Stock Photography - A Two-Sided Market

Posted on 3/16/2015 by Jim Pickerell | Printable Version | Comments (2)

Stock photography is a two-sided market. For the most part image producers need a distributor to make potential customers aware of their work. Image buyers need distributors to make it easier for them to find what they need when they need it.

The distributor needs to cover its cost of providing the service and make a profit. But the distributor must also manage the delicate balance between what customers are willing to pay and generating enough royalty for contributors to encourage them to continue to produce.

Most image buyers have a fixed price that they can afford to pay. This varies with the buyer, the project and the difficulty of finding the right image, but nearly always there is a price cap somewhere for every customer.  Almost never will customers pay whatever the seller asks.

If we go back to the 1990s there was relatively little supply and demand was growing. When customers couldn’t find what they needed in stock they were usually forced to hire a photographer to produce the images they needed. This was usually much more costly than stock and there was a time delay. Consequently, if the customer could find an image in stock that worked for the project they were usually willing to pay a decent price because the alternative would be even more expensive.

The prices charged were usually based on how the image would be used and the estimated benefit the buyer might get from using the image. This became known as Rights Managed pricing.

Image creators discovered that there was enough demand to justify producing images on speculation at their own expense, and making them available through distributor networks where image buyers could find them. A huge percentage of the images produced were never licensed (many creators were lucky if 1% of their production was ever licensed), but the images that were licensed generated enough revenue to enable many creators to realize significant profits.

But there is always a delicate balance between the growth in demand and growth in supply.

In the early 90s there was a nice balance between demand and supply from the suppliers point of view. But there were many potential customers who couldn’t afford the prices charged for use of stock images. In addition, often these potential customers couldn’t justify the expense of hiring a photographer to produce what they wanted so they ended up doing without.

Enter Royalty Free

At this point the concept of gathering together a set of images, putting them on a CD-ROM disc and selling copies of the disc for a one-time fee was born. Customers could use any of the images on the disc in any way and as often as they wanted. This was known as Royalty Free (RF). There were still suppliers, distributors and buyers. Initially customers could purchase discs of about 300 images for a couple hundred dollars. Later the number of images per disc dropped to about 50 for the same price.

On any given disc most customers tended to find only a few images that worked for their projects. Thus, they had to keep buying new discs with different images. Some image creators found they could make some money from images that might never sell otherwise and the volume of disc sales justified making the images available at these low per-image prices.

Many customers that had not been able to afford stock images entered the market and overall demand for RF stock grew dramatically. Initially, relatively few image creators participated so despite the fact that the price-per-image was very low many made a decent living producing images for this market.

As Internet technology got better, distributors started making RF images available for search and single image delivery online. Fees were based on the file size delivered and the customer still received all rights to use the image.

More creators started producing better and better quality images. More and more customers discovered that RF satisfied some, if not all, their needs. Demand was strong enough for distributors to steadily raise prices, generating more profits for them and greater royalties for the image creators. Even with the higher prices RF was still much cheaper and RM.

However, demand began to plateau. About 2001 Getty Images (the industry leader at the time) decided that the only way they could continue to grow RF revenue was to raise RF prices even more. Over a period of about two years they raised the average price of an RF image from about $95 to $240.

Microstock and Subscription

At this point a lot of the graphic designers and illustrators (customers) who had found RF images so useful for many of their smaller projects discovered that they could no longer afford them. Often these potential customers created some of the photographs and illustrations they needed for their projects. Once the project was complete this visual material tended to sit in their files and gather dust.

This was also the beginning of social media. These professionals could now share information, and also photos, with colleagues on the other side of the world. The Internet made it possible for them to easily upload images to a web site and make them available for colleagues to comment on, or use.

iStockphoto, and shortly after that Shutterstock, were born. Initially, iStock was just a sharing site. Later it was discovered that some people contributed lots of images, but seldom found anything they could use, while others use a lot, but seldom contributed. At that point a small download charge was established. It helped cover the cost of operating the site, provided some compensation for those whose images were very popular and encouraged contributing.
Fast Forward to 2006

In February 2006 Getty Images purchased iStockphoto for $50 million. It is believed that iStock’s 2005 revenue was around $6 million. At that time Shutterstock was earning under $2 million a year.

Traditional image producers and distributors never expected microstock and subscription to be any threat to their businesses. But, this new microstock model had several things going for it.
    1 – The core producers – graphic designers and illustrators – had a very clear idea of what customers needed because they were customers.
    2 – There was a huge underserved segment of the market that could not afford traditional stock photography.
    3 – Microstock sites offered several customer friendly search features that made them more attractive than most of the traditional distribution sites.
    4 – Part-timer image creators were able to participate in the market.
    5 – Getty Images gave microstock immediate credibility when it purchased iStock.
    6 – Getty invested heavily to promote iStock and the microstock model.
Initially, the quality of the imagery being offered on iStock and the other microstock sites wasn’t all that great, but it improved quickly.

In 2007 iStock generated $71.75 million from 17.75 million download. In that year Getty’s premium RM and RF collections combined licensed rights to less than 2 million downloads. Clearly lots of customers who hadn’t been purchasing images from Getty’s Premium collection were finding images on iStock they could use, at prices they could afford.

In addition, thousands of part-time photographers and illustrators who had never participated in the traditional market began submitting images to iStock. At one point iStock said they had over 100,000 image contributors. The growth in demand was matched by a huge growth in supply.

Some credit for the growth needs to be given to the Great Recession of 2008. Everyone was looking for ways to cut cost. Customers were forced to look for lower cost options. And a lot of people who were out of work decided they might be able to make a little money taking pictures since no other employment was available.

By the end of 2010, I think iStock was doing between $350 and $375 million in gross annual revenue and was licensing upwards of 25 million downloads annually. At the same time Premium revenue and profits were falling as Getty and others were forced to cut prices in order to try to hang onto their premium RM and RF customers.

Cutting Royalties

Between 2006 and 2010 iStock and other microstock sellers steadily pushed up prices. Despite these price increase there was substantial customer growth year-to-year, but as more and more customer started using microstock growth began to plateau. As microstock image quality improved much of growth resulted from premium customers switching to microstock for many of their projects.

To counter declining usage growth Getty increased prices even more to grow revenue and profits. iStock was already the market leader with the highest prices by far. Getty felt they had the best product and customers would continue to come no matter what the price as long as it seemed cheaper than RM. But, as they raised prices sales started to decline even more.

To keep revenues and profits growing Getty focused on cutting costs. Most of the costs were staff. But those cuts didn’t help much.

In the fall of 2010 it was determined that the only way Getty could continue to generate the profits it wanted was to cut the royalties paid to iStock contributors. Getty figured they were the market leader. Suppliers would have to stick with them and simply accept lower royalties hoping to make up the revenue on a promise of increased sales.

As of the beginning of 2011, royalties for iStock non-exclusive contributors were cut from 20% to a range of 15% to 19% depending on the number of the contributors career downloads. Most contributors were in the 15% to 16% range. Getty also changed the way they calculated royalties so most exclusive contributors saw at least at 10% to 15% decline.

This move angered all contributors. Contributors felt they had worked hard to grow iStock’s business, spending more and more money and time on production in order to produce better, more in-demand images. A big part of why they spent more money was because the revenue they were earning was going up month-to-month. Now as payments were cut contributors were being told to “work harder, produce more and better work at greater cost and we’ll pay you less money.” Additional time an expense was necessary just to earn the same as they had been earning before.

Some contributors pulled out in protest. But, Getty’s biggest problem was they forgot to take into account that many of the creators were also image buyers. These buyers were the graphic designers and illustrators that had supported the company from the start and had encouraged many of their friends to participate and buy from iStock. Many of them said, “I’m never going to buy another image from iStock.” They went looking for other sources for the images they needed to purchase.

Shutterstock was the great beneficiary. They were a cheaper source and they had many of the same images available at iStock. In 2010 Shutterstock was generating about $80 million in revenue. In 2014 Shutterstock’s gross was $328 million. In the same period  Stock’s revenue has dropped from $375 to about $220 million. About $60 million of Shutterstock $328 million was from Enterprise customers and a lot of that revenue probably used to go to Getty’s premium side of its business.

It is important to note that between 2010 and 2014 most of Shutterstock’s growth was at the expense of Getty Images. Certainly they also took some share from the other microstock distributors because they have a well-run operation and for the most part their prices were much lower than most of their competitors. Shuttestock’s 40% growth annually was not the result of a huge number of new customers entering the market.

To the degree that there has been a growth in image use, prices have been falling more rapidly. Consequently, there has been little revenue growth overall.

It is also important to recognize that supply has far outpaced demand. In the last decade many talented contributors with much lower revenue expectations have entered the stock photography market. They are perfectly happy to earn a little extra a month to engage in their hobby. Their primary means of support tends to come from some activity other than photography. But even these people want to see steady growth in revenue when they are expending increasing time and money producing images.

What Getty Tried Next

Over the next four years Getty tried consolidating iStock’s operations (formerly in Calgary) by bringing much of the operations to Seattle. They cut staff and other costs. They let go the core people who had solid relationships with contributors, and a lot of contributor mistrust followed.

On the premium side of the business Getty cut a lot of the higher paid marketing staff. Later they discovered that the customers these people had been servicing were no longer getting the service they needed. Getty was forced to hire and train new people to try to improve service.
To compete with Shutterstock, Getty expanded its Thinkstock collection with 6 million images from iStock and 4 million from Getty’s premium collections. While Thinkstock’s sales grew it seemed to have no effect on Shutterstock’s revenue and probably cannibalized some sales from iStock and Getty’s premium collections. Overall revenue continued to decline.
They raised iStock prices and then later eliminated their highest priced collections when sales all but disappeared for images in the top price categories.

They cut the price of non-exclusive images in half and heavily promoted “50% off on 50% of our images.” However, they pushed a higher percentage of the higher priced exclusive images to the top of search return order so the customers didn’t recognize a lot of this “low price” benefit.

They delayed Payments to contributors. They ran into several problems in supplying contributors with information about their sales as a result of constant changes. They overpaid more than 9,000 contributors for 2 months in 2013 leading contributors to believe that sales were finally actually improving. Once they discovered their error they clawed back these monies over a six-month period making cash management difficult for the contributors.

In 2014 they introduced iStock subscriptions and single image pricing that came close to matching Shutterstock pricing for non-exclusive images. However, their exclusive images that represented 75% of iStock revenue were still two to three times more costly than images found at Shutterstock.

Neither of these 2014 moves resulted in any positive effects on gross revenue. In Q3 2014 Midstock revenue was down 9.8% year-to-year and in Q4 2014 it was down 15% year-to-year. Their 2014 moves also seem to have resulted in a dramatic decline in royalty payments, particularly to exclusive contributors. Many of iStock’s exclusive contributors have reported that their January 2015 royalties were 40%, or more, lower than a year earlier.

Needless to say during this period image suppliers on the whole have become increasingly unhappy. Based on my January analysis of 430 of iStock’s top earners almost 50% added fewer than 100 new images to the iStock collection between the end of 2012 and the end of 2014. On average, each of these contributors has 5,245 images in the iStock collection, or a total of 2,255,531 images for the group. Twenty-three percent of the 430 added no images or removed images in the two-year period. Thus, the contributors that over the years have experienced the greatest success are giving up.

Getting back to the Two Sided market, it only works when the needs of both suppliers and buyers are satisfied. Buyers always want a better product and more service for a lower price. Suppliers need to earn a reasonable profit for their efforts and costs expended. The distributor – middleman – must carefully manage both sides of the market and try to keep it in balance.

As the Two-Sided stock photography market has gotten increasingly out of balance, many who used to earn their living producing stock images have long since given up and focused their energies on other endeavors. Now, even many of the part-timers are finding it difficult to justify the effort expended for the compensation received. More and more of the production comes from people living and working in low cost-of-living parts of the world where often it may be difficult to find other full-time employment.

Copyright © 2015 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:  


  • Morgan David de lossy Posted Mar 18, 2015
    Very interesting history of stock! I wonder how the quality of next years images will be affected by what you say in your conclusion (whom I share). Are we at an end of a cycle? Will this mean an auto-adjustment of supply and demand, and after a while new opportunities for the remaining contributors able to generate quality?

    Or are we at the edge of a brand new model "Netflix-style" where the only way to generate quality will be for the distributors to become content producers too?

  • Tom Zimberoff Posted Mar 22, 2015

    I enjoyed reading your erudite account of the Stock Photo marketplace. But I think it’s missing a hugely important if subtle historical perspective: how Corbis and Getty Images engaged in a competitive bacchanalia of acquisition that led to the abandonment of an agency model, representing the best interests of photographers, and to the prevalence of a distribution model predicated on the economic exploitation of a commodity and a perversion of the two-tier marketplace.

    Every marketplace is two-sided by definition. And no marketplace exists spontaneously. They’re actually created by middlemen to connect sellers with buyers (a point particularly germane to online marketplaces). When they work they help both sides solve each other’s problems, and the middleman is rewarded too. If that’s not the case, middleman is a misnomer; leech is more like it. Incidentally, it’s not the job of a middleman to “manage” what customers are willing to pay. That’s not possible to do anyway.

    Both sides of the Stock Photo marketplace in particular must be treated equally as customers to be economically sustainable over time. Photographers are not “suppliers” per se because the middleman is not purchasing goods from them. In fact photographers pay the middleman to participate in the market, just as publishers pay for publication rights. Furthermore, the idea of “royalties” in a Stock Photo marketplace is ill applied because the incumbent middlemen, the distributors, are not themselves licensees, or end-users. It’s more than semantics. In a healthy market licensees (e.g., publishers) pay royalties to licensors (i.e. photographers), and the licensors pay commissions to middlemen to facilitate transactions between the parties at both ends of the marketplace. I’ll concede that the concept of paying royalties works better in a commodity market. But only a certain flavor of photograph can rightly be considered a commodity. The distinction is more objective than subjective, yet might not be immediately apparent. But there is indeed a difference beyond the abstract. And therein lies the crux of the problem. Distributors have conflated two disparate market segments (i.e., Business-to-Business and Business-to-Consumer) within one revenue channel, confounding economic growth, which has remained stagnant for a decade.

    Historically, photographers engaged in Stock were represented by agents. Their interests were aligned as a matter of mutual economic sustainability. Agents always tried to get the highest price they could on behalf of photographers in accord with providing good service for buyers, building relationships with both sides of the marketplace. On the other hand, the distributors of a commodity care little about the economic sustainability of suppliers and rely, instead, on quantity and low prices over quality and service. Ergo, they’re serving customers who don’t care about quality and service but underserving many other customers who shop for quality, not price.

    In the early 90s, looking down from the 80,000 ft. perspective of investment bankers, Jonathan Klein and Mark Getty (Getty Images), simultaneously with Bill Gates (Corbis), saw a bunch of fragmented mom-and-pop photo agencies and realized that they could be consolidated into one massive money stream. It was an economic ploy that had only a tangential relationship to an interest in photography. So it was that Corbis and Getty bought their way into photography with no hands-on experience, no organic growth. Moreover, unlike buying, say, a record label that comes with the rights to a music library or a movie studio that comes with a treasury of films, the intellectual property associated with a stock photo agency—the actual photographs and the rights to publish them—are owned by the photographers, not the agency. So when Getty and Corbis came knocking on the door with suitcases full of cash, most photographers ran for the doors as fast as they could and took their pictures with them. That’s what I did.

    For sure, these distributors bought agency brand names along with some historically invaluable image archives that will continue to earn revenue indefinitely. But contemporaneous photography, like food, has a shelf life. It’s perishable and must continually be replenished. (Need I explain why?) When more than 80% of the 100,000 or so pro shooters working worldwide told them to go to hell, Getty and Corbis had no alternative but to seek out other photographers who were less independent, whom they could hire as outright employees to shoot libraries of images on film. It was a successful ploy. Distributors anticipated what photo buyers’ demands would be and sent their photographers out to “pre-shoot” without a buyer in place. Eventually, that became too costly and too time-consuming, especially shooting on film. Moreover, the subject matter and style of those archives soon got stale. Getty and Corbis began to buy the archives of individual photographers who had deep coverage in a given subject matter. Then suddenly, we all entered the twenty-first century: digital imaging. To make a long story short, the distributors came to rely on crowdsourcing.

    Before crowdsourcing Corbis and Getty had already made deliberate decisions to exclude photographers from the value chain and, instead, serve an emerging customer base consisting of shopkeepers, freelancers, bloggers, and designers all looking for cheap pictures to fill up these newfangled Web sites proliferating all over the Internet. The incumbents succeeded stupendously with buyers of all stripes. But sophisticated and high-paying buyers were soon disappointed, the ones who rely on professionally competent, visual problem-solvers to provide unique, high-quality images. They were ignored in deference to the new market for cheap photos, which was, and remains, huge. Its customers know little and care less about matters of intellectual property and copyright. So be it. The publication rights they demand are relatively marginal. But giving traditional marketers and publishers an economic windfall—albeit ephemeral—by charging them consumer prices in a B2B marketplace was neither asked for nor necessary. It gave away the store. It was shortsighted and unfair to creators. That gambit has come back to bite not only buyers but the distributors too.

    Corbis and Getty didn’t know how else to react when they were shunned by the best photographers in the world for what they did. They just continued to burn bridges behind them. For that reason, they have no relationship with the tens of thousands of freelance photographers who shoot Photo Assignments (with the exception of a few dozens of outliers). The work of the most talented photographers in the world is virtually invisible to buyers online. The incumbents have no means to aggregate these professionals and connect them with their existing clients, thereby, allowing them to capture transactions between them and use those data to accurately price usage rights in a modern marketplace. (That technology is what my start-up company, Pixterity, is working on.) Once a tipping point is reached (it’s close), when advertising revenue from online publication finally eclipses print, that’s the day compensation for photographers will shift, becoming adequate and fair. That’s what the people who actually pay photographers are saying.

    Here’s the problem: Marketers and publishers HATE crowdsourced pictures. They have to stand out from the crowd(sourced) to communicate with their own customers. That’s why Ad agencies, Corporate marketers, Editorial media, and Small businesses (I call them the 4ACES) spend $6.5 billion each year to hire professionals to shoot Photo Assignments. That’s more than the $4.5 billion spent mostly by consumers on Stock. Incidentally, that $6.5B is unequally fragmented amongst all 100,000 freelance pro photographers who decline to participate in the Stock Photo segment altogether for reasons you, Jim, have already alluded to in your essay.

    Consider this: throughout the entire world there are roughly 7.6 million photo enthusiasts, 2.5 million aspiring professionals, and 1.4 million part-time pros “contributing” to stock photo collections. That’s 11½ million wannabes who keep only $40 million out of that $4.5 BILLION the distributors earn from rank consumers. 82% of the pictures they sell are redundant online across multiple distribution sites. It’s no wonder that if a good image does get discovered, multiple buyers soon pounce on it, leaving the idea of exclusivity an impossibility for buyers who would be willing to pay more for it. Economically, these “contributors” suffer a death by a thousand cuts due to sub-agents. (Rhetorical question: Why are there sub-agents in a digital world? Does Uber need sub-agents to distribute rides?)

    How could there be any other result than a stagnation of revenue growth over the past decade? Since the emergence of Shutterstock, they and Getty have been swapping revenue back and forth with each other like squeezing air in a balloon. They can’t raise prices because the quality of their content is so poor; and they can’t increase quality because their prices are too low to attract better photographers and their pictures. Did you know that even Corbis is now syndicating its collections through Getty? WTF?

    The 4ACES will always opt for quality over price. They will thrive, online or in print for the time being, and so will the photographers who create Stock Photos, once an adroit agent uses technology to balance the cost of creating intellectual property (i.e., photos) with their actual commercial value to the end-user in real time, transaction by transaction. That’s the future of the photography business. That’s what Pixterity is working on.

    Today, ALL PHOTO ASSIGNMENTS ARE OFFLINE; they’re done on paper, over the phone—very 1985. The middleman, or agent if you will, who can use technology to connect photographers with their existing clients (for Photo Assignments) online will also consolidate Assignment & Stock Photo revenue on a single platform. Buyers will quickly recognize that the best source for Stock Photos is the same platform, or marketplace, they already use to to work with pros they trust to shoot Photo Assignments.

    You bet, the two-sided Stock Photo marketplace is out of whack. The future looks bright.

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