Masterfile Still Has Trouble Paying Current Royalties

Posted on 4/12/2018 by Jim Pickerell | Printable Version | Comments (0)

Some Masterfile contributors report that the BIA restructuring of the company last year hasn’t solved Masterfile’s financial problems. Once again the company is falling behind on paying current royalties on new sales. I asked Steve Pigeon, CEO of Masterfile, for clarification and an explanation of the problems. The following are his answers.

SP - That is true.  Our direct licensing business in Canada and USA has continued to decline for both rights-managed and royalty-free images.  It will come as no surprise to you that this is due to fierce pricing pressure, with reports of images in the premium sector being licensed by some competitors at microstock prices. Masterfile will not and cannot match such abysmal pricing but that is causing losses while we rescale our business yet again to cope with declining demand for images at (what used to be) fair prices. And we are not in a position to spend hundreds of millions of dollars for online advertising like some of our largest competitors. 
SP - Added to this, we are facing losses and potential write-offs with certain overseas licensees in the premium sector who are in bad shape for the same reasons as us.

JP - It was my understanding last year that after the April 25th filing date you would begin paying royalties on new sales in a timely manner.
SP -  And we did resume timely royalty payments.  That lasted through November 2017 but the mounting operating losses in the licensing business and a significant overseas agent default pushed us into the current cash crunch.

JP - I believe that as of 4/25/2017 you owed image contributors and your employees approximately $3 million. It was my understanding that the restructuring would establish a payment schedule for these monies. How much of this debt has been paid and how much is currently still owed?

SP -  The amount to be distributed to Creditors was CAD $800,000 minus administrative fees.  Masterfile has made its quarterly payments to the Trustee on time as mandated in the Proposal to Creditors. The timing and quantum of such distributions is determined solely by the Trustee subject to the provisions of the Proposal.

JP - I also believe that part of the agreement was that a certain percentage of what was owed photographers and stock agencies at the time would never be paid. The forgiveness of this debt was necessary in order to get on a track that would allow current payment of royalties and meeting all other future expense obligation. If I am correct in this would you refresh my memory on the percentage of earned royalties that would go unpaid?

SP -  According to the Report of the Trustee to the Creditors, approximately 78% of the debt would be forgiven. While that lowered our debt load dramatically – and we cut operating costs further in concert with the Proposal, it didn’t provide working capital that would carry the company through any further downturns in the licensing business while we were working to expand the copyright enforcement business.  Efforts to secure additional financing are resuming.

JP - What is the average current monthly royalties that are accruing?
SP -  If you are asking what our average royalty expense is, I can’t answer because that is confidential. However, I can say that the standard royalty percentage payable to image suppliers is still 40%.  And I can say that we are about 75 days late with royalty payments.

JP - It is my understanding that there are some significant copyright infringement claims outstanding and it is your hope that once those claims are settled there will be enough profit from those claims to settle the existing debt and get back on a current royalty payment schedule.
SP -  Our actions are far more proactive than my reading of that sentence:
    SP -  A. --  In September 2017 we formed PicRights Ltd. (“PRL”) – a wholly-owned subsidiary of Masterfile – to operate as the  exclusive North American enforcement and collection partner for PicRights Europe GmbH (“PRE”).  PRE acquired significant assets from PicScout (a Getty company) in 2017. The PicRights enterprise tracks and enforces copyright infringements on behalf of news agencies and stock photo agencies, including Masterfile. It operates throughout North America, Europe and the Middle East with further territorial expansion planned for 2018.  PRL is contributing growing revenues, profit and cash flow to the Masterfile enterprise.  We will be merging our ArtistDefense business into this enterprise to increase economies of scale.
    SP -  B. --  We have begun to pursue copyright infringement of Masterfile images in China in cooperation with our agent there.  Infringement in China is rampant and the Chinese government is increasingly supporting intellectual property rights including copyright.  This new initiative has already started and will deliver Masterfile and its contributing artists significant new royalty income made possible by the copyright registrations we have implemented for all exclusive content during the past decade.
SP -  The new ventures are growing quickly and their revenues are expected to significantly outpace any further licensing declines in 2018 to enable us to get all Masterfile royalty payments back on track.
JP - Would you please give me some idea of the total amount of these claims minus attorney fees that you hope to recover?

SP -  That information is confidential but I can tell you that there are over 6,000 active client cases in USA and Canada alone where infringers have already been notified and which PRL and its external legal counsel are working to resolve. And that will generate significant cash flow.  There is a time lag for those to turn into cash depending on whether the claim is settled by PicRights itself or if it has to be referred to external legal counsel. I remind you that the PicRights initiative only started in September 2017 so it has considerable growth potential as the business matures.

Copyright © 2018 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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