Business Planning for the Future: New Business Models Needed

Posted on 8/25/2009 by Leslie Hughes | Printable Version | Comments (0)

Jim Pickerell's piece on growth in demand focuses on why the current paradigm does not work for solo photographers but misses the fact that growing image uses also offer opportunities. For the stock photo industry, the issue is not lack of demand but rather the lack of Google, Gillette and Apple-like innovation when it comes to developing a business model that takes advantage of the rise in image uses.

Sellers vs. creators

First, we talk about sellers and creators a lot, but most often forget that this is really driven by what buyers want and value. For instance, "Growth in Demand, Part I" suggests stock photo distributors do not care about production costs and do not want to raise prices. Perhaps some do not care, but many do-and they have tried to raise prices and failed, because there is a cheaper offer somewhere down the road that satisfies the need.

My point is that, frankly, no one can raise prices on anything, if they cannot justify it to a buyer. And if someone is willing to come in and sell something like it or something that can replace it for less or even free, then there is the problem.

A commodity is really something that is the same-totally interchangeable. Imagery is not actually a commodity but it acts like one in our space, because much of it can be easily replaced when used for advertising and illustrative purposes. In addition, the premise that sellers do not really care about price when unit volume goes up is wrong: this actually is not the case, because of how cost structure works in the business, unless it is on the same set of images. Just as photographers, agencies or distributors are really struggling to improve their margins-hence the tug of war. Suppliers and sellers are trying to find ways to lower costs, both above and below the line, and guess what-in many cases, agencies try to get it from the royalties they pay photographers.

In my opinion, Corbis was shortsighted when it made such a drastic decision to reduce photographer royalties. The fact that they offered a higher royalty was perhaps one key reason they could maintain an edge in getting some of the great content from shooters when their revenue stream was so much lower than Getty Images'-and in many cases, more geographically limited. But Corbis seems to have run out of ideas on how to grow the business, so it cut costs. Of course, Corbis is not the only one-Getty and a host of others are lowering costs and cutting staff, but I see little innovation from the usual suspects.

Sellers and photographers must focus on how to drive (grow) the business today and tomorrow, but I don't think they know the answer. Part of why I continue to watch this industry is that its strength is the creative power that could be wielded if the players would just start looking outward.

The Google business model?

I am not suggesting that anyone try being Google, or that all imagery should be free. I am saying that we must think differently. The "woe is me" attitude is not helpful. This industry is not looking at the right pieces in evaluating how to get out of this slump.

I can point to lots of examples. The Google model is easy for people to understand. Gillette is another great story: the company nearly gives away its razors, because it that customers will need blades over and over and over again. You pay $4 or more for a box of blades. There is a great story behind how that got started.

A Harvard Business Review article that I spoke about in one of my blog articles likens Apple's 2003 re-invention with Gillette. Apple was a computer maker that introduced the iPod with the iTunes store, revolutionizing portable entertainment. It created a new market and transformed the company. In just three years, the combination became a $10-billion product, accounting for nearly half of Apple's revenue. Apple's market cap catapulted from about $1 billion in 2003 to over $150 billion in late 2007. In great part, it became a music company. You can bet that was not an easy transformation, and Apple basically gave away the hardware, because the company understood that it was going to be the music that people would come back for over and over and over again... And guess what, it totally re-energized the music market at a time when CD sales were faltering and singles were dead.

Interestingly, I am reading a book that talks about the early days of the American Society of Composers, Authors and Publishers and how ASCAP tried to block the free airing of music on the radio-even suing and winning. Yet in the end, stations started promoting little known regional artists for free. They used it to launch their careers. Radio turned out to be a great way to promote records. Radio stations no longer would pay the big guys for music, and the rest is history... Interesting.

The point is that things change and sometimes come full circle. The faster we start to look at how the world is changing and how we can leverage that to our full advantage, the sooner we will benefit. I am not saying that images should necessarily be free. What I am saying is that if they can be found to be easily replaced with other images, and their use is on the rise, then we better start figuring out what the client values and how what we do fits in with that.

And there are lots of things. Joe Sohm is one person Selling Stock recently wrote about who has found a new path. There are others. My point is that we need to quit lamenting what is happening and try to understand it, if we are to survive.

Leslie Hughes is the principal and chief executive of New York-based Equidyne Ventures. With more than 15 years of experience in digital and online media, Hughes has significant expertise in content licensing, worldwide distribution and rights management. Hughes was previously group CEO of London-based Imagestate and spent over 5 years with Bill Gates' Corbis, first as president of Corbis Images and then as president of the Markets and Products Group. Prior to Corbis, she held the post of senior vice president of worldwide sales at The Image Bank, a subsidiary of Eastman Kodak later acquired by Getty Images.

Copyright © 2009 Leslie Hughes. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-461-7627, e-mail: wvz@fpcubgbf.pbz


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