Masterfile Sold For $21.4 Million

Posted on 8/22/2011 by Jim Pickerell | Printable Version | Comments (1)

Arius3D Corp plans to buy Masterfile Corp. for $21.4 million, in a bid to expand into the traditional 2D market. Under the deal's terms, full consideration will be paid in cash, unless Masterfile opts to receive $12 million of the purchase price in stock. The Masterfile portion of the business will continue to operate under its current brand name and under the direction of Steve Pigeon, founder and president.

Founded in 2000, Arius3D Corp has a staff of 15 and provides imaging solutions that allow organizations to capture and share 3D representations of physical objects in digital form. (See examples on its web site.) The company has developed the Arius3D scanner and software for capturing and processing images. They also provide scanning services and have developed a motion control system for moving the camera. The potential uses of its 3D images are in virtual museums, feature films, video games, education, marketing, advertising, product design, and manufacturing. To date most of their customers have been museums.

The public company is listed on the Toronto Venture Exchange trading under the symbol “LZR.”  It is trading today at $0.09 per share. In their fiscal year ending March 31, 2011 gross sales for Arius3D was just shy of $2 million and down about 4% from the previous year. The company had an accumulated deficit of $46,461,912 as of March 31, 2010 and expects to have no trouble in raising the additional capital necessary to acquire Masterfile. As Steve Pigeon observed, “These guys know a thing or two about raising money.”

At first glance it is hard to see the synergy between Arius3D and Masterfile whose business is focused entirely on licensing rights to 2D still imagery. The company has a staff of 100 and gross sales last year of about $22 million. Sales were down compared to the previous year despite an aggressive program to pursue unauthorized images uses. Masterfile handles about 150 new infringement cases per week and 15 members of their staff do nothing but work on resolving these cases.

Pigeon pointed out, “Arius3D was interested in us because we know something about managing, organizing and marketing an image licensing -- all the things needed to turn content into revenue. They are creating content, but they don’t know what to do with it once they have it. They don’t have the necessary infrastructure. Most of their content has been created for other parties. They get the licensing rights to the material, but they don’t know how to license the stuff. That’s where we come in.”

He continued, “In our traditional market – advertising – there is not a lot of demand for Chinese urns (the kind of thing Arius3D has been photographing). Our ability to license what they create will be a matter of changing the clientele or changing the content that is being scanned. If we start ratcheting this thing up and scanning other types of objects and material -- everything from food to what have you -- we could build quite a collection of scanned articles that would have universal appeal. Part of the excitement for Arius3D is that they are getting a strong licensing entity that can build their business.”

According to Arius3D CEO, John Wood, "Demand for 2D stock photo content is continuing to grow, however, crowd-sourced supply is impacting the business. As a result, combining the unique content of Arius3D with Masterfile has significant potential.
Masterfile's completely redesigned website released in July 2011 is the perfect platform to showcase 3D content on the internet.

"Consumers are demanding rich and interactive content but 2D photographs are not interactive. 3D content provides the solution and we believe the potential growth in demand for 3D content could replicate or exceed that of 2D stock photo content,” Wood continued.

Some observers were surprised by the relatively low sales price believing that a company with Masterfiles management, reputation and track record should have commanded a much higher price. Pigeon said, “The sale price reflects the world we are living in today. We’ve been approached a number of times over the last few years. Everybody was looking for a bargain. Moreover, we have also been approached by countless companies trying to sell their businesses to us. We’re not offering them any bargains. The heyday when Getty, Corbis and Alan Meckler were all bidding for companies is behind us.”

This should certainly send a message to all the smaller and less successful companies as to what their businesses might be worth.

Pigeon continued, “From our perspective it was a marriage made in heaven. These guys came in. They loved the business. They want the business as is. They are right here in Toronto so it is not a case of closing down a business and putting people out of work.

“The best part is that we don’t have to throw all the people to the wind. When consolidation comes around they move 15 people into our office and the consolidation is done. I’ve been getting all kinds of relieved congratulations from people because they recognize that this is not a case of more industry consolidation where suppliers have to worry about getting sucked into a Getty or a Corbis or pushed out as the case may be.
Distributors have been cut off from about every source of images available to them. We’re still staying out there. We’re not as independent as we used to be, but we are well funded

“One of the reasons we were so happy doing the deal with these guys is that they are also very interested in the 2D market. So in addition to acquiring the company they are paying off all our debt ($3 to $4 million) and they are going to re-capitalize the business with a significant amount of money. There is no way we are going to let the 2D business fade away. We see an opportunity to revitalize the existing business.

“Don’t forget we bought a microstock company last year (Crestock- July 2010) and we haven’t been able to spend nearly as much money on that as we had anticipated. So all of this gives us a new shot at everything,” Pigeon said.

I asked if he believed that the use of still images, overall, has the potential to grow.

“Here’s the thing, Jim. There is still a lot of it being used out there and it is being used at all price points. We’re capable of licensing at all price points so it is just a question of whether we can take business away from other people. I agree with you; there is not a lot of new stuff happening out there. The new stuff is the Internet and the iPad. For these uses people are looking for microstock prices. But, we’ve got ourselves a little microstock business and we’ve got plenty of room to grow there too. I’m not looking for the industry to grow around us, I’m looking to grow within the industry. When you’re a $22 million company in a $1.5 or $2 billion business there is room to grow. ”

Given that Pigeon is nearing the retirement age, I asked if he was considering turning the business over to someone else?

He said, “At the end of the day my work here isn’t done. There is a bunch of stuff that needs to be done. There is a bunch of stuff these guys want me to do. They don’t have any experience in running a stock photo entity. At the moment they like me. Once they get to know me that will probably change.:) They like me right now. They want me running the show and I’m fine to do that.”

The deal, expected to close October 31, is subject to customary closing and regulatory approval.

Arius3D, also announced that current director Perry Monych will assume the position of CEO of the company. The company intends to raise funds through an agreement with an "arms-length financing partner".

Copyright © 2011 Jim Pickerell. 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

Jim Pickerell is founder of, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to:  


  • michael swiet Posted Apr 23, 2012

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