Alternative Strategy For Subscription

Posted on 10/24/2005 by Jim Pickerell | Printable Version | Comments (0)



October 24, 2005

A21 has acquired Ingram, a UK-based provider with a file of approximately 100,000 images that are offered for licensing by subscription, as CD-ROM or as single-image RF.

For the company's outstanding stock the shareholders received $965,039 in cash, $1,448,000 in the form of preferred stock of a21 which is convertible into shares of a21 common stock at a minimum price of $0.50 per share, and 3,620,000 shares of a21 common stock. Final adjustments will be made to the purchase price after finalization of Ingram's closing balance sheet. In addition, a21 repaid a $1,548,071 credit facility of Ingram and other Ingram debt and transactions costs of $286,890. Ingram had no other material liabilities at closing other than ordinary course accounts payable and accrued expenses. The amount of consideration was determined by an arms length negotiation.

Most subscription sellers believe that every image they offer at the low subscription rates must be wholly owned so they don't have to pay out any portion of the fees charged. However, in Ingram's case only a very small percentage of the images in their subscription offering are wholly owned and they must pay a royalty share of each license.

Traditionally, photographers have received a percentage of the fee charged for using an image, but with subscription products it is impossible to determine which images are actually used. To get around this problem Ingram has based its method for calculating royalties on single-image downloads, or the total number of images on a CD, rather than images used.

Essentially, the contributor receives his agreed percentage of the overall paid revenue according to the proportion of his images downloaded in each quarter. So for example if the overall revenue to Ingram in the first quarter is $1,000,000, and there are 100,000 downloads of which 5,000 (5% of the total) belonged to a given contributor, then assuming a royalty of 20% the contributor's payment would be $10,000.

Ingram photographers can go on the site at any time and see what is in their account, however because their figure is always based on their percentage of the total images downloaded the number could fluctuate up or down throughout the quarter. (If early in the quarter a high percentage of one photographer's images were downloaded by one or a few clients the photographer's total revenue might be higher until the purchases made by other customers during the quarter began to kick in and affect the averages up until the date of actual payout. The photographer is always concerned about the proportion of his images that are downloaded relative to those of all other photographers.)

Things To Consider

It might also be possible for a photographer to game this system by buying a subscription and then downloading the total number of his images allowed (and no images from any of the other photographers). However, it is unclear whether such gaming would really present much of a financial benefit and it would probably be easy for Ingram to spot.

Obviously, the way to make money in this system is to have a significant portion of the total images in the file. What is unclear is how many images a photographer would probably need to have in file in order to generate 5% or so of the downloads in a quarter. In any given quarter every photographer earns exactly the same per download regardless of the production values built into the image. Possibly, images with greater production values might be downloaded more frequently, but it would seem that most photographers would want to focus on keeping their cost per image low and getting a volume accepted.

Because this calculation is based on the total images licensed by all customers and not on the specific images used by each licensee there is another possible point of inequity. For example one group of customers (Group A) may pays $800 for a license and each download 8 images per quarter from one, or very few, photographers. Another group of licensees (Group B) might download an average of 300 images per $800 license fee in the quarter, and none of those images belong to the photographers in Group A. Because the two groups are lumped together for the purpose of determining the average royalty to be paid out, the photographers in Group A will receive significantly less than if the royalty were calculated on the specific images used by each licensee.

One of the benefits of the pay-for-download strategy for distributors is that they can earn significant revenue without the huge cost in ownership of the images. Consequently, if the business model is accepted by enough photographers some of those distributors who are now going to extraordinary extents to own images may decide that it is better to pay royalties, particularly once they own a quantity of the high demand subject matter.

Copyright © 2005 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:  


Be the first to comment below.

Post Comment

Please log in or create an account to post comments.

Stay Connected

Sign up to receive email notification when new stories are posted.

Follow Us

Free Stuff

Stock Photo Pricing: The Future
In the last two years I have written a lot about stock photo pricing and its downward slide. If you have time over the holidays you may want to review some of these stories as you plan your strategy ...
Read More
Future Of Stock Photography
If you’re a photographer that counts on the licensing of stock images to provide a portion of your annual income the following are a few stories you should read. In the past decade stock photography ...
Read More
Blockchain Stories
The opening session at this year’s CEPIC Congress in Berlin on May 30, 2018 is entitled “Can Blockchain be applied to the Photo Industry?” For those who would like to know more about the existing blo...
Read More
2017 Stories Worth Reviewing
The following are links to some 2017 and early 2018 stories that might be worth reviewing as we move into the new year.
Read More
Stories Related To Stock Photo Pricing
The following are links to stories that deal with stock photo pricing trends. Probably the biggest problem the industry has faced in recent years has been the steady decline in prices for the use of ...
Read More
Stock Photo Prices: The Future
This story is FREE. Feel free to pass it along to anyone interested in licensing their work as stock photography. On October 23rd at the DMLA 2017 Conference in New York there will be a panel discuss...
Read More
Important Stock Photo Industry Issues
Here are links to recent stories that deal with three major issues for the stock photo industry – Revenue Growth Potential, Setting Bottom Line On Pricing and Future Production Sources.
Read More
Recent Stories – Summer 2016
If you’ve been shooting all summer and haven’t had time to keep up with your reading here are links to a few stories you might want to check out as we move into the fall. To begin, be sure to complet...
Read More
Corbis Acquisition by VCG/Getty Images
This story provides links to several stories that relate to the Visual China Group (VCG) acquisition of Corbis and the role Getty Images has been assigned in the transfer of Corbis assets to the Gett...
Read More
Finding The Right Image
Many think search will be solved with better Metadata. While metadata is important, there are limits to how far it can take the customer toward finding the right piece of content. This story provides...
Read More

More from Free Stuff