CEPIC Sheds Light on Double Counting

Posted on 11/30/2009 by Jim Pickerell | Printable Version | Comments (0)

In 2008, Coordination of European Picture Agencies conducted an extensive survey of stock photo agencies in Europe. The Market For Image Suppliers In Europe provides detailed breakdowns of these numbers. Among other things, this report offers some interesting insights into the degree of double counting that takes place in the industry.

Given the way the stock photo business operates, a significant percentage of pictures are licensed not by the producing agency but by a third party that retains a portion of the gross fee for its services. This fee can range from 35% to 80% of the amount paid by the customer.

For example, when a picture belonging to agency A is sold by agency B for $100, B retains $50 and sends the other $50 to A. For purposes of calculating gross revenue, agency B records $100 from this sale, while agency A claims $50. Thus, the two agencies claim to have earned a combined $150 on a sale where the customer only paid $100. Of course, agency B will also have a $50 expense on its books, so the proper amount of revenue is accounted for, but when companies talk about gross revenue, it is normally the revenue received before any costs, commissions or expenses are deducted.

To determine the real size of the stock photo business in terms of the amount customers pay for images, we need to determine the amount of revenue that is double counted, not just the gross sales of all the agencies and distributors in the industry.

Of the agencies that responded to the CEPIC survey, 130 provided gross sales figures that totaled 99,873,879 euros, not including service fees charged. In addition, 109 agencies provided a further breakdown of “sales made outside their home country,” which totaled 56,362,896 euros.

According to these figures, average sales per agency are 768,260 euros. Consequently, estimated gross revenues for the 109 agencies that sell outside their home countries is 83,740,406 euros. It is important to recognize that an enormous portion of the revenue (67%) of these 109 companies came from sales outside their own countries and not direct sales.

Notably, the CEPIC sample may not be adequately large to draw conclusions. It also does not include either Getty Images or Corbis, whose gross sales alone would be much higher than the above totals. However, CEPIC data is by far the best we have to date and is worth considering in an effort to understand what customers are actually paying for stock pictures.

The group of 109 agencies shows 27,377,510 euros in direct sales and 56,362,896 euros in foreign sales. If these agencies received an average of 50% from foreign distributors, then customers actually paid a total of 61,952,774 euros—not 83,740,406 euros—and 21,787,362 euros would have been reported twice. If distributors kept an average of 60%, then 16,103,685 euros were reported twice, and actual gross sales were 67,636,721 euros (40,259,211 plus 27,377,510).

Assuming that the above group of sellers is representative of the entire industry, and that the gross customers will pay in 2009 is $1.4 billion, what is the sum total of revenue that individual sellers will report?

First, 33% of $1.4 billion ($462,000,000) is the revenue from direct sales. Half of the remainder, or $469,000,000, that would be counted twice and add that to $1.4 billion for a total of $1,869,000,000.

If 50% of the remaining $938,000,000 ($469,000,000) will be counted twice, the reported gross will be $1.9 billion ($1,869,000,000), 34% above actual sales. If distributors retain 60% of the $938,000,000 and producers are paid $375,200,000, the combined reported total will be $1.8 billion ($1,774,200,000), 27% above actual sales.

There is an industry tendency to inflate gross sales estimates by ignoring the effect of double counting when discussing overall industry size. Interestingly, there is virtually no double counting on the microstock side of the business, because almost all of the sales are made directly by the company representing the images, not a third party.

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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