Life after Veer: An Erosion of Independence?

Posted on 11/19/2007 by Julia Dudnik Stern | Printable Version | Comments (0)

"In one respect, I always think it is unfortunate when a brilliant independent company is swallowed by a whale," says Steve Pigeon, president of Canada-based Masterfile. While Pigeon is a pragmatic man who thinks the recent Corbis acquisition of Veer was a good move for the two companies, the erosion of independent agencies is often lamented by industry insiders.

A big casualty of consolidation is lost jobs. Almost all mergers and acquisitions are followed by workforce reductions. Such reductions are not always limited to redundant positions. They can reach the highest organizational levels and are often the result of differences in corporate culture or strategic direction.

For example, when Getty Images made a $202 million investment in MediaVast, layoffs included the managing director of WireImage News, the top position at the company's news division. In the months since, a number of MediaVast executives resigned, citing irreconcilable differences. These included the founder and then-president of FilmMagic Jeff Kravitz.

Reportedly, this is not the case with Veer, whose employees and offices have thus far escaped last week's consolidation efforts. The Veer executive team has made a commitment to staying. However, some onlookers are skeptical of Corbis' long-term plans. Pigeon says the deal was smart for Veer shareholders and Corbis, but adds, "Now, if Corbis can resist the temptation to meddle with a brilliant company, then it may also be a good thing for Veer employees and suppliers."

New CompassMedia CEO Paul Melcher, formerly of DigitalRailroad and Hachette Filipacchi Photo Group, says, "Every single acquisition by Corbis ended up in a total failure." Melcher thinks Corbis hasn't realized that it is staff, not the image collection, that accounts for success. "Let's see if, this time, Corbis has learned its lesson and [Veer] doesn't turn out to be another Sygma, LGI, Digital Stock, SABA [or] The Stock Market fiasco," he adds.

Layoffs aside, how will the alliance between the industry's second- and fourth-largest players affect the remaining independents? While Pigeon thinks the deal makes independent agencies like Masterfile stand out, he also believes it is largely irrelevant. "Those guys were good before. I don't think this will make them better, just bigger," he explains.

Christina Vaughan, founder and CEO of the U.K.-based Image Source, agrees. Though Vaughan thinks the acquisition signals Corbis' seriousness about its growth, she does not think it alters the industry's overall landscape or Image Source's position.

"Veer has been a very good partner for us, as we have both positioned our companies at the higher end of the market, where there has been little impact of low pricing or value erosion," explains Vaughan. Given Image Source's significant market share in the royalty-free space, she does not think that the activity of any one distributor could weaken this position.

Despite leading one of the most successful independent stock companies, Vaughan does not share in the "us versus them" mentality. Instead, she acknowledges other hurdles. "We welcome the arrival of new independent agencies to the industry and would see that as a positive thing. However, [success] takes time, significant capital investment and, of course, expertise." She points to Image Source's collection size, relationships with distributors and brand power as some of the reasons for the royalty-free producer's success.

Despite industry consolidation, Vaughan remains optimistic about the future. She says, "There are so many exciting opportunities ahead for all of us in the media rich space. Content remains king. We should be celebrating the opportunities rather than worrying about erosion."

Copyright © 2007 Julia Dudnik Stern. 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


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