Getty Has Outstanding First Quarter

Posted on 5/12/2000 by Jim Pickerell | Printable Version | Comments (0)



May 12, 2000

Getty Images, Inc. has announced first quarter results that significantly exceed

investor expectations. Revenue for the quarter rose to $104.8 million, up from $79.9

million in the 4th quarter of 1999. Wall Street analysts were predicting gross revenue of

approximately $85 million.

This impressive 31% growth was driven by recent acquisitions and by further growth in

e-commerce revenue. All brands had increases in volume and price, in all countries.

If we remove the two most recent acquisition TIB and VCG from the comparative figures

there was a 17% revenue growth for Stone, PhotoDisc, and the other Getty assets during the

quarter. That would put them on track for a 68% annual growth, but in his conference call

with investors Jonathan Klein reinterated that he was confortable with a 25-30% organic

growth for 2000. This is fantastic growth when compared with what appears to be happening

in the rest of the industry. Klein also said Getty's target for the next three years

was 25% annual growth.

Business-to-business transactions represent 96.4% of all revenue. The other 3.6% comes

from consumers. In talking about internet use Klein told investors during the conference

call, "In 99% of the cases the images still appear in print. The internet - as a market - is

still in very early stages."


E-commerce revenue was up to $31.5 million. VCG and TIB, which were recently acquired,

did not contribute to this e-commerce revenue because their businesses were almost entirely

analog during the quarter. The $31.5 was up from $24.5 million in the the

4th quarter. In spite of the real growth of the e-commerce revenue, as a percentage of

total sales it was down slightly from 31% to 30%. E-commerce sales for the 3rd quarter of

1999 was at 32% of gross sales.

Klein has continually emphasized that recent growth is a result of the success of the

company's core strategy of pulling images out of filing cabinets and making them available

to clients on-line in an e-commerce environment. What's insteresting is that the relationship

between e-commerce and analog sales seems to have stabilized at a comparatively low level of

e-commerce use. Both e-commerce and analog are growing at about the same rate. It will

be very interesting to see what happens in future quarters as TIB and

VCG are fully e-commerce enabled.

Getty has been trying to convert its business from delivering images by traditional

means to internet delivery. A year ago Klein and Mark Getty

were quoted as expecting 100% of their sales to be on-line within three years. By fall they

were estimating that eventually 60% of the business would be e-commerce. Right now it is

looking like there is some magic in the 30% e-commerce level. Photographers and competing

agents should closely monitor this trend.


Getty said that the $31.5 million was 38% of sales, "excluding TIB and VCG." That would

put gross sales, excluding these companies, at about $83 to $84 million. Thus, if

sales of VCG were $3.7 million sales of TIB would have been about $19 million. (TIB's

sales for 38 days at the end of the 4th quarter were $8.7 million. If we extrapolate

for a full quarter, level sales should have generated about $20.6 million. It is not

surprising that TIB sales would be level or down slightly until the integration is complete.)

On the other hand VCG contributed $3.7 million to Getty's gross revenue, after being part

of Getty for only 9 days in March. That is an average $411,000 per day for a quarterly

rate of $37.5 million or $150 millon per year. It should be noted that VCG's 1999

revenues were only $90 million. Thus, there were probably some large, end of quarter,

payments that accrued to Getty rather than the former owners of VCG which, in effect,

represented more than just 9 days of revenue.

During the conference call Klein said TIB and VCG contributed almost nothing to 1st

quarter e-commerce sales, but Getty currently has 60,000 TIB images up on line. He also

said that VCG had a larger percentage of images scanned and ready

to go online than TIB, at the time of purchase of the two companies. He also added that

investors (and suppliers) should not expect the integration of VCG to be as fast as it

has been with TIB.

Klein said the integration of TIB is ahead of schedule and they have reduced the staff

head count by 120. They have closed the TIB headquarters office in Dallas and the offices

in Tuscon and Madison, Wisconsin. In this quarter they intend to close the San Francisco,

Atlanta and other Dallas offices and consoldiate all the New York offices to a single


Stone Revenue Growth

Stone's revenues worldwide have grown 45% since April 1, 1999, and 70% in North America.

Getty didn't break out Stone's revenue, but by extrapolating from the press release

data provided, and other information I have obtained in the past few months, I estimate that

Stone's share of the $104.8 million was about $35 million for this quarter. Looking back

to the 1st quarter 1999, Stone's revenue at that time would have been approximately $23.5


These numbers do not track at all with the information in Selling Stock's 1998 and 1999

photographer surveys. We had responses in those surveys from 46 photographers in 1998 and

47 in 1999. The average photographer share of the income from Stone in 1998 was $62,718

and $45,644 in 1999. (See Story 297

for more details.)

That doesn't indicate growth. Granted the surveys were not random,

and clearly the photographers responding must not be representative.

I believe sales of wholly owned images are the best explanation as to why Stone's revenues

are headed in one direction while photographer royalty payments are headed in the other.

Klein was not specific on the amount of wholly owned sales, but he did make the point that

they contributed to the growth in EBITDA (profits) for the company.

Klein said that the "average transaction (at Stone) has broken through the $1000 mark."

This is up from about $800 a year ago. Klein also

said in the conference call that they are selling more images per transaction, but he

didn't give a number so it is impossible to calculate the average price per image sold

which is a number of much more interest to individual photographers. I had previously

heard a number of 1.7 images per transaction. I suspect the average is now somewhere

over 2 images per transaction.

Accounting For The Rapid Rise

It should be noted how rapid this one quarter rise is -- even for Getty. The following

are the revenue numbers for the last six quarters for Getty. (The dollar figures are in


4th 1998   

1st 1999   

2nd 1999   

3rd 1999   

4th 1999   

1st 2000   







Note that the 3rd quarter revenue was impacted by the acquisition of EyeWire and the 4th

quarter was impacted by a full quarter of EyeWire, $8.7 million from TIB, and $4.3 million

from and American Royal Arts.

I see no indications that there are any factors that occurred in the first quarter of 2000

that would have caused a major growth in industry usage as a whole. Certainly nothing

that would result in an almost doubling of revenue growth from the previous quarter, which

is what occurred for Getty's major brands. The rise can not be attributed to increased

use of e-commerce as explained above. It seems to me that this additional growth, over and

above their normal levels, must be attributed

almost entirely to Getty taking market share from other stock photo sellers.

In his conference call with investors Jonathan Klein said, "We are continuing to take

market share from the vast bulk of the mom and pop companies, as well as to continue to

beat the Corbis brands in the market. The competive environment is wholly favorable to

Getty images. We have always beaten those brands (the ones recently acquired by Corbis)

in the market and the fact that they are

now owned by another company makes absolutely no difference in the day to day battle for

sales which year after year we continue to win."

Breakdown of Revenue

As we noted earlier Getty does not break down revenue by brand, but it is helpful for

photographers to have some idea of what the brands with which they are involved are

generating and how they contribute to the whole company. Based on information Getty provided in

the press release and the conference call, and other information I have obtained over the

past few months I have made the following approximations of 1st quarter 2000 revenue.


Dollars in Millions   







Hulton Getty (Archive)   


EyeWire (Artville)   





.5 (American Royal Arts)   


TIB Footage   




TIB Stills   




The following indicates the respective share I believe each brand contributed to the e-commerce revenues of $31.5 million.


Dollars in Millions   










Other Information

Klein said that 20% of the business is coming from new customers. About half of the

registered user have not used the brands previously.

Getty will be launching a system - probably in the 4th quarter - to handle digital asset

management for others who want to move images on the internet. This is a major business

for PictureQuest, and evidentially Getty intends to move into that market. Klein pointed

out that many of their press customers

want assistance in moving image files, and in marketing some of the images they produce.

According to Klein they will have a system where images can be uploaded within ten or

fifteen minutes of shooting. The schedule is to roll out the system for a few customers

in time for the Olympics, and make it fully available in the 4th quarter.

Getty has 47.6 million shares outstanding and had a basic loss per share for the quarter

of $.46. (The loss per share excludes integration and restructuring costs, debt

conversion expenses and extraordinary items.) The stock market seemed to ignore Getty's

great revenue story. The stock price went down 10% to 29 3/16th on the day of the


Copyright © 2000 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:  


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