Getty & PhotoDisc Merge

Posted on 9/24/1997 by Jim Pickerell | Printable Version | Comments (0)

Getty Communications PLC and PhotoDisc Inc. have merged to form Getty-Images which will become a U.S. corporation. Getty acquired the fully diluted issued share capital of PhotoDisc for $30 million in cash and 9.6 million newly issued shares which makes the total value of the deal in excess of $150 million at current share prices. (Getty shares were traded at $18 5/8 per share on 9/17/97.)

Mark Torrance, chairman and chief executive of PhotoDisc, has been named co-chairman with Mark Getty of Getty Images. PhotoDisc shareholders own 31% of Getty Images and Getty Communications shareholders own 69%.

Getty's gross sales in 1996 were $85 million and in the first six months of 1997 they reported $49 million in sales. Thus, their gross for 1997 should be in excess of $100 million without PhotoDisc.

PhotoDisc had gross sales in the first half of 1996 of $11.9 million. In the second half it was $16.1 million and in the first half of 1997 it was $20 million. Thus, we anticipate that their gross for 1997 will be in excess of $40 million.

Put these together and the new Getty-Images should have gross sales in excess of $140 million. PhotoDisc has produced this revenue with 210 employees making their sales per employee in excess of $190,476. Getty Communications had 750 employees at the end of 1996 making their sales per employee $113,333.

The new company is seeking to be a U.S. company. Getty Communications is traded on the NASDAQ stock market and not traded in the UK. According to Stephen Mayes, Group Creative Director of Getty Communications, the U.S. headquarters will remain in Chicago and they are looking for a new head of North American Operations to replace Brian Wolske who left the company at the end of August. Obviously, the largest U.S. office will be Seattle and Mark Torrance, co-chairman of Getty Images will be resident there.

PhotoDisc has around 50,000 images in their on-line collection according to Stephen Mayes. If we divide that number into $40 million we get an average earnings per image of $800 for 1997.

By way of comparison we reported a year ago that TSI's average for their 40,000 images Master Dupe Collection (recently estimated by Stephen Mayes to be 50,000) was $1,340 per image.

However, the big difference is in the percentage of that fee that the photographer gets. At the time Getty went public the photographer's average share of the gross sale was 38.2%, or $511 per image.

With PhotoDisc on the other hand it has been somewhat difficult to get information relative to the percentage of the gross sale price of an image or disc that the photographer receives. It is our belief that about 20% of the gross selling price of a disc is set aside to pay royalties to the photographer. If a photographer had 32 images on a disc that contained 320 images the photographer would receive 10% of the 20% or 2% of the gross sale price as his or her compensation for that sale.

In addition, PhotoDisc licenses rights to individual images on line. It is believed that the photographer receives the same percentage when an individual image is licensed as when a disc is licensed. However, that is not clear and PhotoDisc tells us that they can not comment on these issues while they are in the non-disclosure phase of a filing with the SEC. It is hoped that this information will be clearer once the SEC documents are made available to the public. Some photographers, whose work has been put on PhotoDisc through their stock agency, indicate that they are also having difficulty finding out what percentage of these individual gross sales they receive.

Sources tell us that when the PhotoDisc image was acquired through a stock agency the photographer often receives much less than 10% of the gross sale price. Two agencies that have placed images on PhotoDisc are West Stock and Index Stock. There may be others.

Many of the PhotoDiscs sell for $299, and have in the range of 336 images. That works out to a gross sale of $.88 per image, per disc. Of course, they sell many discs. But, going back to our $800 average earnings per image per year, 10% of that would be $80.
Some photographers have indicated that there average return per image is around $50 per year.

It should be kept in mind that these are averages and some of the high demand subjects are probably earning a lot more, as many of Tony Stone's top photographers can attest.


One of the reasons Getty merged with PhotoDisc was to get access to the software for their online database . This will make it a lot easier for TSI to get their images up on line.

Stephen Mayes says that TSI will not integrate their imagesinto the PhotoDisc database, but will put their Master Dupe collection in a separate online database using the same basic software that PhotoDisc has developed.

Mayes emphasizes that the companies will be marketed separately, but he says that user will be able to go to the Getty-Images site and get into any of the specialized collections by simply clicking a button for that collection.

Mark Getty and Jonathan Klein were present at a recent luncheon meeting with photographers in Los Angeles, and it was indicated at this meeting that one of their first tasks will be to end the current PhotoDisc advertising strategy, which is openly hostile to traditional stock. They indicated that they plan to develop marketing strategies for the individual companies in the Getty-Images group that will carefully differentiate between the various brands that the holding company represents.

Differentiating Between Stock and Clip

It should be noted that this is the same thing Henry Scanlon at Comstock has been saying about his clip photo offerings. But, so far, no one has given us any indication as to how they are going to differentiate between traditional stock and clip. Therefore, I am going to take a crack at what I think the differences are in the minds of the buyers.

  • If the buyer is looking for the "perfect image" price will often be secondary. In this case he or she may go to TSI first, because they have a larger selection. On the other hand there is no guarantee that the "perfect image" can't be found in the PhotoDisc collection.

  • If the use planned is such that the buyer is not worried if someone else, even their competitors, uses the same image then the buyer will want to get the cheapest price. At $49.95, no matter what the usage, they are going to choose PhotoDisc. I believe that in excess of 80% of the rights purchased usages in the corporate and advertising market are by buyer who don't care how many others use the image.

  • If the buyer wants "rights control," and wants to know for sure that their competitor won't be using the same image then they will go to TSI. This is true of most high ticket sales, but in my estimation this is a very small percentage of total dollar volume.

  • If the buyer needs film and can't work with a digital file then he will go to TSI, but as more buyers are prepared use digital files this will become less of a problem. Some traditional agents say that requests for digital files are just beginning to happen and "that it is amazing how little clients know about going directly from digital files to separations." On the other hand Graphic Design:USA says that 40% of their readers are happy to have stock sources provide digital files rather than film which they will use for separations. And, $40 million in sales where only a digital file -- no film -- was provided is a pretty impressive indication that many people are ready to use digital.

  • If the buyer needs to know that proper releases have been obtained for models, he may have more confidence in going to TSI than picking images up from PhotoDisc. It is interesting that some clients seem to believe that if the image is "royalty free" releases are not necessary.

    Donal Philby reported on the Internet that a client came to him and asked him to shoot pictures to illustrate ads for a law firm that was handling sexual harassment, gender bias and wrongful termination suits. When the client found that Philby's price for shooting this job was much higher than he wanted to pay the client suggested, "I guess I will have to use clip."

    Philby suggested that if he were going to use clip the art director ought to ask for copies of the model and property releases. The art director responded, "If they are royalty free I shouldn't need releases."

  • If the buyer needs access to a deeper collection (that 2.5 million images of TSI) because what he is looking for really isn't covered in the selects file then TSI is the obvious choice. When TSI went public their sales from this part of their file represented about 10% of their gross sales worldwide. PhotoDisc will never be able to compete in this area because they don't retain anything other than the images that they have scanned and which are online.

    One of the things TSI will probably promote is, "call our researchers and let us search for you." Within the industry, there are some strong indications that buyers are reaching the saturation in terms of having too many catalogs to look through and too much selection. Art directors are complaining, "I don't have the time to search for images," and are going back to "researcher assisted" searches by the agencies with which they have the best relationships.

    On the other hand, one long range question for TSI is whether the general file segment of business will generate enough income to make it worth the expense of maintaining, or whether it is worth keeping as a loss leader.

  • Better quality images. The general quality level of the images in the PhotoDisc file is very comparable to the quality of the TSI images. The PhotoDisc level is likely to get better as some TSI photographers begin to contribute to it. On the other hand, even if there is a perceived difference I don't think they will be able to use it as a marketing argument because it would tend to have a negative impact on the other brand they are trying to market.

  • If the buyer is looking for images that are more "cutting edge," "avant garde," or more whatever the latest buzz word is for the newest look, then they will probably choose TSI. However, that doesn't mean PhotoDisc can't move more in that direction, and I expect they will.

The question for photographers producing this kind of work is will this imagery sell frequently enough to enable them to recover their costs of production?

When Will TSI Get Online?

It will be interesting to see how quickly TSI gets their 50,000 images on-line so buyers who go to the Getty Images site can see what TSI has to offer. Stephen Mayes has no prediction as to when this will occur.

When you go into at the moment you have the choice of five different agencies, or brands -- Tony Stone Images, Hulton Getty (historical archives), Energy (motion pictures), PhotoDisc and Gamma/Liaison (primarily editorial). If you hit the PhotoDisc button you go immediately to the PhotoDisc site where you can begin searching through their 50,000 images file using keywords.

If you hit the TSI button the first thing you get is a request to load software, a real turnoff to anyone seriously interested in doing searches. But this seems to be necessary if you want to see images. You can get a listing of office addresses and phone numbers so you can contact someone to get more information or receive a catalog.

It would seem obvious which company is going to generate the most business as a result of contact through this site. The critical issue for every TSI photographer, and to a certain extent for all the rest of us in the industry, is how long will it be before TSI has 50,000 images up on its site to match the PhotoDisc offering. PhotoDisc will get a major boost from this positioning until there is some serious competition on the Getty Images site.

As I see it the main hope for TSI photographers is that it will be an easy toggle back and forth between TSI and PhotoDisc. The wise consumer is certainly going to check out PhotoDisc first. They will only go to TSI if PhotoDisc doesn't have an image that really works.

One of the things to watch for here is whether "the tail starts to wag the dog."

Pricing Levels

Another big question is what, if anything, will be done about PhotoDisc's pricing levels.

The buyer can purchase a single image online from PhotoDisc for $19.95 for a 600K file or $49.95 for a 10MB file. For these prices you have an unlimited right to use the image in advertising and promotion campaigns, presentations, brochures, web sites, on-line, multimedia designs, and packaging with the exception of software, books and music.

You need a more expensive license of $119.95 for a 600K image and $179.95 for a 10MB image if you want to use the image in software packaging, music albums, CD's, cassettes or book jackets, or on any product produced in quantities greater than 100,000.

Why they picked these particular uses for the higher prices is a mystery to everyone.

In June, 1997 they had over $500,000 in sales online. A good deal of this could have come from disc purchases, but I am told by reliable sources that a "significant percentage" of the sales was for usage of individual images.

There have been some rumors that PhotoDisc will raise their $49.95 price to around $70, but I have been unable to get anyone to confirm of deny that for me. Any increase would be a help. I think they could easily double their price to around $100 and not lose a single buyer because their price would still be so far below what others are charging.

The argument for the price increase could be that they need to pay more for the "better quality" work their customers are constantly demanding. I would also love to see them pay a little more to their photographers for the rights to use the images, but I won't hold my breath.

The other thing I believe would be even more important to balance the two sides of the business (PhotoDisc and TSI) is for PhotoDisc to develop a few more categories of uses with different price structures. I think they could get away without losing much, if anything, in terms of sales and greatly increase revenues. Their clients really have no other option because the PhotoDisc prices are way below market costs for the same services elsewhere.

One of the early indicators, relative to which side of this business will be in ascendancy a few years down the road, will be to watch what happens in this area of PhotoDisc pricing. If their prices and pricing structures remains close to the same the future of the business is clip. It PhotoDisc adjusts their prices upward then the TSI model may have more hope for the future.

International Aspects

It is unclear how much penetration PhotoDisc has in the markets outside the U.S., but the association with Getty can only help push the use of clip photos in Europe and Asia.

So far I have been focusing on the relationship with TSI and the corporate and advertising type images.

In Europe it is certainly possible that Gamma/Liaison will also use the PhotoDisc technology to begin delivering editorial type images. There has been no announcement that this technology will used in the editorial area, but it is an option that is certainly available to the other Getty brands.


Getty would probably prefer to license usages for several hundred dollars each rather than $49.95, as long as they can. But there are some very interesting advantages to the PhotoDisc model for the stockholders.

With every PhotoDisc sale Getty pays a much smaller share of the licensing fee to the image creator, and thus keeps a greater profit for the stockholders.

PhotoDisc is also able to operate with fewer employees and at a much higher gross sales per employee figure - $190,476 vs. $113,333.

PhotoDisc has also had absolutely no problem in acquiring images. They have over 50,000 images on-line which is similar to TSI's Master Dupe Collection. The quality of those images is very competitive with TSI's and will certainly continue to get better and better now that they have some of the resources of TSI available to them.

TSI has said that they will not request images from their photographers for PhotoDisc's discs or its on-line site, but they will consider any requests from their photographers that the photographer's images be considered for these products.

The market is certainly moving toward getting their images digitally. Graphic Design:USA reported in their recent stock survey that while 51% of the respondents preferred to use print catalogs to find images 18% percent preferred CD-ROM's and 31% used a combination of CD-ROM and print. That means that have the users have no problem with using digital search to find images.

In addition 40% said they are happy to have stock sources provide an already digitized version of the image rather than film. PhotoDisc is certainly the leader in providing digital files ready for graphic design use.

Thoughts For Photographers

Natalie Angelillo, VP of Content Development at PhotoDisc, has been quoted as saying that photographers are earning in the range of $30,000 to $200,000 annually. I'm sure that's true for a very few, but let's look at what that means in terms of production. If the average annual return per image is $80 and a photographer earns $100,000 per year, he or she must have 1250 images on the discs.

It was possible to get a lot of images selected in the early days when PhotoDisc was building their collection, but now they are getting very picky -- just a picky as any major stock agency is for its catalog. Consequently, it is more likely for any individual photographer to get a few handfuls of images selected rather than hundreds.

If you work closely with PhotoDisc and shoot all the subjects they request you may get a lot of images into the system, but you still must consider what it cost to produce those images.

Maybe those photographers with high numbers are getting 20% instead of 10%. Maybe they are shooting high demand subjects and earning better than the average. In either case, they could earn high dollars with fewer images in the system.

On the other hand if the subjects you shoot are generally in lower demand, it would be necessary to have even more images on the discs to earn this kind of return.

Photographers Best Interests

In an earlier draft of this article that was circulated to a few people in order to get comments, I said the following which may have been too strong.

    Finally, photographers need to remember that STOCK IS A BUSINESS. There is no effort here to "take care of" photographers. No loyalty. Photographers need to look carefully at their costs, negotiate hard and recognize that the leading sellers in this industry will always do what is in the best interest of their stockholders. That may not be in the best interest of their photographers.

Stephen Mayes commented, "Getty Images does take care of photographers: our interests are completely integrated, and one will not succeed without the other. Getty Images has five clearly defined constituencies each of whom share an interest in the success of the company, and attention to one does not automatically denegrate the interest of the others. In fact if any one constituency thrives, the others benefit - this is a symbiotic relationship between the company and: photographers, staff, clients, stockholders and the industry at large.

"It is factually incorrect to suggest that 'no effort is taken here to take care of photographers.'

"It is factually incorrect to suggest that there is 'no loyalty.'

"It is factually incorrect to suggest that the company is run exclusively for the benefit of stockholders and 'that will often not be in the photographer's best interests."'

I admit that to say there was "no effort" and "no loyalty" were too strong. There certainly is effort to take care of the photographers and loyalty as long as it does not have a negative impact on the other elements of the symbiotic relationship or the bottom line.

However, I personally believe that it is equally "factually incorrect" for Stephen Mayes to say that if one part of his "symbiotic constituency thrives, the others will (automatically) benefit."

The industry as we know it will not necessarily benefit if small suppliers are driven out of business because they can no longer compete with the mega agencies. Clients won't necessarily benefit if the price they pay goes up in order to supply a living wage for the photographers. Photographers won't necessarily benefit if their costs to produce go up and the percentages they receive of gross sales go down (although they might if the volume increases enough). If PhotoDisc photographers benefit, that may not work to the advantage of TSI photographers.

In a perfect world it would be nice if Stephen's symbiotic relationship really worked, but in my experience there usually turns out to be trade offs that work less well for some than for others.

I would like to ask photographers not to assume that everything that benefits the other elements of this symbiotic relationship, will necessarily benefit them, and encourage the photographers to carefully look after their own interests.

Copyright © 1997 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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