Masterfile Restructures Its Business

Posted on 4/7/2017 by Jim Pickerell | Printable Version | Comments (0)

Masterfile has filed a formal Proposal to Creditors under the Bankruptcy and Insolvency Act of Canada ("BIA"). This is not a bankruptcy. The Proposal process will provide Masterfile the opportunity to restructure its business with the objective of returning to profitability. This process is similar to a Chapter 11 filing in the USA.

The company will continue to operate normally throughout this process and all expenses incurred after the filing date will be paid in a timely manner.

The amount of the funds owed to artists (including stock agencies) and employees is approximately $3 million. MNP Ltd, has been named Trustee in this matter. In coming days each creditor will receive a notice from MNP including the exact amount owed and the proposed terms of payment. Creditors will also be given information on how to file a Proof of Claim and the voting procedures for a meeting of Creditors which is scheduled for April 25th.

The funds available will be distributed in two ways. There is a preferred creditor pool for employees with unpaid wages and vacation pay that pays up to a to a maximum of $2,000 per person. That will be paid separately by the company from operations once the Proposal is approved by the majority of Creditors.

A considerably larger pool of funds will be shared equally among employees and image creators, based on how much each is owed. The amount offered in the proposal will be approximately one-quarter of what is owed each creditor.

What Happened

Masterfile was founded in 1981 and had decades of reliable payments to artists before the industry began to dramatically change after 2008. According to Steve Pigeon, President, “the company’s revenues have declined year-over-year since then. Despite efforts to cut costs (closing regional offices, reducing headcount by 80%, reducing salaries and other operating expenses), we have suffered considerable financial losses that worsened during the past year.  Masterfile’s revenues are only now showing signs of stabilizing, but our cost structure remained too high and had to be scaled back further to reflect current revenues.”

In 2015 Masterfile made a deal with Mediapro in Austria to cut cost. Masterfile received an upfront payment from Mediapro and signed a distribution agreement similar to its agreements with other international distributors. The agreement required Mediapro to pay royalties to Masterfile on all image sales. Masterfile, in turn is required to pay royalties to its artists on funds received from its international distributors and licensees. 

Pigeon said, “Masterfile then used some of the funds from the Mediapro transaction to pay some past due royalties in May 2015 but a 6-month balance remained which we aimed to catch-up on in future based on generating profits and additional cash. 

“That didn't happen. Revenues continued to decline following the transaction. We managed to stay current with royalty payments for the following year but by July 2016, we had used up the cash from the Mediapro transaction and were tapped-out. Along the way, we made further cost cuts largely through staff terminations, reduction in staff work schedules and further salary cuts to senior managers and other personnel.”
At one point Masterfile had a staff of over 100. At the time of the Mediapro transaction the staff was down to 37. Pigeon said, “Including reductions that were implemented last week, our staff is now reduced to 22 full time equivalents. That has been a painful process and included some of our most senior personnel.”

Masterfile is probably the largest agency in the North American market that has tried to maintain traditional prices.

Up until November 2015, Masterfile’s average license fee for an RM image was $600. That average was up 21% from 2006 and down 1% from the 2014. The average license fee for RF was $240, down 13% from 2006 and 2% from 2014.
By comparison Getty’s average RM license fee in 2006 was $550. By 2014 it had declined by at least 50% and is still going down.

Pigeon said, “We continue to try to maintain fair pricing for stock photos but there is no denying that the glut of free content and dirt-cheap content that continues to flood the market has undermined our efforts. I don't have current info at hand on our average price per image but it’s safe to say that it has declined.”
Pigeon agreed that instead of producing as many block buster ads aimed at reaching the world, the major ad agencies are doing much more small targeted advertising. As a result they no longer have big budgets for most of their projects. They are looking for less expensive images that will be used for a shorter period of time.

In 2015 Masterfile said that more than 70% of the company’s revenue came from corporate communications segments of the market that presumably needs the highest quality work and has the budgets to pay for it. See “Masterfile Struggles.”

Terminating Artist Agreements

As royalty payments have been delayed some artists claim that they have tried to terminate their contracts, but have not been allowed to do so until their contracts expire. Pigeon says, “That is patently untrue. Up to the date of the filing, a number of artists chose to terminate their contracts and we did not stand in their way. However, effective with the filing of the Proposal, under the rules of the BIA, there will be a stay on any legal actions, including restrictions on contract terminations until the Proposal process is completed.”

Copyright © 2017 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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