Fees Paid By Volume Photography Users Will Continue To Decline!

Posted on 7/11/2011 by Jim Pickerell | Printable Version | Comments (3)

Photographers complain that stock photo fees are way below what it costs them to produce images. And they are right. But, the prices volume user pay for images will continue to decline. Here’s why.

In the rights managed (RM) environment the prices customers pay are theoretically negotiated for each use. But, given the huge oversupply of quality images, customers prioritize image suppliers based on the fees they charge and plays one seller off against another.

The situation is made worse by the fact that many sellers offer exactly the same product as their competitor, or products that are very similar. Google recently released a new function at http://images.google.com that makes it possible for customers to take a thumbnail from one source and search the web to see if that image is available elsewhere at a lower price.



Volume users of images (think major publishers) sign preferred provider agreements with various image suppliers and instruct their researchers to go to the cheapest source when they look for images. If they can’t find what they need at the cheapest source then they may go to the next more expensive source. Internet search has made this process very efficient. A customer, sitting at her desk, can very quickly determine what is available from a variety of different suppliers.

For example there may be 10 agencies that are one publisher’s preferred providers. The following is a sample of the fees they might charge and the rights they might give away.
Agency 1    $90 – any size – any circulation – 50 year license


Agency 2    $90 – any size – any circulation – 10 year license
Agency 3    $90 – quarter page – any circulation – 10 year license
Agency 4    $95
Agency 5    $100 – any size – 15 year license
Agency 6    $100 – any size – 10 year license


Agency 7    $120     
Agency 8    $135 – any size
Agency 9    $135 – quarter page
Agency 10    $150

Researchers are instructed to check Agency 1 first to see if they can find a suitable image and then move on to Agency 2 and down the list after they have exhausted the possibilities of the cheaper sources.

Even if a researcher doesn’t find what she needs until she get to Agency 8 she can now go back to Google Image Search; drag the thumbnail she has found into the search box and see if she missed finding the same image on one of the other cheaper sources when she went through the first time.
 
When an agency with higher prices wants to increase sales volumes it will need to go to the publisher and negotiate a lower rate (say $85), or give up more rights for the same money, in order to improve its position in the search order.

Publishers will continue to seek the lowest possible price. In 99% of the cases there is no image that is so important or so unique that it can not be replaced by something similar, but cheaper.

So Are There Any Solutions?

In Germany the BVPA association annually establishes a price schedule that all German pictures agencies who are member of the association agree to abide by. German customers know these are standard rates accepted throughout Germany. Normally, customers pay these rates without question . It is not clear what German customers do when they purchase pictures from agencies or distributors that are not members of the BVPA. As far as we know this practice is not employed in any other part or the world and would be considered “restraint of trade” under U.S. law.
 
Some photographers set up their own sites and only sell to customers who will pay what the photographer thinks the image is worth. That can work fine if (a) the images the photographer is offering are so unique, that no other image in the world can convey the same message (an exclusive images of Brad Pitt’s and Angelena Jolie’s next child for example), (b) a little different image can’t be substituted for the image and (c) that the picture is something the publisher absolutely must have. Unfortunately, images that meet all these requirement are very rare. It is almost impossible to build a business around producing them.

The bigger problem in operating an independent site is getting potential customers to visit it. If the images you produce are only of interest to a few major customers then with aggressive and consistent marketing you may be able to continually remind these customers of your site’s existence. Keep in mind that it will almost always be more convenient for the customer to spend her time searching sites that contain the work of hundreds of photographers rather than going to the site of a single photographer.

Another factor to consider is that the vast majority of stock images customers are people who use relatively few images per year. Most photographers have no way of finding these people and encouraging them to use the photographer’s web site. In 2008 there were approximately 286,l00 graphic designers in the U.S. All of them may be potential customers. In addition there may be hundreds of thousands of individuals who need a good image from time to time for their small business, posters, or web sites. Such customers will go to the major image databases, not the web sites of individual photographers.
   
For some photographers the answer is to deal with only one agency. That may work fine as long as the photographer’s agency happens to be first on the customer’s preferred provider list, but even Getty doesn’t stay on top all the time because. Other majors will undercut Getty’s price to try to get an advantage and before long Getty will offer an even better deal to get back on top. Then the photographer also has to deal with Getty’s search return order.

Another strategy would be to place images with the major agency, but prohibit them from licensing usage rights below a certain price. For the most part agencies are unwilling to work in this manner. They want the flexibility to license images for the best price they can get (whatever that happens to be), and they simply refuse to represent photographers who won’t agree to those terms.

In very rare cases, if the photographer has certain images the agency really wants, and particularly if the agency believes the images can be sold to its high end, advertising customers it will agree to never license an image below a certain price. But as I said, such agreements are very rare and non-existent with most agencies.

Even when the photographer can get such an agreement he may be shooting himself in the foot. The agency will end up licensing the images of other photographers to the volume customers. The photographer with high priced images will end up waiting for those few customers to come along that might be willing to pay those prices. In the long run he will probably make very few sales and less money.

Some photographer think the answer is for Getty to get a total monopoly (they don’t have too far to go) and then they can raise the price to whatever they want to charge. I think it is highly unlikely that Getty will ever buy up all its competitors. There will always be at least one there that will under price them and force them to keep their prices low if they want the volume. Even if Getty were to buy up or put out of business all its RM or RF competitors it would still be competing against itself and its iStockphoto brand. They would not want to raise iStock prices and lose all those customer. But as long as customers have the choice between gettyimages.com and istockphoto.com there is no way to keep all prices high.

One solution use to be to license images as Royalty Free (RF) with fixed prices for certain file sizes. The complaint about fixed prices RF licenses was that the customers who were purchasing images for use in major advertising and brochure campaigns were getting them for less that what they were worth. But at least there was a fixed minimum price for the smallest file size. Average RF prices have tended to be higher than average RM prices. For example in the third quarter of 2009, the last time Alamy reported average sale prices, their RF average was $177 while the average price for an (RM) image was only $118. 

So RF was one way to hold the price up until Getty Images started insisting that all RF images also be available for licensing under Premium Access deals. Premium Access is Getty’s way of offering volume users all the images they need for a fixed monthly or annual price. An overall fee is negotiated and then the customer can use as many images as they want from the site. The number of the customer’s downloads are tracked and the total is divided into the amount paid to determine the value of each license. This often works out to less than $2.00 for the image producer. Some Getty suppliers have reported that as much as one-third of their monthly sales are Premium Access licenses.  

Microstock


Microstock offers a few advantages worth thinking about. Microstock has always been focused on the small user who can’t afford to pay a lot for images. As a result the microstock sites have much broader base of customers than traditional RM and RF. Instead of focusing on a volume of uses by a single customer they have focused on reaching a volume of customers, most of which uses relative few images. The question, of course, is whether a volume of uses at low prices can generate more revenue than many fewer uses at much higher prices. Statistically, for the distributors, it looks like the microstock volume of small sales is about to generate more revenue than RM and RF being sold at higher prices. However, it is not clear how that will shake out for individual photographers represented by these organizations.

In the microstock environment prices (in terms of number of credits required to purchase a file) tend to be fixed, regardless of who the customer is. For RM the fact that the price is negotiable depending on who the customer is and how the image will be used is a big problem. Microstock customers can get discounts by committing upfront to purchase large quantities of images (buying large packages of credits). iStockphoto customers who are willing to spend $19,000.00 can get 20,000 credits or pay $0.95 per credit. Of course, very few customers will need that many images or be willing to make that kind of financial commitment. Consequently, they will have to pay a lot more than $0.95 pre credit for the images they need.

This system seems to be a fairer way of offering discounts to volume users than negotiating each sale separately. However, it should be noted that anyone who wants to purchase a package of more than 2,000 credits must call iStock and negotiate the deal separately. iStock may be as flexible on these high value deals as Getty is on Premium Access.

It should also be noted that even when iStock customer get credits at lower prices they are still required to pay more credits for the higher priced images that are in the premium brands. It is believed, although not totally clear, that Getty makes every image on its site available to Permium Access customers for exactly the same price regardless of whether it comes from a high priced collection, or one where the base prices are much less expensive. The iStock system is fairer to creators who have placed their images in premium priced brands.

No one, but possibly Getty and Corbis, have any idea of the percentage of images that are licensed for volume uses at discount prices compared to the images licensed to customers who use a few images a year and don’t have the leverage to negotiate reduced rates.

All and all, based on all these factors, I think the value of images will steadily deteriorate. Photographers who hope to support themselves from their photography should take this into account. If anyone has any other ideas about how pricing can be turned around I would love to hear them.


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 www.selling-stock.com, 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: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  

Comments

  • Larry Minden Posted Jul 11, 2011
    Will some of you represented by Alamy please tell management that a 50 year license term for RM images is absurd.

  • Cheryl Difrank Posted Jul 12, 2011
    Larry, believe me, some of us have yelled and screamed about the ridiculous textbook licenses - 50 years/UNLIMITED print runs! Alamy's response is always the same - "This is what we have to do to be competitive." They have always felt they needed to give the clients whatever they want in order not to lose the client. And as long as Alamy and Getty feel that way (who collectively control the market) prices will continue to go down. There will never be enough photographers/agencies who pull their images from Alamy and Getty to make them change their minds or raise their prices. The damage is done. (And it was done not just by Alamy and Getty, but progressively by RF then microstock and great digital cameras and easier access to photo buyers through the internet.....) A lot of agencies and photographers have already lost their direct clients to Alamy and Getty and pulling their images from Alamy is not going to get those clients back. Unless the photographer or agency has such a specific specialty that doesn't otherwise exist on the big guys' sites.... and even then.....

  • John Harris Posted Jul 13, 2011
    Again, you collapse all photography into the ubiquitous and generalisable. This ignores the qualitative, geographical and ideational aspects of photography and search which could actually create a more differentiated and sustainable market. We already know that the "savvy business models" are a (rather less than creative) destructive downward spiral of price competition and rights giveaways.... Giving your work away, even if you are an amateur, must become deeply uncool!

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