Has Microstock Caused Industry Revenue To Decline?

Posted on 1/28/2009 by Jim Pickerell | Printable Version | Comments (3)

Recently, Selling Stock subscriber Don Farrall commented: “When RF was first introduced, it brought in new buyers and added to the overall pool of dollars spent on stock photography. Yes, some RM dollars were lost, but they were more than made up for by explosive growth of RF. Eventually, many RM shooters added RF, or switched altogether to RF, because they could make more money. This is not the case with microstock. The introduction of microstock has produced an overall contraction in the amount spent on stock photography.”

This is, in my opinion, an erroneous portrayal of history and may lead to false conclusions today. True, after the introduction of royalty-free licensing, there was explosive growth in the number of customers using digital images delivered on CDs and later online. Yet the resulting overall growth in dollars spent on stock photography is not beyond dispute.

When the royalty-free model was introduced in the early 1990s, the stock-photo industry was very fragmented and made up almost entirely of small private companies that did not disclose revenue. No one had any idea how much revenue the industry generated at that time.

PhotoDisc and other royalty-free companies grew rapidly and supplied images to many new customers, but it stands to reason that the revenue generated by such companies was offset by a corresponding loss in rights-managed sales, as more and more professional buyers were able to replace expensive photos with cheaper ones.

It was not until Getty Images, a public company, began providing the industry with regular sales data that it became possible to make better determinations about industry size and growth. As Getty acquired companies in the late 1990s and 2000s, its post-acquisition revenues never quite matched the sum of the revenues it and each of the acquired companies generated independently. This got worse later in the 2000s.

As royalty-free revenue grew during this period, we saw a corresponding decline in rights-managed revenue. After a few years of unabated growth, royalty-free imagery reached a plateau in the number of units licensed. Some time around 2002, the growth of royalty-free revenue became a function of price increases, not the number of images used. Between the first quarters of 2002 and 2006, Getty raised its royalty-free pricing by roughly 150% to an average of $250, and such a high price opened the door for many buyers to explore the lower-priced microstock alternative.

Unquestionably, microstock has grown rapidly and brought many new customers into the market. Similarly conclusive is the loss of rights-managed and traditional royalty-free sales to microstock.

At the end of 2007, Getty’s average price per rights-managed image licensed was about $500. The price per royalty-free image licensed was about $250, and the price for an iStockphoto image was about $4.00. Thus, when a traditional royalty-free customer used a microstock image, it was necessary to make 62 more microstock sales to offset the loss of one traditional royalty-free image sale and 125 microstock sales to offset the loss of a single right-managed sale.

Despite these discrepancies, gross industry revenue appeared about in balance through 2008, due to a dramatic annual increase in the number of microstock buyers and continual increases in microstock prices. Thus far, we haven’t seen much of a drop in total industry revenue due to the existence of microstock.

As we look ahead, however, it becomes apparent that the rate of growth in microstock images licensed has begun to slow, making it somewhat harder to continually push prices up for fear of losing low-end customers. We may be entering a period where there will indeed be an overall decline in industry revenue as a result of cannibalization of traditional sales by microstock—but this has not happened yet.

The state of the world economy is also likely to accelerate the use of microstock instead of more expensive products. Farrall’s analysis is likely to be closer to reality by the end of 2009 than it is today.

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.  


  • Tim Mcguire Posted Jan 28, 2009

    You make no mention of the new perpetual and broad rights granted in licenses for the use of RF images. That must have created an added negative affect on RM sales in the 90's and early 2000's.

  • Jonathan Ross Posted Jan 28, 2009
    Hi Jim,

    Even being one of the photographers that has made some small investments in Micro I also see that Micro does not look like the same opportunity that was created when Macro RF was introduced. Even in your own numbers if Micro had come into the picture at an average sale price of half of Macro RF as Macro RF had become of Macro RM then maybe there could be room for all three models to work together. I am not sold on the third model but I do believe the future is hard to predict.
    If Micro had just set it's start price at $50 dollars just in the same sense Macro RF did with RM we might have three tiers that can work together and offer the buyer all the price and quality they need and make a strong enough return for the photographer. At the current price point of Micro I think it will be very hard to make a strong income in this new industry for many, I believe the price point must rise but that is not what I am hearing from the Micro agencies.
    One thing to remember is that Micro is here to stay to some extent and it will be important to find a way to work with it or around it to make stock photography your business.

    Two Cents,
    Jonathan Ross

  • Martin Borek Posted Jan 29, 2009
    Dear Jim:
    thank you very much for this analysis. It seeems absolutely right what you say about the market changes- after working in it for almost three decades I feel the same. I believe that Microstock will be used more during the economic crisis. Even on the cover of Germanys important magazine STERN they had used a Microstock picture in a collage. And in other Gruner + Jahr publication I also saw Microstock, too.
    Do you have an idea when RF really started and what brands next to Photodisc were on the market? And were the Clip-Art discs also what we later called RF? And does anybody know exactly when Microstock started and who offered it?
    Best, Klaus

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