Production Costs and Image Pricing Unrelated

Posted on 1/21/2009 by Jim Pickerell | Printable Version | Comments (6)

“The biggest problem with the stock-photo business from an independent photographer’s perspective is the lack of any real link between cost of production and prices charged by distributors,” commented Tim McGuire in response to “Ross Shares Cost Control Strategies.” (There were also several other well thought-out comments that are worth reviewing.)

Many think, as McGuire, that the industry should find a way to charge fees based on the cost of production. But the flaw is really in the whole idea of stock photography as a primary business.

Stock photography used to be about making supplemental income from pictures produced on assignment, where all costs and a reasonable fee for the photographer’s time were already paid. Any additional revenue generated was a bonus. It cost very little to send a few transparencies to a stock agency, and if the agency could generate a little extra in sales, that was better than doing nothing with the images.

In the 1980s, demand for stock pictures began to grow, because they were often cheaper than shooting an assignment. For a few years, demand was much greater than supply. Photographers discovered that certain subjects were in much greater demand than others. By producing the right kind of images, photographers could earn more by shooting specifically for potential stock sales than by working on assignment.

That worked while demand was greater than supply, but by the mid-1990s—and some will argue exactly when this happened—the market hit a tipping point. Demand stopped growing, and supply grew at an ever-increasing pace, because everyone wanted to get on the bandwagon.

Consequently, image prices will never be linked to production costs. There are at least three reasons. First, customers will always make decisions as to what they are willing to pay based on how they value the image. Second, the value of an image to any particular customer has nothing whatsoever to do with the cost of production and is based entirely on planned use. Third, the value is also affected to a great degree by other choices available to the customer.

There will never be a link between cost and price, as long as photographers are willing to create images, at their own expense, before they know anything about the customer and how that customer will value the image. Those who want set their licensing fees based on production costs need to find customers who will assign work on a fee-plus-expenses basis.

McGuire suggests that photographers might want to become their own distributors, but photographers have absolutely no way to determine, before an image is shot and marketed, the number of customers likely to buy it at any particular price point. History has also taught us that different customers are willing to pay widely divergent prices for the same image. A photographer may establish a price sufficient to cover all production costs in a single sale, but that is no guarantee a given image will ever sell. With a lower price, based on a certain number of expected sales, there is no guarantee the image will sell that many times—or at all.

Every production is a crap shoot (hence the concept of producing “on spec[ulation]” of future sales). Experience enables some photographers to make better judgments about subject matter and style, but even so, a huge percentage of the images produced never sell.

Consider that in 2008, Getty represented approximately 1.5 million rights-managed images but sold only about 500,000 rights-managed licenses. Since many of these were for the same images that sold multiple times, well over two thirds of Getty’s rights-managed collection did not sell. Similarly, of the 14 million images in the Alamy collection, the company licensed rights to about 215,000 during all of 2008.

iStockphoto has over 4 million images and an estimated 22 million downloads, at an average of $6.50 each. Thus, the average annual gross return per image in was $35.75 in 2008. While on average each image generated some revenue, each photographer’s production and overhead costs for each accepted image are not known. What is public knowledge is that 70% of the photographers with images on iStock made no sales in 2008. Many photographers shot, keyworded, color-corrected and uploaded images that were not accepted; to determine profit, such costs must be deducted from the overall revenue generated by the images that did sell.

In all, the problem is not in the lack of a link between production costs and image price, but in the hope that such a link would exist in the business of stock photography.

Copyright © 2009 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:  


  • Tim Mcguire Posted Jan 21, 2009
    Hi Jim,

    Lots of things can change and I hope they will. It seems HOPE is in the air these days! The problem I have with your article is that you seem to think that photographers cannot affect change. I tend to be optimistic if not realistsic and hope that one day photographers will get smart and either reject the current stock distribution models offered by the market leaders in this business or demand that there be a link between costs of production, revenue splits, and prices charged for licenses.

    I don't believe for a second that Getty Images doesn't know how much revenue on average an accepted image will bring in based on past experience. That average revenue per accepted image may differ between RF, RM, and Micro and their different brands but they know the numbers and they adjust their mix of imagery and price points based on those numbers. The big image distributors (Getty and Corbis) also have adjusted revenue splits based on these numbers. Look at Corbis' latest adjustment downward on photographers’ royalties so Corbis can better compete. My question is, why not charge more for the images if you need more revenue? What makes them think photographers can make due with a 20% reduction from their stock income? If photographers’ costs were part of the bottom line decision process in places like Getty and Corbis I think there would be no choice but to raise prices.

    The problem is that Getty and others don't have to consider costs of contracted photographer production overhead or profits. The big distributors and probably by default, the smaller distributors operational plans and pricing policies are made based on numbers only accounting for their own overhead and their own revenue needs. Not photographers business needs. When the revenue splits are defined by the distributors it is based on what the market will pay and what percentage Getty (or whoever) needs to meet their bottom line based on past experience. I would highly doubt that freelance production costs are ever really considered beyond..."Oh yeah, how little can we get away with paying image producers"?

    This lack of a link between production costs and pricing based on average income per accepted image is what has lead us to this downward spiral of lower prices, perpetual rights giveaways, and lower revenue splits for photographers. Not to mention the fact that photographers and distributors have to work harder and harder to make the same or less income.

    Notice the overall revenue for the stock photo industry and perhaps the overall photo industry has remained stagnant or even fallen in the last 7 or 8 years. Just as the use of imagery has increased steadily.

    Jim, for many, stock has been their "primary business" for at least the last 8 years. Because it started out as supplemental income doesn't mean it must or should stay that way. I don't understand your reasoning. Stock photography is certainly a primary business for the likes of Getty Images. Why shouldn't it or can't it be the same for those acting as wholesalers for Getty or others... the reason is because there is no link between prices and costs of production. Most manufacturers / wholesalers charge something for their products before the retailer gets to distribute/sell the product to the "consumer". There are usually some strings attached (costs) before a car dealer gets a car from a manufacturer. If the car dealer didn't have to, in some way, consider what it costs to manufacture a car then I'm sure cars would cost a lot less. Perhaps a bad analogy because there is no over supply of car manufacturers... but I think it still makes my point though my argument is mostly theoretical.

    When I describe my stock business to people unfamiliar with the stock industry they always assume I SELL my pictures to Corbis and other "agencies". Maybe I should look at that assumption they make and analyze it a little. Many of these people are successful business people in other industries. Maybe photographers selling their images to distribution outlets or charging a fee based on their production costs would make better sense.

    If Getty had to shell out some money for the imagery they want to have access to, be it a copyright buyout or just an up-front fee to assume some of the risks of production, the entire industry would change. First off, editors/buyers would have to be a lot better at picking profitable images, photographers would have to be a lot better, and prices would have to reflect, at least in part, the costs of production. This could mean a lot of photographers are forced out of business (maybe me too) but at least the business that continued would be more sustainable and stable for all involved.

    I have no idea how to stop the current downward spiral without first watching the industry hit rock bottom. And that may be a while as production will start coming more and more from photographers living and carrying out their business in places where costs of doing business and costs of living are lower. I personally like living in Seattle and don’t want to move to India to make a living…

    The over supply (photographers and images) and extreme price competition are powerful market forces pushing down hard on this business but in my opinion it cannot go on and be sustainable for more than a very few photographers or production companies who are very well funded and able to produce hundreds of great images each shoot day for years on end in places where production costs are low.

    Personally I am looking for at least a partial and/or a temporary exit from the stock photography business to go get an MBA in sustainable business. We'll see where that takes me. I agree with you that most likely the changes I hope for are unlikely to occur in the short term and I'm not looking forward to continuing on the "treadmill" of stock photography production which appears to keep getting faster and faster and the incline keeps getting steeper and steeper. Jim, you’re probably right about stock photography production as a full time professional endeavor. As I see it now, it is only a reasonable risk reward equation for those who have the stomach for extreme risk, have very deep pockets, and have the ability to produce massive amounts of relevant marketable images. I guess maybe I’ll just make some extra money from stock to put me through school and move on to greener pastures. Perhaps my hopes are unrealistic or my photo skills are not up to snuff but I keep on hoping nonetheless :-) I seem to like writing about it too. (Need any extra writers Jim?) Keep hope alive!

  • Jagdish Agarwal Posted Jan 22, 2009
    Hello Tim,

    Welcome to India. In the last few weeks, we have received e-mails from photographers in USA wanting to come to India. Grass always appears greener on the other side.

  • Don Farrall Posted Jan 22, 2009
    I was once describing the stock photo business to a stranger that I met on a plane. He was from Australia, not that that matters. I explained the process and the financial split between the photographer and the stock agency. He looked at me in a puzzled way and then said “ You mean the distribution of the product is worth more than the product itself?”… A sobering but truthful conclusion.

    I can produce what Getty cannot. But I cannot bring the world to my photos, in a manner that remotely touches Getty’s ability to.

    In a small way Getty does address the production value question. There are three tiers of RF sales pricing that are generally based on image uniqueness and production costs. And the choice to sell an image as RM further raises the potential, but it also puts into play the price versus volume quotent.

    Don Farrall

  • Ghislain David de lossy Posted Jan 22, 2009
    Hi Jim,

    worst is the situation if you shoot film for stock. you can spend up to 15,000€ per day, and then see your sales under $100 each.
    It could be interesting to ask how many here do actually shoot film, and how is the situation for them.


  • Leslie Hughes Posted Jan 26, 2009
    What I like about what Tim says is that he puts forth the thought that photographers can affect change. I too believe this. However, it is more likely that the market will drive price and costs will drive the business model of distributors and producers - even Corbis and Getty. It will then become a business decision if the cost of making the "product" is worth it. That is the rub. If it is not, then supply will dry up. That is not the case at least for now. Someone is making enough money to keep supplying. And there is at least one company making a profit and another owner willing to continue to support an unprofitable endeavor, although clearly trying to move the company to a point where it can support itself. What has changed in recent years is that while sales have come down, volume levels have gone up. I am not saying that is good but that is what happened - now the volume growth by some measurements are slowing and so pain is being felt. If price and volume doesn't grow - then what is there?

    I have run sales teams for all types of stock libraries and trust me when I say companies want the highest pricing possible and sales teams try everything to raise prices on a single image they are pricing if applicable. Most are paid on commission. They know that production value can be used but if the image is easily replaced with another agencies lower priced image, what do you want them to do?

    One history of the word commodity is that it was a "thing of value made in large quantities." Sounds familiar. As stock has become more of a volume business and more and more has been made, price has fallen. Whether you think photography has become a commodity or not, clearly there is an abundance of supply and many of the images have alternatives available. When there is a viable alternative, price becomes an issue and other things become more important.

    So does production matter? Yes. We have to drive production costs down more in this economy than ever. Ensure we are making highly marketable images that are the least to be easily replaced - understand production costs will rarely impact how a distributor will price in a stock offering and remember, we each have to differentiate as well as know what the market we want to target wants. There has been and will continue to be a shake out for both agencies and photographers which in the long run may be a good thing for the business.

  • Tim Mcguire Posted Jan 27, 2009
    Hi Leslie,

    Thanks for your comments. I know you've been at this probably longer than I have.

    From what I know, or think I know, the growth in volume in this industry has not made up for the more and more generous licensing models offered for photos at lower and lower prices. The overall revenue in the stock business has been stagnant if not falling slightly over the last 7-8 years. Every new licensing model seems to dilute the model before it offering more for less (and even less than that to photographers). How can that be good for anybody in the medium to long term? I agree there is little anyone can do about this downward spiral we're in. Maybe as a photographer it's time to get out... maybe it's been time to get out for a while :-)

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