Do Production Costs Dictate Price?

Posted on 3/27/2009 by Jim Pickerell | Printable Version | Comments (3)

In response to “Selling Same Photos At Different Prices,” Dreamstime CEO Serban Enache commented: “Jim, with all due respect, especially as I know your perspective on this, we believe it’s wrong to ask a customer to pay more just because he affords a higher price. That is because the cost of creating an image should dictate its initial price AND the demand over the time on that image (which makes it more or less special).”

It is hard to believe that anyone in the microstock business could say that the cost of creating an image should dictate its price. When a microstock customer is charged one or two dollars for an image, it would seem impossible to argue that such a fee represents the production cost. It seems clear that the fees charged for microstock images have no relation whatsoever to what it cost to create even the simplest of images. Granted, much higher prices are occasionally charged for extended licenses, but this discussion focuses on the typical microstock license fees that represent the vast majority of sales.

Enache may argue that each image will sell multiple times, and thus individual customers should only be charged a fraction of the cost. That might make sense, if the site operator actually knew what it cost to create, keyword and upload an image, and then priced images accordingly, but this is not what happens. Microstock agents price images based on file size and competitor pricing, factors that have absolutely nothing to do with what it costs to produce a given image. If cost of production has anything to do with price, why are customers charged more when they request a larger file size? Did it cost the photographer 100%, 200% or 1,000% more to produce that file?

The site operator does take into account his marketing costs when establishing prices. He knows what it costs to acquire and store images. He knows his overhead, and he knows the percentage of total revenue earned that he can afford to give to the creator, in order to cover his company’s costs and realize a profit. However, the cost of production does not enter the equation, because the site operator has absolutely no production costs for the content he licenses, and no knowledge of the true costs of producing a given image.

He knows approximately how many total downloads there will be a month, although he has no idea, nor is it an important consideration relative to his costs, how many downloads there well be of any specific image. On the other hand, the photographer cares very much about downloads per image, because it is the basis of his compensation.

Enache also says: “Because a percentage-based royalty is in place, the agency will make the same money as the photographers (with us, it’s 50-60%), no matter the price.” However, the photographers’ cost are very different from those of the agency. Enache does not seem to be willing to recognize or acknowledge this. An equal split of any given number may be plenty to allow the agency to realize a profit, but it may be far below what the photographer needs to cover costs and also realize a profit.

An example from personal experience: A little over two years ago, I uploaded 17 images of the U.S. Capitol, Supreme Court and columns to Dreamstime. So far, the images have been downloaded 73 times, and I have earned $85.24, or an average of about $1.17 per download and $5.00 per image in the collection. To produce these pictures, I had to wait for a clear, sunny day, which is not always easy to find in Washington D.C. These shots also had to be made in the afternoon, when the sun was on the right side of the buildings. When the right environmental conditions developed, I took the subway to the Capitol and spent about 3 hours door-to-door to take pictures from a variety of angles. My assistant spent another couple of hours editing, keywording and uploading the images. If general overhead and cost of equipment are also added to the equation, $85.24 doesn’t cover the cost of production. There is a lot more to production costs than the 1/100th of a second it takes to actually record the image.

Some photographers receive a lot more than 4.29 downloads per image and earn more than $5 per image on file, there are many photographers who earn even less. Some situations may be easier to shoot than others, making it possible to produce more images faster, but there are also many situations where the costs of production would be much higher.

The point is not that microstock prices are so low, but that the fees charged for stock images in general have absolutely nothing to do with the cost of creating them. The industry needs to stop pretending that the two are related. This has always been true. It is true of traditional stock as well as microstock, although at traditional stock prices, it is possible to recover the cost of production with many fewer sales than is the case of microstock.

Photographers understand this, even if agents do not. The photographer trying to make a living really does not care about price or percentage. What he cares about is his return on time and expenses invested. He may keep producing as long as that return is adequate. When that return becomes inadequate, he will move on to some other way of earning a living and maybe continue to take pictures as a hobby.

Let’s drop the fiction that the prices currently being charged for stock pictures in any way relate to the cost of producing them, since the system for establishing prices is arbitrary and only considers marketing costs. I have trouble understanding what is so wrong with basing prices on the value each customer receives from using the image.

While Enache may have raised this issue, he is not alone in his beliefs, which is unfortunate for photographers. Too many agents fail to recognize or acknowledge that the photographer’s costs are quite different from their own.

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, 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:  


  • Alan Bailey Posted Mar 27, 2009
    As the owner of an agency/producton house, I always thought your point of view was obvious. Microstock is a pure numbers game just like RF. It may cost me $200 to get one image out the door and into the channel, while it costs $15 to do the same thing with a different image. The customer dictates whether my efforts are valid in his choice to purchase either image.

    At the moment, the only universal mechanism to dictate value/price of images lies with whether I place an image in RM, RF or microstock.

    And to your point, photographers will only put images into microstock or any other model if the return makes it worth their effort and cost. It may take a year or two, but the microstock model will sort itself out. A lot of photographers are putting a lot of time and effort into images that will not make a good return on micro (of course, the inverse is also true).

  • Steve Pigeon / Masterfile Posted Mar 27, 2009
    You're absolutely right, Jim. The only workable business model where a user pays proportionate to the cost of creating an image is assignment photography. A stock licensing model that tried to scale prices according to production costs would be doomed from the start. Clients are not interested in what it costs to make a stock image - they are only interested in what it costs to use it. And that price is dictated by supply and demand.

  • Bill Brooks Posted Mar 27, 2009
    Jim I agree with everything you say above, except your continued use of the word "agent" instead of "archives" is driving me up the wall.

    With the advent of the internet, 10 years ago, PACA changed the first "A" its name from "Agency" to "Archive". At that time most PACA members removed the agent terminology from their photographer's contracts. An agent is legally required to always act in the best interests of the photographers it represents. Today I often hear photographers still refer to their image libraries as "agent". The image seller is not an "agent" to the photographer, no more than a grocery store is an agent to the farmer. The sooner photographers stop thinking of their picture archives as their agent, the better they will understand their business.

    It would be a small step for you, and a giant leap for photographer's thinking, if as a matter of style, you dropped the word "agent" and started using words like "picture archive".

    There are other words you could use, but lets not go there.

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