New Business Model - Issue 5

Posted on 9/20/2007 by Jim Pickerell | Printable Version | Comments (2)

Issue 5 - Basing price on the size of a digital file is extremely unfair to the customer, as well as the seller. File size has almost no relationship to how an image will eventually be used, or the value the customer will receive from its usage.

Pricing images based on file size was first introduced by the developers of RF, which look at stock photography as nothing but a commodity. Originally, it was favored by users because it was cheaper. Now, in many cases, images sold in this way are no longer cheaper, but the pricing system is still prized for its simplicity.

One of the big problems with pricing based on file size is that sellers end up knowing almost nothing about how the image will be used. Should they care?

RF advocates argue that if a user is going to make a "larger" use of an image, he will need a file with more pixels. But that defines large in terms of square inches of the eventually display, which has only a minor relationship to the worth for any specific customer. Yes, size - one-quarter, one-half or full page - has always been a factor in determining usage, but circulation has been a much more important factor and that is totally disregarded when we price based on size.

Let's look at a few uses. A picture might be used on a student's personal Web page, or by a nonprofit or repeatedly on CNN. They all need the same file size. Should they all pay the same?  Are they all getting equal value from the usage?

What about users who intend to reproduce an image quarter page? They all need the same file size for reproduction. One is a national nonprofit creating a fund raising brochure to be mailed to 100,000 people, another a textbook publisher that wants 10-year use for 2 million impressions in print and on the Web, and a third is a small local business that intends to use the picture in his Yellow pages ad. Based on the value each receives, should they all be paying the same price?

One way to solve this problem and maintain simplicity is to price the usage so the customer receiving the smallest benefit can still afford to use the image. This is the microstock model. Granted, customers who could afford to pay more will get their usage at bargain basement prices, but the theory is: we'll make it up in volume. That can work for a little while, as long as the market is growing exponentially. But when it begins to mature and there is no longer a host of new customers entering the market, there is a problem.

(It is interesting that microstock started out making images available for free. Then they discovered there were costs involved in delivery and raised the price to $1.00 to cover their costs - not the costs of the producers.)

Consider what happened with traditional RF.

Initially, it was offered on CDs with large numbers of images at a fixed price for the CD, or at very low single image prices. But when the number of users began to plateau, they realized there were only two ways to grow revenue. In the CD environment, they started to cut the number of images offered on a given CD and create more titles, all at the same prices they had previously charged. With single images, the only way to grow revenue was to increase price. The problem: budgets of many of the low-end users had little elasticity, and they were forced to drop out of the market. For a long time, that didn't present a big problem for the RF seller because the higher revenue who could pay, more than made up for the loss of revenue at the bottom end.

But there were a couple of unintended consequences. That group of users who could no longer afford RF began to look for other alternatives. Welcome microstock.

And a couple years ago, traditional RF discovered that they had reached a point where they could no longer raise prices without losing more in volume than gained by the higher price.

Don't jump to the conclusion that if RF is so bad, we should return to RM pricing based on narrowly defined usage parameters. I'm not suggesting that. Remember RM has a major problem also. It is too complex, and a high percentage of customers demand a simpler system. Also, it really has no strategy for dealing with low-end users. What I said when I began this series is that we need to develop a new business model that combines the best features of existing models and minimizes the weaknesses. I'll explain this point in more detail when we get to my recommendations for a new business model.

Copyright © 2007 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:  


  • Betsy Reid Posted Sep 21, 2007
    Hi Jim,
    You write that "basing price on the size of a digital file is extremely unfair to the customer, as well as the seller," and that RM is "too complex, and a high percentage of customers demand a simpler system."

    It is refreshing to hear you say so!

    As you may recall, SAA covered this topic in depth in our 2004 SAA White Paper, "Understanding Stock Licensing Models."

    Our conclusion, then and now:

    "There is clearly room for improvement in the licensing models of today. For example, Rights Managed licensing need not be complicated or inflexible, just as Royalty Free licensing need not give users so much more than they actually need"

    We have continued the discussion in our new White Paper, "Infringements of Stock Images and Lost Revenues" which can be downloaded from

    As for new business models that address these issues, how about PLUS Packs?

    We now have a universal standard that offers a simplified, easily automated RM licensing approach, developed with the participation of stakeholders from across the industry through the PLUS coalition.

    PLUS Packs were designed to offer licenses for a specified end user within a defined category of use, such as Display or Marketing Materials. A short list of licensing options (Duration and Region) keeps the process simple, while enabling licensors to scale pricing to accommodate the needs (and budgets) of both a large international company and a small local business.

    SAA has even developed a free software tool for anyone to use in order to support use of the PLUS Packs system system.

    SAA is glad to see, at last, a call for evolution and innovation in stock licensing business models.

    Betsy Reid
    SAA Executive Director

  • Peter Anthony Gallo Posted Sep 24, 2007

    The image licencing business is very similar in concept to the music ( song ) publishing business.

    In the case of music publishing,either users ( companies selling CD's or downloads) pay the copyright owner for the use of the song ( for song in this analogy read image) on the basis of the number of units sold or on the number of times they ( Radio and Television stations) play the song or on a mutually agreed price ( in the case of songs used in radio,TV and internet ad's)

    In all the above cases the buyer has to correctly account to the seller or the sellers agent.

    Payments are either an industry agreed percentage of the selling price times units sold in the case of record companies or an industy agreed amount weighted by the number of listeners /viewers in the case of radio and television stations.

    It may well be worthwhile studying the business to business pricing of musical copyrights when developing a new pricing model for imagery, especially RM imagery

    Kind regards

    Peter Gallo

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