Subscription Stock

Posted on 5/25/2004 by Pat Hunt | Printable Version | Comments (0)

637

SUBSCRIPTION STOCK



May 25, 2004

    The following article first appeared in Picture Magazine , published in New
    York. Author, Pat Hunt, is VP of Corporate Relations at Index Stock Imagery, and a
    writer for various photographic publications. She can be reached at (path@indexstock.com)

by Pat Hunt

Oh no! Not another quirky way to sell stock photography! We've barely recovered
from the shock wave Royalty Free sent through the system. Well yes - here we go
again and selling stock photography by subscription won't be the last business
model, which is newly spawned by the Internet era and the proliferation of
e-commerce. Just as RF has matured and become a household word for stock agents
and creative artists, the subscription model is sneaking up behind. It is luring
artists to contribute image content as it attracts clients and potentially a
whole new customer base, for which standard stock imagery has been previously too
costly.


THE BUSINESS MODEL


So how does this model work, who's doing it, and who is making money on it?
How important a role does it play in the overall picture? These questions
are hard to answer as the subscription model is still growing and maturing, but I
will review some companies that are employing this model, and describe their
similarities and differences. We'll also hear from large agents who are studying
the model and deciding if and where to place it in their "big picture".


There are a few companies that offer web sites that specialize in the
subscription model only. They vary somewhat in content and direction. A few of
the giant agents have incorporated this model into their overall structure,
looking to satisfy every customer need and price range possible. There are other
large stock players who have opted to stay out of the "ball game" all together.
We will hear from them all.


PHOTOSPIN


PhotoSpin ( www.photospin.com ) is a good place to start, as the creative
professionals at PhotoSpin envisioned a subscription business model as early as
1995, when they first began building 60 CD-ROM products. By the year 2000 they
poured their content into a subscription service, offering 2 tiers of payment for
a 12-month usage. They claim to be "the first content subscription site for
business professionals" with 70,000 photographs, illustrations, video clips,
sound files, and fonts. New images are added each month. Subscribers pay an
annual fee for unlimited downloads of content for one year. "The $249 tier gives
customers the full PhotoSpin collection, including high-resolution (up to 55MB)
print ready images. The $149 tier provides access to web and low res images, as
well as some fonts, audio files and video clips."


The imagery is all RF and wholly owned as in-house photographers create most of
the imagery. "This is important because it is the best way to assure subscribers
the images have proper model releases." Occasionally PhotoSpin will purchase
collections out right, but the artist or photographer must be able to provide
legitimate model releases for the body of work. According to Val Gelineau, CEO
and co-founder: "This is a win-win situation for both the artist and PhotoSpin
as the artists get immediate compensation for their work without the hassles and
delay of royalty payments." The company claims to have 80% customer retention and
"customers spend over 15 minutes on the site when they come to visit."


ARTTODAY


ArtToday, Inc. has jumped into this format with a serious commitment and a
variety of models on three different sites: clipart.com ,
photos.com , and
animations.com .
Clipart.com has been around for 7 years. Photos.com is 1 year
old and Animations.com was launched this last fall. According to Dan Burke,
Director of Marketing and Product Development: "I think it's pretty fair to say
that no one has as much subscription experience on the web as us." The price and
content breakdown is as follows:



    ClipArt.com: - 1 Week - $7.95, 3 Months - $49.95, 6 months - $99.95, and 1 year -
    $149.95. There are over 2,600,000 images and fonts on Clipart.com.


    Photos.com: 1 Month - $99.95, 3 Months - $199.95, 6 Months - $299.95, 1 Year -
    $499.95. There are over 80,000 stock photos on the site. 70,000 of them are
    simple photographic images. 10,000 are photos with clipping paths. Each image is
    available in 3 sizes: 1-2 MB, 3-4 MB and 12-16 MB.


    Animations.com: 1 Month - $7.95, 6 Months - $29.95, and 1 Year - $49.95. Each
    image is available in 4 sizes - 1-7K, 8-14K, 15-26K and 27K+.

The company claims its audience ranges from consumers to professional designers.
Its content acquisition is completely different from PhotoSpin as:
"Illustrators, photographers, and individual artists all submit content to our
sites" and "we own a minor percent ourselves." "Licensed content providers share
a negotiated royalty pool."


According to Burke: "There is no doubt that subscription models are only now
coming into their own; simply put, they are convenient, easy to use, and the
value is unbeatable. Every day that passes, the web is commoditizing industries.
Subscription sites are the perfect outlets for digital media."


HEMERA TECHNOLOGIES


Hemera Technologies , of Quebec, provider of Royalty Free images and
graphics software, offers another version of the subscription model with their
site: www.ablestock.com . It also offers a Royalty Free image product.
According to Mats Lindeberg, Communications Manager: "Our customers use the
images for everything from final art to comps to customer presentations to
brain-storming."


AbleStock's membership structure is as follows:
Access to entire stock photo collection - Twelve Months - $599; Six Months -
$399.
Complete Membership (entire collection of stock photos and photo objects) -
Twelve Months -
$799; Six Months - $599.


There are about 36,000 RF images, which are wholly owned and available in three
file sizes: Low res - 1.5MB; Medium res - 10MB; Hi res - 25-28MB. "If you have a
Stock Photo Membership you can download up to 30 stock photo images a day." "If
you have a complete membership you can download up to 30 stock photo images plus
30 photo-object images a day (60 images total)." Single images are also available
for download with the following price breakdown: 25-28MB - $129.99; 15MB -
$79.99; 10MB - $29.99.


DYNAMIC GRAPHICS


Dynamic Graphics , a global media company, also offers a Royalty Free
subscription based model known as: Liquid Library- www.liquidlibrary.com . They
did not reply to a request for information, so all the following details come
from their web site. A body of freelance professional illustrators and
photographers contribute image exclusive work to the site. There is a "portfolio
submissions" guideline page on the site. With a subscription, each month's CD is
delivered to the clients at a cost of $125 per month.


The CD includes the following: 70 photos in high, medium and low res, 70
illustrations in high res color and black and white, 10 media elements: 1 movie
clip, 1 music track, 2 flash animations, 2 sound effects, 5 PowerPoint templates,
plus a monthly magazine, a free online management system, and discounted access
to a 65,000 image library. There are various discounts offered for subscribing
for 6 months, 12 months and 24 months.


TRADITIONAL STOCK AGENTS


As mentioned before, some large traditional stock agents have adopted various
degrees of the subscription model to expand their client reach, and open up all
opportunities for licensing image content. Index Stock Imagery has the
perfect example of this in their Webspice offering ( www.webspice.com ). Webspice
offers over 30,000 Royalty Free photos, with new photos added every month, over
2.5 million Web Graphics (buttons, bullets, arrows, rules, textures, etc.),
35,000 GIF 3D graphic and text animations and 2,000 Themes and Site Styles. The
Themes are for Microsoft (r) Front Page and Microsoft (r) Office Applications.
The target audiences here are Webmasters, Website designers and small businesses.
Their image content comes from individuals and collections, and the artists
share in a piece of the total revenue pool.


The photos and graphics are for electronic use only, and are only approximately
280 x 280 pixels. This is "attractive to users who need many low resolution
photos and cannot afford to license single photos. The subject matter is varied
and the subscription prices are $19 for 1 month site access or $99 for 1 year."
According to Michael Pachter, CTO of Index: This model "introduces users to the
stock photo concept and offers opportunity for up sells to higher resolution
images when they have need and budget. They do get limitations on either
selection or resolution. However many are customers who otherwise would not
license anything from a stock photo agency."


CORBIS IMAGES


Corbis Images would like to express that they are careful to develop the
appropriate pricing and business model when entering a new market. To this end,
Corbis serves the educational market and wireless carriers with
subscription-based products. "The company is constantly evaluating consumer and
photographer needs to determine the right business model for these emerging
markets," says Robson Grieve, Corbis Senior Commercial Marketing Manager. "Our
research suggests that broader subscription products are possible."


"The challenge for Corbis is to develop a subscription model that opens up a
unique economic opportunity, while not compromising the integrity of the
photography and art.
We have image content from Royalty Free sources, Rights Managed sources, and some
wholly owned collections that might be appropriate for this kind of business
opportunity." Robson Grieve also says: "The advent of new technologies has
created new markets for images, and given us a chance to experiment with new
business ideas. We are very focused on using this learning to reach customers in
new markets; and adding lifecycle and archive analysis gives photographers every
chance possible to make the most out of each image they provide to Corbis."


For either of these companies, this business model does not represent a major
market share. They represent an adjunct to an already complex business
structure, which attempts to serve all possible image licensing clients.


GETTY IMAGES


Getty, on the other hand, assures us that: "Getty Images licenses both
its Right-Managed and Royalty-Free imagery according to usage, rather than on a
subscription model." According to Deb Trevino, Getty Images Senior V P of
Communications: "With the upcoming re-launch of Getty Images' web site, the
company will be announcing two additional purchasing options on its Right-Managed
and Royalty-Free collections. By the end of year 2003, Getty Images will have
introduced Flexible License Packs, which will offer customers unlimited use
across a range of media without having to create individual licenses or provide
precise license details. This is a quick, cost effective and flexible way for
creative professionals to license RM imagery across multiple media campaigns.
And Getty Images has created a number of different license packs to give creative
professionals a wide variety of media combinations from which to choose."


"And for creative professionals who prefer buying imagery in bundles or larger
quantities, Getty Images will be adding a new purchase option to fit their needs.
By the end of the year, creative professionals purchasing imagery from Getty
Images Royalty-Free collections will be able to buy and download virtual CD's,
bundles of Royalty-Free images that are packaged together as a unit, which
creative professionals can access immediately after purchase. Virtual CDs allow
creative professionals to download images immediately, still taking advantage of
the superior value of CD's in response to creative professionals' request to be
able to access CD content online."


To round out this picture, three other quotes are pertinent to this discussion
concerning agents who have decided not to embrace the subscription model.
According to Kai Chiang, Chief Operating Officer of SuperStock: "Such a
pricing model further exerts downward pressures on the customers' perceived value
of photography, which may be to the detriment of the creative community." Geoff
Cannon, Executive Vice President/General Manager of Masterfile
Corporation
, makes a similar comment, as he is also concerned about the
perceived value of imagery. Alfonso Gutierrez, General Manager of Age
FotoStock
says: "We have not decided against it - we simply don't see the
need for it. The market is huge and we have not reached a ceiling yet in our
expansion capabilities."


THE ARTISTS


Therefore where are artists placed in this mix? For those companies
whose images are wholly owned, prospective contributing artists do not apply.
For those soliciting imagery from individual freelancers or collections, the
arrangements vary and numbers on earnings are hard to get. Photos.com projects
an upwards earning level equivalent to $50 /image per year. They pay based on
downloads, so not all imagery will meet this projection.


Like the traditional stock photo business, there are many factors for the
artists to consider in how they make money with subscription plans.
First of
all, will each artist get a share of the pie? If the pie is small, even a big
slice is not a lot of money. They need to be with a service that will grow over
time and generate increasing subscription fees. One thing to consider - does the
artist get compensated for both contributing to the collection and for the
popularity of their photos as measured by downloads? Since each photo is worth
something because the value of the subscription does depend on both the size and
quality, it's possible that artists should get a share based on both the number
submitted (which should be edited for quality) and the number downloaded.


JIM PICKERELL


Jim Pickerell, publisher of the Selling Stock newsletter, has some
thoughts on this subject: "The industry is segmented in terms of the amount of
money buyers can afford to spend into the following: Assignment, Rights Managed,
Royalty Free and Subscription. Any particular buyer may use images from time to
time that are supplied in all these ways. Subscriptions should be limited to
products such as PowerPoint presentations and educational uses by students where
the buyers simply can't afford to pay the price of any of the three higher
levels." Jim points out that the big risk for photographers is that buyers will
find images in the lowest cost areas and make high value uses of them. He says
buyers should not be allowed to use subscription images in brochures and
advertising without some additional compensation, or photos licensed using this
model will inevitably cannibalize not only assignment and RM sales, but RF sales
as well. He also feels: "It is questionable as to whether it is economic for
photographers to produce images that are only sold at Subscription prices, if the
photographer's only income from this production is a royalty on sales. He
suggests that artists "do a little math" to make sure it fits a business model
appropriate for an artists income."


FINAL WORDS


For the specialty agents the model represents their whole business, and they
project themselves as doing well. As Dan Burke of Photo.com states:
"We've got a strong business to date, and we feel we haven't even scratched the
surface yet." However he further states: "My thoughts are that competitors will
fail miserably if they don't learn how to work this model correctly. There are a
lot of pitfalls. If we didn't have 7 years of trial and error in an almost
competitor-free market (for ClipArt.com), we wouldn't be able to survive the
intense RF stock photos market today with Photos.com. My prediction is that any
new entrant into the photos space will fail unless they have some very deep
pockets, have a lot of smart and focused people, and a strong supply chain
willing to buy into the subscription model."


According to Val Gelineau of PhotoSpin: "We've found our customers to be
incredibly loyal and satisfied with this subscription service. If you deliver a
good product, one that you truly believe in, at a reasonable cost, customers
respond positively. Our subscribers come from all walks of business and purchase
all kinds of images, not just from us. But, with a subscription service, chances
are they come to us first. That creates a very nice type of relationship with
the customer."


Dov Schiff, Senior Media Relations Specialist, of Corbis also states:
"This is a growing usage model, especially in new mediums and non professional
uses. It is difficult to anticipate at this time what impact these low end uses
will have on the professional market."


According to Mike Pachter of Index Stock: "The subscription market can be
an added source of revenue and a way to introduce customers to stock photos. In
the e-commerce arena, subscription plans will grow but not displace traditional
stock licensing."


A final word from Mats Lidenberg of Hemera sums it all up: "We firmly
believe that the AbleStock membership is a tool that Creative Professionals buy
in addition to but not instead of, traditional pay per download and right managed
stock. Just as Royalty Free CD's changed the stock photography market and
actually grew revenue for the industry as a whole (when the fear was that it
would only push invoice values down) we believe that by meeting the customer
demand, the subscription model will have the classic impact of a good business
innovation, it will create more customers for the industry as a whole."


Copyright © 2004 Pat Hunt. 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

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