Alamy to Open U.S. Office, Raise Company Cut of Sales

Posted on 9/25/2008 by Jim Pickerell | Printable Version | Comments (3)

Alamy has announced that it will open a U.S. sales office in early 2009. The company is aiming to grow its business Stateside, particularly in high-value markets, by 30% to 40% per year by establishing a local presence.

The move is a departure from Alamy’s U.K.-based sales model and will mean a change to the current commission structure. To fund the additional costs of operating in the U.S., the company plans to increase its commission by 5%.

Most suppliers currently receive a 65% royalty, which will be reduced to 60%. A small percentage of early adapters receive higher royalties but pay storage fees. The 5% reduction will be from whatever such higher percentages are, and storage fees will still apply. Distributor sales commission will also go up by 5%. These increases will apply once the U.S. sales team has been recruited.

Alamy will also discontinue some of the current service charges, such as bank-transfer fees, check fees and the 1% foreign-exchange fee on accounts not paid in dollars.

CEO James West explained: “We feel there are great opportunities to increase our business in the U.S. and make more money for our contributors by setting up an office there. We cannot sustain such an expansion through our current commission structure but believe that whatever our contributors may lose in commission revenue will be more than made up for through a substantial increase in sales.”

In the first year, contributors will likely see a slight decline in their royalty payments. However, Alamy projects a longer-term increase in gross contributor payments, expected to grow by $1.5 million to $6 million over a three-year period.

“Around 80% of our revenue comes from high-value, high-volume, large accounts, but we are under-exposed in this market in the U.S.,” said West. “From talking to our U.S. customers, it became clear that we needed to establish a U.S. presence,” he added.

West and his family plan to move to America for six months of next year, allowing the CEO to oversee operations and learn more about the market. Recruiting is ongoing for local sales staff.

Tibor Bognar Posted Sep 25, 2008
Seems to be an ill-timed move in view of current US economic situation. As all clients buy directly from the website which is just as accessible in the US as it is in the UK, and Alamy has always had a dedicated phone for the US staffed during US business hours, one wonders how useful this will be. But of course Alamy will risk little as the expansion will be financed by the photographers - a decision taken unilaterally and without any consultation, just like many recent unpopular Alamy decisions.

Bill Bachmann Posted Sep 25, 2008
I personally feel that this is a good move for Alamy. Sure, we hate to lose 5% of our sale, but I trust their judgement in this matter. It will be good to help grow the US market for them with a presence and sales team here. Thy are good people so I stand behind the effort!

Bill Bachmann
Orlando, Florida

Tim Mcguire Posted Sep 25, 2008
If Alamy opening a USA based office has been deemed to be worthwhile because it will increase volume (# of sales) for Alamy in the medium to long-term then it seems opening the new US based office would eventually pay for itself at the current revenue splits through increased volume.

Financing expansion seems to have become a "good excuse" used by image distributors to raise the revenue split in their favor. In many industries financing a business expansion is what bank loans are used for. Bank loans cover temporary expenses associated with expansion. In 2000/2001 Getty used moving to all digital as an excuse to permanently lower photographers revenue percentage. Now that they are all digital who benefits the most from that expansion? One might argue that it is not photographers.

Unfortunately, many stock image distributors look at the money they are sending out to photographers in the form of royalties, as their personal revenue stream to be tapped into whenever they want or need. Bank loans are harder to get, you have to pay them back, and you have to pay interest.

The establishment of a New York office will be an added expense but if it’s existence has been determined to be worthwhile by itself, in terms of increased volume, it should eventually pay for itself plus some profit. Taking an additional 5% of photographers revenues to finance such a move might make sense if it were temporary to cover costs while getting the new office up and running and profitable but making it a permanent change means Alamy is using this move as an excuse to take more of the revenue photographers images are generating. This is especially so since Alamy's statements seem to infer that photographers will see an initial dip in revenues which will eventually be recovered by an increased volume of sales generated by this new US office.

Alamy may be making a good move to open a US based office but the reasoning behind why they need to permanently take an additional 5% of what were photographer royalties does not make sense to me unless they feel the Alamy New York office will never be profitable at the current revenue split. The problem is that Alamy tells photographers eventually revenues will be back to the same because of the increased volume. If, in the long-term, photographers will see the volume of sales increase enough to make up for or go beyond past revenues then Alamy should see the same but for some reason they also want an extra 5% of all sales. If that volume of sales increase brought on by the new US based office is not enough for Alamy and they also need to take an additional 5% of revenues then why should 5% less be enough for professional photographers?

I guess my point is, why should photographers pay for the business expansion of image distributors? The risk seems to be put on photographers while the majority of the rewards will eventually go to the distributor. Should this New York office fail miserably would Alamy change the revenue split back to what it was before? Doubtful...

Alamy to Open U.S. Office, Raise Company Cut of Sales

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