Impact Of Major Agency Consolidation

Posted on 1/6/1999 by Jim Pickerell | Printable Version | Comments (0)



When Agencies Don't Represent The Best Interests Of Photographers

January 6, 1999

In recent years there has been a dramatic consolidation of stock photo

marketing into the hands of a few large organizations.

The leading companies in this acquisition binge are: Getty Images, Visual

Communications Group, The Image Bank, Corbis and Index Stock Imagery. I

estimate that these companies currently control over 45% of the total sales

of stock images worldwide. In addition to licensing rights in the traditional

manner, each owns or has plans to establish a royalty free division.

These organizations bring capital to our industry at a time when there are

huge costs in transitioning from analog to digital systems of marketing and

delivering images. They also bring a management style that is focused on

reducing costs and increasing profits for their investors.

Improving the bottom line for their supplier/photographers is of secondary

importance. Some major sellers of stock photography even proclaim that,

"We are not here to serve the photographer. We are here to serve the


Granted agents have always provided service to the customer and neither

agent nor photographer can earn anything from their product, if there are no

customers. Customer service is important.

But, there has been a significant change in the photographer/agent

relationship that for many years focused on serving the needs of

photographers. This new reality is increasingly difficult for

photographers to understand in all its ramifications.

When I started in this business 35 years ago it was understood that the

purpose of an agent was to "Serve The Photographer" and to be the

photographer's representative in negotiations with the customer.

Now there is a very important change in emphasis that many photographers

fail to recognize. This change may require photographers to think and act

in different ways than they have in the past, if they hope to continue to

be successful.

Some photographers want things to remain as they used to be, but for the

most part that system is dead. As we move toward the new millennium

photographers must accept that the system for marketing images has changed,

and develop new strategies for survival in this changed environment.

The change is not the result of a single sudden move by any large

corporation, but has come about through a long transition of chipping away

at the share of gross stock income paid to photographers. Nevertheless,

there certainly has been an acceleration in this trend in the last few

years, and particularly in 1998.

In the new environment photographers need to examine, with a much more

critical eye, the methods and business strategies of the companies they

choose to represent their work. They definitely can not accept on faith

that their "agent" will act in their best interest.

Photographers used to look for an agent to help manage their career. Such

agents still exist, but are increasingly rare. It used to be that agents

would accept only those photographers who they believed they could

adequately represent. The agent was concerned about providing adequate

income for the photographer. Agents would prosper in direct proportion to

those they represented. Stock agents used to tell us that they always

acted in the best interests of all the people they represented.

Many agents now believe that photographers are overpaid and that it doesn't

cost much to produce the pictures that photographers are suppling.

Today, the word "agent" -- and all the fiduciary responsibilities it

entails -- has been removed from many stock agency contracts. The photograph

is just a product. These marketing organizations we call

"agencies" could be selling software, shoes or any other consumer product.

The product is incidental, it is the process that is important. They

concentrate on the most profitable, high demand segments of the business

and ignore buyers with special needs. As a way of increasing profits they

seek to institute management efficiencies that will cut costs.

Cutting Costs

There are a number of things stock marketing organizations can do to cut

costs and improve their bottom line. Some may not be in the best interest

of some of the photographers they represent. Photographers need to

understand these issues, evaluate them in terms of their own needs, and

consider their options.

Once these large organizations have established a policy it will be very

difficult to bring about a change. On the other hand, these organizations

will often be willing to negotiate special deals with individuals they

really want. It is worth proposing other options. The standard agreement

is not the only option.

Most photographers will find it difficult to force significant changes in

proposed agreements, or proposed methods of operation. Nevertheless, it is

still worthwhile for the photographer to make the effort to understand how

these changes are likely to impact his or her business. Constantly compare

and reassess all your options. What works today may not be nearly as

productive a year from now.

Some key issues are:

Photographer Share -- The biggest cost is that portion of the gross income

the marketing organization pays to the photographers. Thus, it is natural

that these organizations would move to reduce that payment. This can be

accomplished in several ways. The most obvious is to lower the percentage

of the gross sale paid to the photographer.

This is particularly advantageous because it is a percentage and not a

fixed cost per unit. As they lower the percentage they pay for the product

it also enables them to sell the product for less and still make the same


Assume that the operating costs of a marketing company are $50 per

transaction, and they want to make a $10 profit on each transaction. If

they have to pay the photographer 50% of the fee collected, then the

average transaction fee must be $120 ($60 to the photographer and $60 to

them.) If they only pay the photographer 20% they can reduce their price

to the customer to $75 and still cover their costs and make the same

profit. By reducing the price they probably will sell more product. They

may not sell enough to make up for the loss the photographer is

experiencing, but every additional sale is not only additional profits for

them, but it also cuts their average cost per transaction.

They are willing to sell for lower prices because all the product costs

them is a percentage of the sale.

Increase Marketing Fees -- There was a time when the agency paid all

advertising and promotion costs out of their share of sales. Then they

started producing print catalogs designed to sell the images in the

catalog, and the photographers were asked to "share" the costs of catalog

products. It wasn't long before that "sharing" turned into the

photographer paying most of the cost and the agency paying very little --

at least at some agencies.

One thing the photographers don't share are the fees paid by foreign

agencies to handle the catalog. One hundred percent of these fees go

directly to the catalog producing agency. In some cases these fees get so

high that the foreign agencies are unwilling to take the risk.

At this point the catalog producing agencies offer another option. "Pay us

the higher fees we ask upfront, and we'll let you retain a greater

percentage of the gross sale." This way the photographers gets to pay even

more to be in the catalog (because they receive a smaller share of the

gross sale) -- and in most cases the photographers aren't even aware of

this increased cost.

Photographers have started questioning some of these costs in the last few

years, but the questioning has not resulted in any adjustments.

This type of cost is not that unusual in other businesses or industries.

Take, for example, the grocery business. The grocery store controls access

to the consumer. Some manufacturers pay the large chains for favored

positions on their shelves. In some cases they pay to keep the competition

out of the store.

What it boils down to is that when those who control access to the

consumers need more profit, they will come up with an additional fee.

Image Building -- There are two types of advertising. One is image

building and designed to promote the marketing company. The other is

designed to sell specific products. Both are useful and necessary in order

to maximize sales.

Originally print catalogs were designed to sell specific images and one of

the justifications for charging photographers a fee based on the number of

images they have in a catalog was that the catalogs helped sell specific


Now, some agencies have started producing elaborate books designed more to

excite art directors and convince them that the agency has "cutting edge"

material, rather than sell the specific images in the book. These books

are often referred to as "hearts and minds" books. Their purpose is to get

the art director to think of the agency whenever they need an image rather

than sell what is found in the book.

This is not to say that the agency has no expectations of sales from these

"H&M" books, but they can recover their cost of advertising with fewer

sales, and in the worst case they are getting some of their "image"

advertising paid for that otherwise they might have to pay for 100%

These books may have some major disadvantages for the photographers whose

images are selected.

To begin, these books usually have fewer images played bigger so the price

per image to the photographer is often much higher than in the average


Additionally, photographers are encouraged to spend time, energy and

resources to produce images for these books when the images themselves may

not produce as much return for the photographer as some other things the

photographer could have been doing with his or her time.

The agency editors also get into a mindset that the only image that is a

good image is one of the type that is found in these flagship "H&M"

catalogs. Thus, when it comes to selecting images for the files that will

back up the "H&M" catalogs, editors often fail to select images of the type

that art directors actually buy.

One of the leaders in producing this type of catalog is Tony Stone Images

with their "Interpretations" and "Twist" catalogs. The company insists

that sales from these catalogs are great, but I have had trouble finding

photographers that would say the sales of their images in these catalogs

are great. In fact, the photographers who have talked to me have said just

the opposite.

The other question about this type of advertising is whether it really

belongs in a catalog format which is a hugely expensive product to produce

and mail for that single impression it makes on the art director. Certainly,

one of the reasons for putting this advertising in a catalog is

that TSI has already established the precedent of charging photographers

for catalog insertions. So far they aren't charging photographers when

they use one of their images in a direct mail promotion on in a print ad.

Thus, the catalog format enables them to offset some of their advertising costs.

Another question to consider is: if the purpose of the advertising is image

building for the organization so that all photographers might benefit, and

if it is established that the photographers should pay for this

advertising, wouldn't it be fairer for all photographers in the

organization to pay a proportional share of the ad costs based on their

income rather than a few bearing the total burden?

In House Production -- There is an incentive for the marketing organization

to hire staff to produce subjects that are in greatest demand. They have

sales statistics that point them in the direction of what to produce. If

they own the work there is zero percentage to be paid to the photographer.

Of course they have the cost of production and the staff salary to offset.

But if their theories that photographers are overpaid are true and if they

manage their expenditures carefully and shoot only high demand subjects

they have an opportunity to increase profits.

A production strategy is somewhat risky because the agency also wants to

continue to receive the low demand material from freelancers shooting on

speculation. If the freelancers get the idea that they can no longer get

high demand subject matter into the files they may stop supplying work

altogether. Nevertheless, many corporate owned organizations are quietly

moving in this direction.

This is particularly happening in the Royalty Free area, by companies like

PhotoDisc and Digital Stock. The percentage they offer freelancers who

cover all their own production costs is 20%. But, they will also fund

shoots and pay photographers a day rate in exchange for an even lower

percentage of future sales. Many photographers, particularly those who

have made most of their living in the past doing assignments are accepting

these offers.

One advantage to such deals is that the photographer has a greater

assurance of getting a large number of images into the files if the agency

is laying out funds to produce the images.

As their files build in this direction the RF agencies will pay out less and

less of the total usage fees in royalties. If they are

careful to only fund those shoots that will be in high demand, based on the

statistics they have developed from previous sales, they can recover the

costs of the shoots after a few months sales and everything from that point

on is gravy.

We believe that in some cases PhotoDisc may be paying U.S. photographers

close to $3,000 a day, plus all expenses, for a total buyout. In such case

the photographer receives no percentage of future sales. In other RF cases

the photographer may get all expenses paid and a small stipend for his or

her time, but receive 10% to 15% in royalty on future sales. Each shoot

can be separately negotiated depending on the specific situation.

Mark Austin of Digital Vision, a London based RF company, says he can find

plenty of photographers in the UK who will do shoots for $1,000 a day and

sell him all rights.

While this is what the RF companies are doing, traditional agencies are

headed in this direction as well. Both Tony Stone and the Telegraph Colour

Library have studios and in house staffs that produce some of there

material. If these companies have trouble getting photographers to accept

lesser percentages, then the next obvious step will be to produce more

wholly owned material.

Agencies like Super Stock and Comstock have been producing in house for years.

Ninety percent of the material in the Comstock file is wholly owned.

Comstock represents some freelancers and seeks to flesh out their file with

specialized material that their three staff photographers don't produce.

But, most of this is of subjects that are generally in lesser demand. Comstock

also protects their wholly owned material by refusing to accept from

freelancers any variations on high demand subjects that might compete with

their wholly owned images already in the file.

Multiple Price Points -- Another strategy for greater profits is to try to

offer the market multiple price points. This is being accomplished by

having separate divisions that offer product at different price levels.

All of the major companies have Royalty Free divisions or have announced

their plans to build them. The RF business was established on the premiss

of making images available to clients at greatly reduced prices by paying

the photographers a much smaller percentage of gross sales.

It is greatly to the advantage of the parent company to sell as much

product as possible from the division where they retain the highest

percentage of the sale. Corporate advertising and promotion may tend to

push such divisions.

On the other hand one of the disadvantages of RF divisions for the traditional

agency is that so far the RF companies have paid all the catalog and marketing

costs and charged nothing back to the photographer. Traditional agencies may

be reluctant to give up this perk.

The marketing corporation is interested in overall profits, not compensating

suppliers based on their contribution. The limit of their interest in

photographers is to keep them supplying product. They have very little

interest or concern in seeing that there is fair compensation for every

image used.

One clear example of this is Corbis' Production division which creates

products, primarily aimed at the consumer. The original purpose in

building the database was to further this goal, not to license rights to

images. The idea of Licensing rights in the traditional manner was an

after thought at Corbis.

Production has access to any images in the files and pays only 3.5% of

"profits" for their use. Many of the current projects are designed to

build a user base for the future, and are unlikely to earn a profit in the

near term. Thus, there are no profits to share and Corbis gets to use

these images free of charge, other than the $4.50 they paid the

photographer when the images were originally acquired for the database.

Someday, the production division may find a way to make a profit and the

3.5% on the images they use may have some real meaning for photographers

whose images are used at that time. Meanwhile, those photographers whose

images were used to learn how to make that future profit, receive no


Editing -- The editing process can be streamlined by holding photographers

to rigid submission standards. This will lead to reduced costs in the time

it takes to edit and integrate selected images into the library. But,

there is a risk that images that would sell will never be seen by the


At many agencies editors are purging the files of old material and in some

cases returning material that photographers believe is still saleable.

Editors are also instructed to be much more selective in what they choose

so the agency will have fewer images to integrate and less costs in

maintaining the file.

The guidelines under which these editors operate are often difficult to

explain in detail, and photographers may be left to guess at what the agency

is really looking for relative to any specific subject matter. This is

particularly true if the approach to the subject matter breaks new ground

and is not something the photographer has shot before, or the agency has

previously shown in its catalog. This ambiguity makes it very difficult

for the photographer to know what to

shoot and what to submit. In the end over control by editors leaves

photographers frustrated and may result in fewer submissions.

Large agencies have tended to accept more images than they really needed as

a way of keeping their photographers happy. There is certainly some room

for cutting back. But, the challenge when developing a strategy to cut

back is not to miss saleable images.

Another editing aspect is a drive to remove logos on everything so all

images can be used by anyone. Thus, in order to get an image selected at

some agencies, the photographer needs to do Photoshop work on the image

prior to submission.

Take aircraft photos as an example. In an effort to build a file of images

that can be used for advertising at least one major agency will accept no

commercial aircraft images that have any logos. This results in automatic

rejection of certain types of images. Most pictures of several aircraft at an

air terminal would look stupid if all logos were removed. This editing

strategy disregards a huge number of images that might be useful for

editorial purposes.

Different companies have different editing philosophies and within any

company various editors select different types of images depending on their

background and experience. The more restrictions placed on the editor, the

greater the chance that saleable images will never make it into the files.

In the long run tight editing of the files does not benefit the clients or

the photographers, but it does improve the agency's bottom line.

The challenge for photographers is to get their particular vision seen by

potential buyers. At a minimum this means getting the image into an agency

file, but it is more important to get them into digital or print catalogs.

Research -- Stock images are found in two ways. A client may pick an image

from some type of catalog, or an agency employee goes through the agency's files,

pulls images that fit a description supplied by the client, submits a

selection for the client's review and later refiles everything.

Clearly, there is much more potential for profit when the client does the

research work and selects the image than when an image is pulled from a

general file -- particularly if the fee for usage is the same for both.

File research is a very costly process when you calculate man hours per

image sold. The bankers who don't want to be agents have pointed out the

inefficiencies and have determined that the costs of the research side of

the business must be cut in order to increase profits. There are wide

variations in how agencies handle research.

Some have no catalogs and all sales result from researching the files.

Such agencies are happy to do research. In the middle are agencies like

The Stock Market. They say 40% of their sales are from non-catalog images.

They put a lot of emphasis on their catalogs, but file sales are still

important. For other agencies over 80% of their sales come from catalog

images and their goal is usually to cut research costs.

The larger agencies want to streamline and automate their in house

processes as much as possible. They concentrate on those activities that

bring the greatest return for the least cost. Activities that require a

lot of effort to produce a small return are eliminated or reduced as much

as possible.

In the old days the "agents" felt a responsibility to "represent" their

photographers, to store all the images the photographer produced that met

certain quality levels, and to have them available whenever a client made a

request. This was very costly and had a lot of inefficiencies, but it was

considered a fiduciary responsibility of being an agent.

Now the landscape is different.

Control The Marketing Chain -- The marketing chain in selling images can

sometimes be very long with many hands in the process between production

and final sale. The goal of the large organization is to get a percentage

at every step in this chain.

The important thing for the photographer to realize is that the percentage

the photographer receives from the parent agency is of little importance,

if large cuts are taken before anything is paid to the parent.

There is a big movement for parent agencies to acquire local selling

agencies so they get both the local selling percentage plus their parent

agency percentage. The parent can also increase its percentage of the

total take by giving a larger percentage to the local selling agent that

they happen to own. The amount on which the split with the photographer is

calculated is then smaller.

Photographers ask, "What is the justifications for wholly owned offices

getting a higher percentage of sales?" The justification is that they will

take as much as they want as long as photographers continue to supply


Some companies that own both the selling agency and the producing agency

retain 75% of the gross fee collected from the client.

Limit Content Available To Competitors -- It is to the advantage of most

agencies to restrict the amount of content available to their competitors.

Everyone agrees that there is an oversupply of images of many subjects that

are in frequent demand. It probably would be better if not as many

photographers were shooting and if those shooting didn't produce as much.

Many agencies want to restrict their photographers from selling anything

they don't accept. Often they try to argue that if they don't select the

image it is not saleable. Experience has shown many photographers, many

times, that this statement is false. Photographers should be very careful

not to accept this as an argument. Many agencies want to select only the


The challenge for the photographer is to get as many of his or her images

as possible, seen. It is very risky for photographers to produce without

some assurance that the production will at least be made available for

clients to view.

Options Available To Photographers

First, recognize that large agencies are limiting the variety of content

available to clients. They do this to increase their profits from the

material they have chosen to handle. Recognize that this can be a

weakness for these agencies and look for ways to capitalize on it. Many

clients will be looking for a broader and different selection than the

large agencies offer.

  • Negotiate for the right to separately market work your agency refuses

    to properly promote. Don't let them lock up work in unproductive files.

  • Examine contracts carefully. Don't assume everyone else signed the

    same agreement. Negotiate. Talk to others. Don't assume that the

    contracts are written with an effort to be fair to the photographer.

  • Don't become too dependent on agency editors, unless there is some

    guarantee that when you do what they ask the resulting images will make the

    catalog (at least the on-line catalog).

  • Keep in mind that making the catalog is only the beginning; the true

    test is sales. Keep careful records of sales and compare various marketing


  • Spend time learning what the market needs by looking at what is being

    used. Trust your own judgement. Don't be too quick to conclude that your

    work is unsalable just because an editor from a large agency rejects it.

  • Use on-line resources to see what is already available before you

    shoot. Don't waste time or money producing redundant material.

    On-line databases offer the photographer some tremendous advantages in

    production planning. It used to be difficult to determine what agencies

    already had in their files. Now a huge amount of that material is

    available in keyworded databases on-line and additional large quantities

    will be appearing in coming months.

    Assume that you have an idea for an illustration on Time. Go to the

    popular URL's and inputs the appropriate keywords. See what is already

    available and learn whether what you have in mind has already been done, or

    whether the buyer already has so many choices that what you planned to do

    has little chance of ever being selected. Look for gaps in the files and

    consider shooting that type of material.

    This method is not fool proof because it still doesn't tell you about the

    images that are being sold be agencies that do file research, but it is a

    much better research tool than we have ever had in the past.

  • Seek production support -- even if you can afford to pay the costs

    yourself. If the agency has a financial commitment to the images they will

    be much more inclined to promote them heavily.

  • Take another look at RF (much as I hate to say it). They provide

    production support for an increasing number of the photographers they deal

    with. They do not charge catalog or other types of advertising fees. Look

    at your actual percent return from your traditional agent after all the

    fees they charge are deducted. As the percentages that Rights Protected

    agencies pay drop, and their "charges" increase, the RF option becomes more

    attractive for certain types of material.

    It is not clear that the volume of sales at the lower RF prices will really

    pay off for most photographers in the long run, but it may be worth testing

    in your own situation. Presently, RF is experiencing growth as more and

    more new customers are learning when to use RF and when not to. But, the

    competition is also increasing.

  • Diversify. We are in a period of transition, and during this period

    you need to test a variety of marketing options to see which will work best

    for you.

Larger organizations, don't always bring efficiencies. Sometimes they

bring more decision by committee and added confusion. Don't assume

everything large will automatically work better.

You also need to look for other ways of producing income other than relying

solely on stock photography. In the future very few photographers will

find that they can earn their entire living from stock photography.

Copyright © 1999 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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