Getty Images will use Punchstock.com to launch a new RF brand called Valueline on August 31. Prices for Valueline images will be $19 for a 1mb low res image and $49 for all other RF file sizes from 10mb to 300mb.
Initially, the new brand will be seeded with 100,000 images created prior to December 2005 from the Digital Vision, Photodisc and Stockbyte collections. Most of these images are wholly owned by Getty, but a few are owned by photographers who receive royalties on each sale. In addition, Valueline will contain about 20,000 images from other sources (presumably image partners) that will add breadth and depth to the collection, per announcement said.
Too Many Images
After an aggressive program of image acquisition that has more than doubled Getty's RF image collection since November 2005, the company has now decided there are too many RF images on its site. The site has 876,039 RF images and that does not count the 120,000 that have been removed in preparation for launching Valueline. The average annual return per RF image (RPI) in November 2005 was about $558 and now, the added images, the RPI is down to about $326. While the number of single image RF on the site has increased about 146% since November 2005, the average annual revenue from RF has only increased in the range of 9%.
Getty's basic search-return-order prioritizes brands first and then delivers images based on how recently they were added to each brand. As a result, older images are seldom seen. One problem -- newer images are not always the best for a particular customer's needs. With Valueline Getty can give these older images a high priority in Punchstock's search return order and push all the other brands on Punchstock farther down. It gives older images a better chance of visibility and generating revenue.
Microstock Implications
Sources within Getty have indicated that this move is a "direct results of Getty's loss of sales to low cost non-Getty RF brands" (read microstock). This, and Getty's move yesterday (Getty Dramatically Lowers Prices For Web Use) indicate that the company has recognized it's not successful in up-selling microstock customers to Getty's traditional priced products. Getty is dramatically lowering the price of its traditional product to draw customers away from the microstock sites and get them to use the slightly higher-priced Valueline images.
Huge Risks
This strategy has huge risks for the industry, and in the long run probably for Getty. All the other RF brands on Punchstock, which include virtually all of the world's RF companies, may now be forced to lower their prices to compete with Valueline. Chances are, these other brands will lose sales to Valueline, significantly decreasing Punchstock's overall revenue, unless there is a dramatic increase in the total number of images purchased.
There is no indication that the total number of images used at traditional prices has been growing. Thus, if customers who have been paying $250 for an RF image can now get what they need for $49, and no more images are sold, the impact on the traditional side of the industry will be pronounced.
Many image buyers may leave other traditional stock portals and race to purchase quality Digital Vision and Stockbyte images at prices significantly below what they would pay elsewhere. The reduced price should make older Valueline images more attractive. This could hurt the rest of the industry, but keep Punchstock's revenue strong. On the other hand, one of the sites they may be leaving is Gettyimages.com. Meaning: Getty gains a $49 sale on Punchstock, but loses a $250 sale on Gettyimages.
Last quarter, Getty licensed rights to approximately 240,000 RF images for gross revenue of $59.68 million. If even 5% of those customers find the images they need on Punchstock instead of Getty Images, that could cost Getty almost $2.4 million in the next full quarter. To make up the loss, it's got to sell 49,000 $49 images to microstock buyers or 126,000 $19 images.
Why Switch?
Customers purchasing images at Microstock prices has been growing dramatically, but the only way Getty wins is if it can upsell a significant number of Microstock customers to this new higher priced imagery. What is not clear is why Microstock customers will want to use these images, which are older and often out-of-date.
It is also unclear why a customer would pay $19 when he can get an image that will work for $1 or, for a slightly larger file size, pay $49 when he can pay $3 to $5 for an image. While the Valueline prices are low from a traditional point of view, they may not be low enough to attract the microstock customers in significant numbers.
It is far from a foregone conclusion that this will work to Getty's advantage, but it seems very likely that image producers will lose.