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THINGS TO WATCH IN 2005
January 3, 2005
The beginning of a New Year is a good time for reflection. Sales improved for many in 2004, but a significant number are still trying to get back to where they were in 2000. And industry changes are still coming fast and furious. As we move into 2005 here are three issues worth watching for developments.
Subscription Model
Subscription pricing has gained some major attention in the past year-and-a-half due mostly to major moves by Jupitermedia in acquiring the two leading brands involved in subscription sales - Photos.com (part of Art.com) and Ablestock.com (part of Hemera). They have also made Comstock's RF images available to subscription buyers. I believe the total 2004 revenue from subscription sales by Jupiterimages properties will be in the range of $15 million and it is certainly growing.
The next largest licensor of subscription content is LiquidLibrary.com and I believe this brand's 2004 sales were in the range of $3 to $7 million. There are a number of other smaller providers. In total, I would guess that subscription sales in 2005 will be under $30 million worldwide with Jupiterimages clearly dominating this segment of the market. Thus, even if it grows at a very good rate it may have very little impact on the overall $1.5 billion market for still stock images.
Most sellers believe that people who are interested in buying images by subscription are totally different from those who buy single RF and RM images, and thus are no threat to this other segment of the market. I'm not so sure. At the very least, I would think that many of those who have been buying CD-ROM discs and virtual discs (representing 17% to 20% of current RF revenue, or maybe as much as $60 million) might be inclined to take a hard look at the subscription offerings as it improves with imagery like Comstock's. If Jupitermedia can capture a significant share of the CD market it could represent significant growth for them and hurt all the other RF sellers. This is certainly something to watch carefully.
Photographer's Choice
One thing that surprises me about Getty Images is the relatively low number of images on Photographer's Choice. The biggest complaint I hear from Getty Images photographers is that can't get enough images accepted by Getty. Yet in a recent count I could only find 14,220 images as part of Photographer's Choice.
It is my understanding that every contract photographer has had the opportunity over the last two year to put up 50 to 60 images into Photographer's Choice. If every photographer were taking full advantage of their opportunity then less than 300 have participated. It is my understanding that Getty has well over 1,000 photographers under contract. What's happening to the rest of them? I suspect that many more than 300 are participating, but not posting their full complement of images. Why? It's hard to imagine that these photographers can't produce 30 saleable images per year.
Everyone says the sales of images offered on PC are great. In addition many of these photographers have had good selling images returned as a result of the film file purges, or new images the Getty editors reject. Many of these would continue to sell if they were just placed online.
It is hard to feel sorry for these photographers who are missing the opportunity to put images into Photographer's Choice.
Lower Royalty Percentages
Photographers, particularly those represented by Getty, should begin to brace themselves for another cut in royalties. Getty needs to increase their margins and the only way they can do that is lower the royalties paid for content.
Currently Getty's gross margins are 67.4% for Rights Managed and 75.9% for Royalty Free. That means on average RM producers get 32.6% of the sale and RF producers get 24.1% of the sale. Getty is already pushing 3rd Party suppliers to percentages below these numbers and that will bring some improvement. But as they add more and more suppliers it will become increasingly obvious that they make more money when they sell the 3rd Party content, or images that they wholly own, than when they license rights to images owned by their contract photographers.
At that point they can either start weighting the image returns from customer searches toward the 3rd Parties and their wholly owned material, or cut the royalties paid to contract photographers. Either way the contract photographer loses. It will be easier to hide what is happening by simply changing the search results. However, with this strategy they risk making it more difficult for the customers to find the image they really want to buy.
Reducing the photographer's percentage by a few points is likely to have a much more dramatic effect on revenue even though such an action is sure to raise a lot of complaints and rebellion from photographers. On the other hand there is nowhere else photographers can go to earn anywhere near the revenue they earn by having images on the Getty site. (See "Return Per Image" Story 689.)
Getty won't mind losing a few photographers. They've got more now than they want and they can easily replace any loses by adding 3rd Party suppliers. All this leaves photographers in a very difficult negotiating position.