Business Planning for the Future: Growth in Demand vs. Single-Shooter Volume, Pricing

Posted on 8/25/2009 by Jim Pickerell | Printable Version | Comments (3)

A previous article in this “Business Planning for the Future” series noted that future growth in demand for images is a widely debated subject among stock industry professionals. In my view, traditional customers do not seem to have any growth potential, and there are also indications that growth in demand for low-priced imagery might have reached its natural level. Industry veteran Leslie Hughes—formerly of The Image Bank and Corbis, currently the principal of Equidyne Ventures—has offered an alternate point of view.

“I hate to nitpick, but the use of images is rising. In fact, I don’t think that anyone could argue that the use of visual imagery isn’t growing; it is as strong as ever, everywhere. It is the type of sale or business model that is changing, and the revenue stream that is challenged,” Hughes wrote in a lengthy comment, which is well worth reading in its entirety.

Before I discuss my views in more detail, it is important to recognize that this series of articles is directed toward individual photographers who see stock photography as a way of earning a living doing what they love. I do not deny that there is a growing demand for imagery. However, most of that growth in demand is for images priced at such a low level that it becomes almost impossible for photographers creating new images to sell enough volume to earn a living. Most photographers earning a living from stock alone are doing so because they have a huge body of work, produced in years past, that is still generating some revenue, although that revenue stream is declining at a very rapid pace.

Professionals must remember that the goal is not just to supply all the demand that exists, but to make a profit doing it. I can instantly create additional demand for automobiles: all I have to do is sell them for $1,000 each. At that price, there would be lots of new demand, but I do not think anyone can buy the steel, set up the factories and pay the labor needed to manufacture cars at that price. I also do not think hobbyists will produce them and give them away for less than the cost of production.

The stock photography business differs from most other businesses in that those who sell the product and set the price are not at all concerned about the cost of production. In fact, in most cases, the sellers have no clue as to the time and fixed costs that went into producing the images.



Sellers agree to pay the producers a certain percentage of the fee customers pay and set prices based on their own operating and marketing costs, as well as their judgment as to whether they can realize a profit from the percentage they retain. If the resulting profit is not enough, sellers ask for a larger royalty percentage or upfront fees—or require the producer to do a lot of extra work preparing images for marketing, thus reducing their own costs. Sellers are not required to even consider the production costs when setting the price.

This is akin to car dealers telling manufacturers: “We’ll give you 20% of what buyers pay us. It’s your job to figure out how to build all the cars we need for $200 each. And, by the way, we have no idea how many of the cars you send us we’ll be able to sell, but send us a lot.”

Sellers feel very little pressure to raise prices, as long as the number of sales continues to rise. If sales start to decline, the seller may then conclude that if he lowers the price, he’ll increase the demand, sell more product, and because he gets to keep a fixed percentage, make more money, as long as the revenue from the increased units licensed is greater than that given up by selling images at a lower price. In either of these scenarios, if the number of suppliers is also increasing (which is the case), the odds are that no individual supplier will benefit.

Some argue: “The sellers do consider production costs. If they didn’t, nobody would be supplying them with new images.” Unfortunately, that is not the way it works, because:

  • Many producers are not trying to earn a living. They just want to have fun and see if they can earn a little extra pocket money. There have always been people at this level in the stock photography business, but their numbers are growing astronomically. They will continue to continue to produce whether they make a profit or not.

  • The potential for success is oversold. New entrants approach this market with totally unrealistic expectations. They focus on the few top producers and forget about all those who devote huge amounts of time to the endeavor and spend more than they will ever earn. The only real benefit these people receive is the satisfaction of having created the image.

  • Number of players dilutes individual revenues. For the professional, the competition from the part-time producers makes it almost impossible to sell enough images to earn enough money to support oneself.

Think differently


One suggested strategy is to accept that images are a commodity and have to be made available for low prices or free, and then find other ways to earn revenue from the images you produce. Providing a free service works for Google. Why not photographers? Fotoglif, GumGum and PicApp and experimenting with systems that would pay image creators a percentage of the advertising dollars generated when their pictures are seen. So far, I have not seen any evidence that this will generate significant revenue for the image creators, though it may provide some for the distributors. I hope it works, but I’m not ready to jump on this bandwagon until I can see some evidence of results.

Giving something away for free to draw in customers for paid services works if you have something else to sell them. If distributors give something away, they have something else to sell the next time the customer needs a picture. But the photographer who chooses to participate in such offerings will likely lose rather that gain. Photographer A gives away an image, but when the recipient of this largess returns, he does not buy one of his images but rather buys images by photographers D, E and F. It works for the distributor, but the odds are infinite that it will not average out in any photographer’s favor when there are tens of thousands of photographers in a group—particularly since some photographers give away nothing.

In the stock photo business, I have trouble recognizing any of these “other things” that photographers might offer. If they were to offer assignments or photo books, I can see how that might work. But both of these products have more cost-effective ways to market them than giving away images. If anyone has some other innovative ideas, please let me hear them. Maybe something new will come along, but in the meantime, my guess is that most people have to worry about paying tomorrow’s bills, not speculate on making some money several years down the road. Producing new stock images is rapidly becoming the wrong way to earn enough to cover living expenses.

If you know of some actual success stories where photographers have found new strategies, let me hear about them. We are continuing our “Reinvention” series to share such experiences.

Leslie Hughes responds in "New Business Models Needed"



Copyright © 2009 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

  • Posted Aug 25, 2009
    "Stock photography...ain't what it used to be!"
    I've had 2500 images edited out of my collection a few years ago, that hurt.
    Itz gotten very selective as far as images. And these newby editors think they know what the clients want, HA, the clients dont even know what they want till they trip over it. I can attest to that as a photog and a model too.

    cheerio.
    just keep shooting for the passion of it, if you get a check in the mail, take mom out for lunch.

  • Jagdish Agarwal Posted Aug 26, 2009
    Every product has competition. Each service has competition. We must learn to live with it. Make your product or service better or different from your competetors. It works.

  • Don Farrall Posted Aug 27, 2009
    Jim,

    The first part of your article, prior to the “Think Differently” section, appears to contradict with some of what you have been promoting over the past year or two… the “everyone should be considering a microstock component as a part of their overall stock venture” mantra. I have felt from the beginning that microstock was not a sustainable model from a contributor standpoint. Not in it’s current form. It appears that you are finally coming to that realization. At this point it is not the “hobbyists” that are a threat to the serious traditional shock shooter; it is the few “pro-microstock producers” that have gutted the profitability out of the traditional market. These are people who clearly could be selling in the traditional marketplace, but who have chosen to be the “top dogs” in the volume end of the market.

    I like your car analogy. Of course anyone can compete with an existing business model when they enter the market at such a fraction of the established price. In addition as you noted, the illusion that a lot of money can be made off of a single image in microstock is waved in everyone’s face as the “most-downloaded” images of almost any search term gives a very unrealistic picture of the sales potential of similar images, (of which there are generally hundreds).

    It is still possible to earn reasonable, (not great, but reasonable) money in traditional stock. Yes the “low hanging fruit” – the easy to produce images, can’t command the price they once did. But exceptional images can and should, still be sold for amounts that represent a good return for the effort, skill and production costs. I sold an image this past month, total sale license $20,000. It was RM, so the royalty was $8000. Obviously not a normal sale, but these sales do still occur.

    As for a new business model based on Google, Apple, or Gillette. We don’t need a new model that provides for a great long term return for a giant entity, at the expense of the creators of the work. I think we have that now in too many forms.

    What is my solution? I would like to see microstock Agencies selling images to their “new customer base” of buyers, (small businesses, bloggers, etc) these people who microstock suggests would have never bought images at traditional prices, at what ever “cheap” price they like, that will generate their intended volume. I would also like to see microstock Agencies selling their images into the “traditional commercial market” at prices closer to traditional RF prices. In theory, this should make more money for all agencies and all contributors, at the expense of “traditional commercial images buyers” who could no longer pay $10 for an image for a national campaign. This would require the introduction of a limited usage agreement, and an extended – commercial usage agreement. It would also require the adoption of policies across multiple agencies. Which in it’s self would be a difficult task, however, if one agency, like Istock, adopted this system they might be able to get contributors to pull their images away from other agencies based on the potential for selling some images for better royalty amounts.

    I am hanging in there, continuing to make a living at stock, and shooting assignment work as well. I still have hopes that things will shake out in some fashion. All of my agency clients that I shoot for, also use stock, and they all use some amount of microstock. I am hearing that the novelty of cheap images is wearing off, and that they are looking for better and “less exposed” images when ever they can get a budget that doesn’t force them to use subscription or microstock imagery.


    Don Farrall

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