Business Planning for the Future: Issues to Consider, Part II

Posted on 8/17/2009 by Jim Pickerell | Printable Version | Comments (0)

In addition to the broader economic and legal climate, factors such as decreasing photographer royalty percentages, competition from foreign workers and increasing preference toward video content can have substantial effects on a stock-production business.

7. Royalty percentage


The trend among distributors is to pay image creators a smaller and smaller share of the gross licensing fee when an image is used. In cases where photographers receive higher royalties, the number of sales is often lower. Thus, photographers often earn more in gross revenue from distributors who pay lower royalty percentages than those who pay the highest.



There are exceptions, of course. While this does not mean that image producers should seek distributors who keep most of the gross fee paid and offer the creator a pittance, it does mean that royalty percentage should not be considered in isolation.

Unfortunately, there is no reliable way to determine whether a distributor’s offer is better than that of any other until you have had specific experience with both with the same collection. Thus, it is best, whenever possible, to simultaneously offer the same images to several distributors and base future decisions on your own personal experience.

8. Pricing trends




As customers have more choices, the laws of supply and demand tend to cause prices to drop. That has certainly been happening in the stock photo industry. Interestingly, microstock sellers have been able to steadily raise prices without losing customers over the last four year, mostly because they started at such an extremely low point. Microstock has also seen a major growth in customers, but it not clear that sellers can continue to raise prices and keep all the same customers.

There is some evidence that continued price increases will result in a decline in sales. Image suppliers should try to determine if microstock distributors have reached all the potential customers and are simply taking market share from each other, or if there is truly continued growth in the customer base. If microstock sellers start to lose low-end customers, they will need to find a way to modify their pricing structures in order to supply images to low-end users at prices they can afford. At the same time, sellers will want to continue to raise prices in those situation where the customer receives greater value from using the image and thus can justify paying more.

9. Foreign workers in the market




Opportunities are increasing for those working in areas where the cost of living is lower than in the U.S. American photographers need to be aware of the competitive advantage that these foreign workers have. This often means that certain production costs—particularly model and studio expenses—are lower for the foreign photographer than in the U.S., making the daily revenue of the foreign photographer significantly lower. Photographers operating in a number of locations can often develop profitable businesses on revenue that would be totally inadequate for someone working in the States or Western Europe.

In the microstock arena, photographers can easily identify the best selling images in any subject category. Many photographers in the developing world then focus on producing similar images at a much lower cost. This enables them to quickly develop viable and competitive businesses, but it reduces the useful life of images produced by the first photographer. Many in the U.S. will cry that this is unfair and it should not be allowed to happen; those in the developing world see it as an opportunity and a way to compete. Nothing will stop this trend; U.S. photographers must figure out how to live with it.

10. Technological change


No major technological changes are anticipated, but these can quickly alter the landscape. There is a natural resistance to jumping on the bandwagon of each new release, and there is often a great risk in being an early adopter. At the same time, it is important to try to get a clear understanding of how the new technology may alter the business climate. Factor that into your planning. New technological developments may make it easier for amateurs and customers to produce professional quality images, or at least images that are perfectly satisfactory for online uses.

11. Video


There is general agreement that the future of information distribution is online rather than in print. Unlike print, the Internet can effectively use video as well as still images. That does not mean that video will replace all still uses. If the reader simply wants to know what an author looks like, a still image is more appropriate than a video of the author reading his article. On the other hand, some information can be communicated much more succinctly, effectively and powerfully with video than with stills.

Many customers will also have a bias toward video because it is “new,” even when it does a poor job of communicating information. The challenge for future communicators will be to determine when video is the more effective option, when to use stills and when to use text alone.

Producing good video requires a skill set and costly tools that are much greater than those required to produce still images. As a result, there will probably be less competition, at least for a while. There is also the question of whether Internet demand will be for short clips of the type used in television ads, or whether the majority of Internet uses will be quite different.

Previous in the series


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.  

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