Adapting To Changing Business Ethics

Posted on 1/17/2012 by Jim Pickerell | Printable Version | Comments (1)

It seems to me that 30 or so years ago photographers could have verbal agreements (a handshake, if you will) with others in business and both sides would feel an ethical obligation to honor the agreement.

Today, honoring agreements is often secondary to maximizing profit. Failure to honor an agreement tends not to be as much of a problem when the customer is local, a small business and where many of the dealings are face to face. But the larger the customer organization and the smaller the supplier the more likely the customer will do everything possible to exploit the supplier in an effort to maximize its own profit.

In economic theory a company's purpose is to maximize shareholder returns. Sacrificing profits to other concerns would be a violation of management’s fiduciary responsibility to shareholders. When asked, “do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible?” economist Milton Friedman said, “they do not!"

Thus, when management exploits workers and suppliers it is carrying out its fiduciary responsibility to the owners provided the workers and suppliers don’t totally revolt. Exploitation can be continually pressuring supplies to cut costs of the goods supplied even when the corporation’s overhead costs are declining due to technological innovation and profits are growing.

When profits decline suppliers must be the first to reduce what they expect for their goods, even if their costs are increasing. When a new line of business is introduced suppliers must accept a low share of revenue in order to “grow the business,” but once that line of business matures and starts throwing off substantial profits suppliers are locked into the same low fees they were willing to accept during the grow the business phase.    

Another favorite tactic is the contract that spells out all the obligations of both parties in great detail. Would you believe that 30 to 40 years ago there were one-page agreements between agencies and photographers and the rights granted for use of an image in a textbook could be spelled out in one short paragraph? With these minimal agreements suppliers were often better off than is the case today.

Today, the supplier is at risk if he fails to abide by any of the contract details. On the other hand, if any of the details become inconvenient for the corporation it either revises the contract or simply ignores the requirements all together. Rather than feeling an obligation to abide by any agreement, the corporation turns to the legal system, not with the hope than an impartial judge will decide what was really meant in that complex original agreement, but to drag out any decision until the party with the least resources (supplier) is worn down.

Often the party with the deepest pockets no longer feels any ethical obligation to abide by a contract if it can gain an economic advantage by ignoring the terms and litigating the issue. Friedman’s “stay within the law” comment is usually interpreted to mean that if they can end up with more money for shareholders after settling a law suit, than they would have had by abiding by the terms of the agreement then they should ignore the agreement.

Maybe business has always been that way and I was just more naïve and unaware of the problem 30 or 40 years ago, but I think there has been a general decline in the feeling that one should honor business agreements.

Textbook Publishers

Today, in the stock photography business, textbook publishers are the classic example of those who ignore agreements. For years they have been making agreements based on print runs and totally ignoring their obligation to report to the supplier and compensate the supplier for additional uses when the corporation is about to exceed the authorized print run.

When questioned about a print run publishers tend to do everything possible to avoid supplying the information. In some cases they will only provide the information if the supplier agrees in writing not to show the information to his lawyer. If and when the publisher does supply the information, and there is clear evidence of a violation of the agreement, their next step is to attempt to negotiate a minimal settlement instead of abiding by the terms spelled out in the agreement. Failing this they force the supplier to go to court, if he wants any chance of a settlement. Lawyers for the publisher then do everything to drag out the case and wear down the supplier, both financially and emotionally.

Because some photographers and small agencies have chosen to fight, rather than knuckle under, publishers have changed their strategy when licensing rights for future projects.  Now they want licenses that cover every conceivable way an image might be used, including types of uses not yet invented, and for much longer terms. They expect to get these additional rights for the same low prices, or less, than they have paid previously for many fewer uses. In fact rates today are much lower than publishers paid ten or 15 years ago for a fraction of the use they are currently requesting.

Adapting To The Changing Environment

Recently, I wrote an article suggesting that instead of licensing for longer terms, suppliers should start licensing uses, particularly electronic, for a maximum of two years. Suppliers should accept the responsibility of re-invoicing for a new license when the 2-years are up rather than expect the publisher to notify them that they should re-invoice. I received several complaints about this strategy.

1 – Some said, “We shouldn’t have to do this because publishers have an obligation to honor their contracts.”

Obviously, they are not going to do that. They feel their first obligation is to maximize profits for their stockholders. If they can pay stockholders a couple more pennies by failing to pay us for additional use that’s what they are going to do.

2 – Others said, “Keeping track of when I should re-invoice is too much work. I don’t have time to do it.”

If you don’t have time to invoice for the use of your images then you shouldn’t be hoping to earn money for their use. Also, you shouldn’t be complaining about publishers not paying a reasonable fee for the use of your work.

As a practical matter, if licensing 2-year electronic uses were a normal practice, organizations would spring up that would handle the tracking and re-licensing for you for a small fee (much less than a normal agents commission).

3 – “What do we do if they refuse to pay the new invoice?”

The same thing you would do it they refuse to pay your first invoice. This is a new license for the right to continue to use the image. One key will be that the first license must be properly written making it very clear that the first license is terminated at the end of 2-years. The publisher has no rights to use the image beyond that date. If you publisher refuses to pay then you may have to take him to court, but continued use in any way will be a clear violation of the agreement and harder to dispute than a circulation argument.

One thing that would facilitate this collection process would be a small claims process rather than having to file a copyright suit. There are people in the U.S. Congress that recognize how a small claims process could help and at some point will be introducing legislation. Actually, enacting such legislation may take a few years, but at least there is some movement in the right direction. It is recognized that the current system is not working. At the right time, photographers will need to support this legislation.

4 - “How will I know if the publisher is still using the image?”

In order to make digital files available to students, teachers and other educators publishers will need to develop a searchable database that is available to those who want to license rights to use view the images. Publishers will not give this service away for free. All the photographer must do is search that database to see if his picture is there. If the picture is available on the database after the expiry date of the first agreement then the publisher needs to pay for continued use of the image.
5 – Some pointed out that “Publishers will never agree to this way of working.”

They won’t agree if they don’t have to. The only way it will happen is if everyone stops licensing for long terms. If publishers can not get the images they need any other way then they will agree. The system is a fair solution to the problem. Eventually, most educational material will be delivered online. Some will only be used for a short period of time and others will be used for an unlimited period of time. The only way to fairly compensate creators is to find some way to charge based on how long a particular image is being used.

You may not want to change the way you do business, but if you want to earn any reasonable money for educational use of your images in the years ahead you better start thinking about ways to adapt.

Copyright © 2012 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:  


  • Charles Swan Posted Jan 18, 2012
    An effective method of enforcing agreements and copyright is essential for photographers and image libraries. A small claims court system for copyright claims is in the process of being introduced in England and should be operational later on in 2012 for claims under £5,000.

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