No limitations on size or print run. The basic license
fee provides film only. Express shipping charges for film and/or CDs is
additional.
Custom Options
While the above prices cover the majority of uses SuperStock will also
offer custom pricing. Volume discounts will be available, and if someone
has a particularly small use, or a small circulation SuperStock will be
willing to negotiate lower prices. For additional fees buyers can also
purchase Limited Use or Exclusive licenses. Multiple uses and
International uses will be priced separately.
Express Pricing will be launched in North America immediately and they
expect to launch it in their other wholly owned offices around the world
in February.
Positioning In The Market
Superstock has attempted to position their pricing between Royalty Free
and the prices offered by the traditional Stock Agencies. This
positioning enables them to offer RP services at close to RF prices.
They believe buyers use RF because of the "simplified process" of
licensing, not because of price. With EP SuperStock has tried to
simplify the purchase of Rights Protected images and provide a very broad
license.
SuperStock has a clear understanding of what the RF buyers are looking
for having been a principle supplier of images to EyeWire which was sold
last summer to Getty Images. SuperStock's goal is to take back business
they have lost to RF.
EP offers the simplicity of RF prices, and as a traditional agency
SuperStock is able to provide several add on services that RF can never
offer. These include:
New Leadership
In December, Gary Elsner was named President and CEO at SuperStock by the
company's former co-presidents, Jim Ong and Bill Beermann. The agency,
headquartered in Jacksonville, Florida represents hundreds of
photographers, artists, archives, museums and special collections from
around the world.
Beermann and Ong have now assumed the role of co-chairmen, turning over
the company's day-to-day operations to Elsner. Elsner was VP of Sales at
FPG for over 32 years and left that company a little over a year ago.
SuperStock offers three distinct collections of images, each with its own
catalog line: The Portfolio Collection of Contemporary Photography,
Vintage and Historical Images, and Art Images, Classic and Contemporary
Art and Illustration.
Elsner's role at SuperStock will be to work with the executive management
team to reposition the company to effectively compete in the evolving
visual content industry. He will also oversee the complete digital
conversion of SuperStock's image archive, as well as the implementation
of a state-of-the-art e-commerce web site.
In announcing his appointment Ong explained, "Elsner's appointment is
the first step in the company's plans to pursue a new direction for the
next millennium." And Beermann added, "He will provide the vision and
momentum that SuperStock needs to fulfill its strategic mission."
Comparisons
For the most part Superstock's Express Prices are not that far out of
line with standard industry rates for 1/4 page uses for small
circulations. Where the differences become marked are when the image is
used 1/2 or full page, or when the print runs are very high.
For example when we compare "Express Prices" with those in Negotiating
Stock Photo Prices for brochures we find that $350 is about the right
price for 1/4 page use with 20,000 circulation. There are a many uses at
this small size and print run, but, NSPP says a full page picture in a
large press run brochure is worth $1,925. SuperStock will give up that
use for $350. This pricing is better than royalty free, but not much.
With advertising uses $750 is about right for a single 1/4 page insertion
with a million circulation. I assume that buyers will lower circulations
will push for lower prices and get them. For a single full page use in a
major large circulation publication NSPP recommends a fee of over $3,000.
For a single full page ad insertion in a major newspaper like USA Today
NSPP recommends a fee of $1,580 which is probably low considering that
the fee paid to the publication for the insertion is over $200,000.
Nevertheless, SuperStock will only ask $600 for that use and allow up to
12 insertions of the same ad for $1,200.
Elsner says the prices are only "slightly" lower than the average prices
SuperStock has been getting for these uses. This would indicate that
SuperStock has already been giving away larger sized uses (1/2 and full
page) and larger press runs for the price of small press runs in their
price book.
We have indications that a number of other agencies have been doing the
same thing, but this is the first public acknowledgment of this fact.
Most agencies do not report the size of the usage or the circulation
figures on their sales reports. As a result photographers have no way of
telling whether the fee they are being paid is for a 1/4 page use, or
full page; for 10,000 or a million circulation.
SuperStock photographers have reported a fall off in royalties in the
past year and Elsner acknowledges that SuperStock's gross income was
"down a bit" in the 1999 fiscal year that ended in June when compared
with the previous fiscal year. But, he says sales have now "turned the
corner" and are moving back up.
Elsner points out that SuperStock is the first agency to have a published
price list. Every other agency has a price book, often with prices that
haven't been changed in years, and they "negotiate down" from the prices
in their book.
Will These Prices Reduce Negotiations?
I don't think so. Buyers will say:
- "I don't need a year license, I'm only going to use the picture
one time; give me a discount."
- "That's your price for full page use, but I'm going to use the
picture small; give me a discount."
- "That's your price for unlimited point-of-purchase and we are only
going to be using the picture in 5 locations; give me a discount."
- "That's your price for some major advertiser with a print runs in
the millions. We will only be printing 10,000; give me a discount."
- "Our TV commercial will only be used for a month, not a year; give
me a discount."
- "That's your price for a chapter opener in a book, but we will only
be using the picture 1/4 page; give me a discount."
- "That's your price for a major web site making bundles off of
banner ads. We don't have any banner ads; give me a discount."
- "That's your price to putting the picture on 100 billboards. We're
only going to put it on two; give me a discount."
Delivery Fees
Delivery fees, which according to Elsner are priced basically at costs,
and which will not be shared with the photographers, will become a
significant part of SuperStock's gross revenues. For example, if they
make a $350 brochure sale - $175 of which goes to the photographer and
$175 which they keep - and deliver a 10MB compressed image to the client,
SuperStock gets to keep almost 60% of the transaction fee and almost 20%
of that fee was for delivery.
If they make a textbook sale for $135 and charge $80 for digital delivery
the total fee to the buyer is $215. The photographer gets $67.50 and
SuperStock gets $147.50, or almost 70% of the total transaction fee.
Elsner believes that down the road clients will expect these digital
delivery fees to be rolled into the usage fee. At that point the
photographer's percentage would be figured on all the fees charged the
client. But, the major question will be whether the agency will be able
to raise the overall fee enough to cover their costs.
In recent years major sellers have shown little taste for raising fees in
spite of rising costs of production and distribution.
Will This Strategy Work?
The important question for everyone to consider is will lower prices and
a moving away from pricing-based-on-usage enable SuperStock, or any other
agency, to capture enough additional market share to offset the lower
prices.
The buzzword, not only in our industry, but in everything connected with
the internet, is "eyeballs." Do anything you have to do to make more
sales -- and it doesn't matter how much money you lose. However, if you
read the reports out of Wall Street some are beginning to question this
mantra, and beginning, again, to talk about profits.
If Wall Street starts putting their money where the "profits" are,
instead of where the "eyeballs" are, our industry, like many others,
could see some major shifts.
TONY STONE DISCOUNTS
Buyers who call TSI sales to order an image from the catalog are being told they
can get a discount on the price, if they order on-line. One art director we know
was told he could get 15% off if he purchased on-line.
We have heard from various sources that the discounts offered range from 10% to
20%. Such discounts encourage a quicker adoption of the on-line model of selling
-- one of Getty's goals -- but it will also results in lower royalties for the
photographers.
A steady rise in the number of on-line user is of great benefit to Getty in trying
to sell their stock to the investment community.
Story 272
ARE NSPP PRICES STILL VALID?
December 7, 1999 - In early December I received an e-mail from a Negotiating Stock Photo Prices user.
She is primarily an assignment photographer and gets stock requests very
infrequently. Upon receiving a recent request, she decided that, in addition to
using the book, she would check with a friend who is a Tony Stone photographer to
see what he thought she should charge.
The TS photographers said, "Pickerell's book is 2 1/2 years old and prices have
dropped substantially in that time. The guide is no longer accurate." He convinced
her to discount the numbers in the book by 20% to 25%, and to use that new number
as her asking price.
She wanted to know how much I recommended discounting all the numbers that appear
in the 1997 edition of NSPP in order to come up with a number to quote.
Don't Discount -- Don't Drop The Prices
The numbers in the book are still a good initial starting point for a quote. In
some cases you should start even higher. I want to assure every reader that the
numbers we use at Stock Connection when quoting a price are always the number in
NSPP or something higher. (We go higher depending on the uniqueness of the image or
the use). If we were discounting the numbers in the book there is no way our
average sale per image licensed would be $650, which it is.
That doesn't mean we never negotiate. We do. But a surprising number of people
accept our price without any attempt to negotiate it.
We regularly get the question, "Why are your prices so much higher than Tony
Stone's?" There are several standard answers to that question. "Our prices are
based on our, and our photographer's, costs of doing business." "Why are
Nordstrom's prices higher than K-Mart's?" "Stone appears to operate on the
principle that by lowering prices they will increase volume and grab more market
share. We don't believe that if we lowered our prices we would increase our volume
enough to offset the lower prices."
At Stock Connection we have a basic policy that we will never match a Stone price.
We always ask for something higher and will lose the sale rather than match the
Stone price. Usually, when we get requests where we're competing with an image
supplied by Stone the number we end up quoting is 50% to 100% higher than Stone's.
The big variations often come on full page or cover use, not the 1/4 page uses. Our
price may be in the $800 to $1,200 range and the price they say they can get from
Stone is in the $350 to $600 range. Even with some negotiation our price ends up
being significantly higher than what the client tells us they would have to pay for
a picture from Stone. Despite this, we end up making the sale 80% of the time.
(There was something about our picture that made them want it or they would have
bought the Stone picture in the first place. And they knew that our price -- based
on the total cost of their project -- was reasonable and fair.)
In checking back with clients on that 20% of sales we lose, we find that more often
than not the project was killed, or they went in a totally different direction and
used a totally different type of image. Thus, neither Stone nor Stock Connection
made the sale. We would much rather lose that other small percentage of sales to
Stone than lower our prices and encourage discount pricing.
If your selling your own work direct to clients, you can get the prices listed in
NSPP, or higher. Don't discount those numbers as a starting price. And please, if
you are a Tony Stone photographer and someone asks you for advice, don't tell them
they have to lower their prices just because you are getting lower fees from Tony
Stone.
Feedback From On-line Readers
Harold Lee Miller said, "It doesn't surprise me that this came from a person not
experienced in stock sales. We use the book on every sale we make and rarely do we
lose a sale because of price. When we get a call from a buyer, usually we sell a
picture, and we always start a bit higher than the book price. Sometimes we have to
negotiate down, but never a great amount.
"These art buyers are very sophisticated about how to get a lower price and we have
to fight with them sometimes, but usually we come out with a good price. In fact,
we always do. We don't discount, we don't match price, and we don't take any grief
from buyers who try to make us do that. And to be honest, we don't run into it very
often. Most of these buyers seem to know what's reasonable and don't want to spend
their day haggling to get a price that they know is lower than market. My personal
opinion is that they have this same book and they use it as their reference, too."
David Madison said, "I believe the NSPP prices to be very valid, FotoQuote as well.
There has NOT been a substantial drop in image prices from what I see licensing my
own work, and from my agents. In fact, our average price keeps increasing from year
to year, both in house and via our agents (needless to say, none of my agents are
Royalty Free agents).
"The inexperienced stock seller must also remember that what a client tells you
when negotiating with you may in fact not be true; or it may be true but a case of
apples and oranges when it comes to the usage and rights involved."
Story 263
RF AND STOCK PHOTO USES
November 10, 1999 - At the recent Photo Expo and PACA International conference in
New York we talked with representatives from a number of the leading Royalty Free
companies.
Based on those discussion I make the following assumptions:
- The average unit price for an RF disc sale is $225.*
- The average price to purchase a single image on-line is $75.
- Currently 20% of the total RF units sold are single images on-line and about
80% are from discs. (The percentage of single images sold by PhotoDisc and probably
Corbis is probably higher, but for most other companies it is lower.)
- Eighty-five percent of the RF sales worldwide are in North America. So far
there has been very little penetration of RF, or electronic search for rights
protected images into Europe in spite of the fact that the European market for
stock photography is at least as large, if not larger, than the U.S. market.
- The percentage of sales for personal use is very small, but I could find no
one who was willing to share estimates with me.
- There is a rapid movement away from discs and toward single image
purchase.
- I estimate that the gross sales of RF still images are about $155
million.**
PhotoDisc |
$ 30 Million |
Corbis Digital Stock |
$261 Million |
Eyewire |
$ 8 Million |
Digital Vision |
$ 5 Million |
John Foxx |
$ 3 Million |
Artville |
$ 2.5 Million |
PhotoAlto |
$ 2.5 Million |
All The Rest |
$ 34 Million |
|
|
Total |
$ 155 Million |
* When someone purchases a disc they make on average the equivalent of three
(3) traditional rights protected uses. This could be one-time use of three images
from the disc, or it could be using one image for three different purposes that
would have been priced separately in the rights protected market.
** These figures include still photography and illustration, but not
cinematography, or other graphic arts products that are being sold by some of the
companies engaged in the Royalty Free business.
There have been some customer surveys, but most of that information is very closely
held. However, even those with the best data are engaged in a lot of guess work
when it comes to the number of uses actually being made from the products purchased
because there is no requirement to report that information.
Yet assumptions about this number are critical in determining Royalty Free's
penetration into the current market and the potential growth of that market.
As a larger percentage of RF sales are to single images acquired through on-line
search it will become easier to estimate the number of images actually used, if not
the number of times they are used.
Analysis
One of the most important things to determine is the growth in usage of stock
photography. As we will see this doesn't necessarily track with growth in number of
sales or dollar volume.
Using the basic assumptions outlined above, along with generally accepted
statistics about the rights protected market, I can draw some interesting
conclusions about usage.
From the comments made in seminars in New York it seems to be generally accepted
that the size of the stock photo market worldwide is about $1.25 billion in annual
sales.
In the early 90's when there were almost no RF sales the size of the stock photo
market was about $1 to $1.1 billion. It was generally accepted at that the gross
fee for the average Rights Protected usage, worldwide, was about $400. That seems
to be dropping in two ways.
First, the average fee paid seems to be coming down. I believe it is now in the
range of $300 to $350. This is being driven by the pressure on many sellers to
compete with royalty free. In addition, customers are tending to get additional
rights for the initial fee. This is particularly true in book publishing where
certain uses that were previously charged as re-uses are now being included in the
initial basic fee. It also occurs when the clients get web use in addition to a
basic print use for about the same fee as they would have paid previously for the
print use alone.
Working The Numbers
In the early 90's with a market of $1.1 billion and the average use fee at about
$400 there would have been 2,750,000 uses annually.
Today, the average use of an RF image is $75 (3 divided by $225 for discs and $75
for single image purchase). This means that with $155 million in sales RF is
generating about 2,066,666 uses annually. (Keep in mind that if we have erred there
are probably more uses per sale rather than fewer which would result in an
increased number of annual sales.)
Meanwhile the RP side of the business has about $1.1 billion in sales ($1.25
billion minus $155 million). At $350 per use RP generates about 3,142,857 uses
annually. (If the average sale is as low as $300 then the number of uses could be
3,666,666.)
Thus, current total uses annually are: (RF) 2,066,666 plus (RP) 3,142,857 =
5,209,523.
This is a healthy 89% growth in usage in the last few years with virtually no
growth in revenue. Royalty Free has 40% of the usages (2,066,666 divided by
5,209,523) but only 12% of the revenue ($155 million divided by $1.25 billion).
North America Alone
The comparisons for North America are even more dramatic. Assume that 45% of
worldwide sales are in North America. Thus, in the early 90's 1,237,500 of the uses
were in North America.
Currently, with 85% of the RF sales in North America the gross annual income for RF
is $131,750,000 and there are 1,756,666 uses. On the RP side there is about $500
million is sales representing 1,414,285 uses. That makes 3,170,951 uses in North
America (1,756,666 + 1,414,285) and Royalty Free represents 55% of the total uses.)
Rights protected sellers in Europe should not be sanguine. While the impact may not
have hit Europe yet, at most the buyers are a couple years behind the U.S. in terms
of use of technology. The growth here in the U.S. has been very dramatic in the
past twelve months. My predication is that by 2002, RF will have the same type of
impact in Europe that it now has in the U.S.
Obviously, there are many variables in these equations that we are unsure about,
but the overall directions seem clear.
Where Do We Go From Here?
Royalty Free's claim that they have grown the market in terms of number is uses is
true. It is hard to imagine that there would have been such a growth in the number
of uses if there hadn't been a lower price model.
But, is it necessary for prices to remain as low as they are?
The RF people we talked to seemed to universally agree that price alone is not the
only, or even the main reason that image users buy RF. They recognize that they
could raise their prices significantly and still remain way under the price of
their Rights Protected competition. But most seemed to be afraid of the "Two Ton
Gorilla" (PhotoDisc), and are unlikely to raise prices before TTG. Digital Vision
is expected to break ranks and step out with higher price points in the spring, but
everyone else will probably wait to see what PhotoDisc does.
One theory offered is that Getty Images will have to raise the PhotoDisc prices
because that is the only possible way they can reach the revenue figures the
investment community is projecting for them in the coming year.
With the purchase of The Image Bank, Getty seems to have run out of companies to
acquire, within the stock photo industry, that will add significant revenue to
their bottom line. By the end or 1999 Getty's revenue will be around $300 million
and financial analysts are projecting sales of $360 million in 2000 -- a 20% growth
rate. Looking across the landscape it is hard to see enough companies that Getty
could possibly acquire in 2000 to add $60 million in sales to their bottom line.
It seems clear that if PhotoDisc were to raise prices everyone else in the industry
immediately match them. The big question is what will PhotoDisc do in 2000?
The RF companies also believe they have reached "critical mass" in terms of
content. One of their major concerns is that the new players entering the market
will dilute the market share of the existing suppliers. There no longer seems to be
the expectation that the market will continually growing unabated, no matter how
many new suppliers enter the market. The market leaders are getting much more picky
about what they offer. They have no trouble in getting content, but are accepting
fewer images and looking to add breadth rather than depth to their product line.
They seem to finally be accepting that there is a limit to the amount of imagery
the market can absorb.
Photographers will find it as difficult to get their images accepted by a good RF
company as it has been to get accepted by a major stock agencies. As more single
image sales are made, rather than discs, photographers, particularly those with
only a few images in the system, will find that they earn less per image.
Photographers will no longer earn a share of the sale, even if their image is never
used, as has been the case with disc sales.