How Will Recession Effect Microstock?

Posted on 2/26/2009 by Julia Dudnik Stern | Printable Version | Comments (3)

We already know that professional image buyers have slashed spending. This week, stock-industry blogs and coversations were filled with phrases like “40% decline” and “half the revenues of last year.” PhotoShelter says the sky is not falling, but its own survey shows the trend of 40% of buyers are reducing image budgets. With iStockcharts data suggesting that iStockphoto revenues declined by 12% from January to February, many wonder if the microstock market is finally beginning to feel the effects of the global financial crisis.

Just as with traditional stock, the microstock buyer—otherwise known as the general consumer—is spending less. While those that either love or earn money from their endeavors, such as bloggers, may continue to purchase micro imagery, more frivolous purchases of photos for personal uses are going to decline as the general consumer continues to buckle down.

How significant this decline will be depends on what percent of total microstock transactions are pure-pleasure and how much general consumer spending dips overall. The former is a bit of a mystery, but it stands to reason that there are many more practical purchases by do-it-yourself marketers and non-profits than there are teenage girls buying cell-phone wallpapers. The implications of the broader recessionary trend, however, can be considerable.

When trying to forecast microstock’s performance in 2009, it is tempting to look to retail projections for insight into general consumer behavior. The last holiday season had the worst sales in 40 years. According to the International Council of Shopping Centers, 33,000 retail establishments and 148,000 stores closed in 2008, and the organization predicts a loss of another 73,000 retail establishments globally during the first half of 2009. In December, sales of women’s clothing, electronics and luxury products fell by 23% to 35%. Even ecommerce sales were down by 3%, the first drop since 2001 and a sharp contrast to a 19% increase in 2007.

Now that there is no holiday pressure and retirement plans, savings accounts and stock holdings have all taken significant hits, retail spending is dismal—with the exception of discount chains and super centers, which offer the best parallel to microstock. While the budget end of stock photography can decline alongside other consumer businesses, such decline is likely to be much smaller than that of traditional stock businesses. Microstock will continue to take market share as buyers move downstream. This cannibalization was already significant in 2007 and 2008, and its pace will certainly accelerate as promotional budgets shrink. It is safe to predict that whatever image needs can be filled by microstock, will be.

In addition, the healthier the business, the better it fares during tough times. Digital Railroad offers an excellent example of how a change in the financing and venture-capital climate can near-instantly kill a poorly capitalized and badly managed business. In contrast, PhotoShelter appears to have pulled out of stock licensing with its initial photo-archive offering and most of its dignity intact. And though there are those who profess feeling bad for Alan Meckler, who took a multimillion-dollar beating in the stock-image industry over the past several years, the former owner of Jupiterimages emerged with a thriving, debt-free online publishing business.

Compared to these somewhat troubled companies, few businesses are as successful, in any industry, as iStock and a handful of its closest competitors. Their sales and traffic may decline during this year, but this is far from a certainty—and losses of anywhere near the traditionals’ 40% are difficult to fathom. While Alexa shows that iStock’s site traffic is down slightly over the past month, visits to Dreamstime, Fotolia and Shutterstock have all risen over the same time period. Some smaller companies will undoubtedly struggle or shutter, but microstock as an industry will survive the economy’s cyclical conniption alive and well.

Copyright © 2009 Julia Dudnik Stern. 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


  • Carlos Zardoya Posted Feb 26, 2009
    Great article, Jim. I am completely in agreement with this. Microstock is aswell a b2b than a b2c business, so comparing with retail industry is a good idea for having a refferal for the first. At this stage, no-one doubts that any industry or product is to be affected due to the recession -what no-ones know is utnil when, but it's true that low-cost models may survive better in this, than high-end costly structures (while I strongly rely that there is space for both segments in the market, if customer gets well the difference in production/quality value). The key, under my point of view, and to keep/retain the customers with you, is to offer all them what they need, and at all price points and models, on one acces/marketplace. Corbis' decission to integrate Snapvillage into Veer community, seems the trend and right direction into this industry. We'll see more doing in the short term (we did more than 6 months ago and the synergies found are encouraging).

  • Kelly Thompson Posted Feb 26, 2009
    Thanks for taking this to task. A few things.

    1. iStockcharts is scraping our site for data. It's not right. Sometimes it's not even close. We have a very long tail that it doesn't pick up on at al.

    2. It's looking like iStock will have double-digit growth February over January. Nice traffic growth as well.

    3. The only place we've seen the recession really hit iStock is video. Our sales are flat there.

  • Serban Enache Posted Feb 27, 2009
    Dreamstime has a growth of over 30% for its user-base in the last 5 months, probably highest in the industry.
    It is so true, we're mostly a B2B model and customers are usually small companies. They must be affected by the crisis more than high-end users budget-wise. What they spend may be less, but the long tail makes up for the volume compared to the high-end users.
    Still, we see no sign of slowdown (records for sales, new members, received content). When this economical turmoil will eventually be over, the process may be even more accelerated (more budgets).
    By referring to the sales of a niche of photographers one might get biased. With content growth, sales dilution are inherent, therefore you have to take into account ALL photographers involved within an agency.

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