Chasing Lost Business Ignores New Markets

Posted on 5/28/2008 by Julia Dudnik Stern | Printable Version | Comments (0)

The proliferation of the royalty-free model, strengthened by the advent of microstock, has turned stock licensing into a volume business. Though most severe in creative stock, pricing is on a clear downward trend across most image categories. While there will always be a professional buyer segment that seeks premium imagery and related services, many art directors and designers have shifted from traditional to micro-payment imagery for certain projects.

Despite numerous reports of declining traditional revenues, many agencies still do not recognize that much of this lost business won't return. Micro and mid-priced offerings continue growing in quantity and quality. Businesses operating in these relatively new niches tend to be technically superior to their predecessors, combining a more intuitive and efficient search experience with a constantly improving product. With the exception of buyers who have exclusivity requirements or seek niche subject matter, those who migrated to micro-payment and midstock have little reason to go back.

Traditional agencies have begun to implement coping strategies, but most attempt to either recapture lost customers or prevent additional departures.

Some libraries have adopted tighter editing policies; however, these only address the needs of professional buyers who work in the creative industries. Do-it-yourself marketers and other large new-buyer segments, responsible for an increasingly large share of image-licensing transactions, have different definitions of quality and suitability. Perhaps a better conceptualized, technically superior collection can sway an already lost traditional customer-when he or she has exhausted the lower-cost options. But editing alone will not compensate for the overall decline of traditional transactions.

There is a small group of traditional producers, including Image Source and Westend61, that have combined a more rigorous editing approach, which explores secondary markets for edited-out imagery, with a price hike of about 25% on premium images. Though seemingly rebellious, this actually makes sense. The fact that high-end buyers can pay more for the "right" image has been proven time and again, and higher per-image revenues help offset the lower number of transactions.

Other than these exceptions, the prevalent traditional response to market conditions has been to lower prices. Some have followed Getty Images with $49 Web-use pricing; others have offered steep promotional discounts, launched budget collections or reduced prices across the board. Many that diversified into lower-priced imagery say they did it in the hopes of keeping existing customers from looking elsewhere.

While some of these initiatives have been more successful than others, price adjustments are only the first step. Traditionals have recognized the vast new buyer market tapped by microstock, and many responded by offering this market a product it can afford. What is missing is a marketing approach that reaches that segment, as traditional agencies continue to focus on the shrinking pool of once-traditional buyers.

If this continues, this new buyer market will remain the domain of microstock agencies and non-photography businesses that invent new business models. While many image producers already see the industry as overly dependent on distributors and technology companies, these "outsiders" are leading the push toward new buyers. Recent launches of ad-supported image products by PicScout and GumGum present excellent examples of attempting to leverage the growing blogging and social-publishing segment.

Some traditional agencies have begun casting a wider buyer net. Getty Images launched a couple of ad-supported consumer-facing Web sites, U.K.-based moodboard created a unique "pay what you want" property and New York-based PhotoShelter just announced a new personal-use image license, which caters to those using images as desktop wallpapers, screen-savers and on handheld devices.

Such examples are few, and their commercial viability is not yet proven, particularly in the absence of publicly available financial information. However, if traditional image agencies are to survive in a rapidly changing industry, they must gain access to the buyers that have fueled the microstock growth, and they must do it on their own. While innovations by industry suppliers are valuable, relying on third parties alone will yield growth-for the third parties.

Copyright © 2008 Julia Dudnik Stern. 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


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