Understanding RPI

Posted on 7/18/2007 by Jim Pickerell | Printable Version | Comments (0)

Recently, I've been made aware that some photographers don't understand the difference between Return-Per-Image (RPI) and Return-Per-Image-Licensed (RPIL) and they are drawing some incorrect conclusions, particularly when Alamy reports its quarterly numbers.

Most photographers are interested in the size of their royalty checks at the end of the month, and how that relates to overall costs, rather than whether they've made a few big sales, or not. RPIL simply tells you the average of all the images that were licensed and doesn't take into account all those other images that the photographer had costs to produce and place into the market, but which generated no revenue during the month or year. A photographer needs to measure his success by understanding how much he is earning from all the accepted images in his collection, not just those that are eventually licensed, and how that number relates to his total cost of production.

RPIL can be useful if you have at least one of two other bits of information - total number of sales made during the period, or total revenue generated. (If you know any two of these three figures you can easily calculate the third.)

RPI, on the other hand, is a figure based on a photographer's entire collection, both the images that have been licensed and those that have not.

Let's assume that a photographer works for a month and produces 5,000 new images. After he finishes editing he submits 500 for consideration to an agency. The agency edits very tightly and only accepts 50 to offer in its online database. And the agency didn't accept anything from a number of the situations the photographer shot. Some days the photographer worked all day and the agency only accepted a couple images, or none, from that shoot. The photographer still has costs and time invested for such non-productive days. Let's say that 80% of images accepted came from 5 of the 30 days worked. And some of the images produced during these five days are among his best sellers during the year. Does the photographer say, "I got 40 accepted images for 5 days work and I made X," or "I got 50 accepted images for 30 days work and I made X."

These produce two very different numbers. I think a photographer needs to look at the averages of what he can produce and get marketed, not just what he does on his best days. Average RPI is designed to look at a photographer's total stock business, not just that portion that produced the best selling images.

For example, a photographer working for Getty might earn an annual average RPI of $100 for every image he has in the collection, but after a lot of hard work and expense Getty has only accepted 100 of the images he submitted. Thus, his gross revenue for the year is $10,000. (Incidentally, if we divide the total number of images on the Creative section of the Getty site into the total revenue generated by Getty in 2006 the average photographers received an RPI of about $100.) Now, of course, some photographers, particularly those shooting lifestyle images, made much more than $100 RPI, and correspondingly some are making less. But this numbers gives photographers a basis for judging the results of their production.

Then we go to Alamy where it is much easier to get images accepted. Partially because they have so many images on their site, the RPI is much lower. A photographer submitting images to Alamy might work just as hard as a Getty photographer, put in the same amount of time, have the same expenses and get 1,000 images into the collection. On Alamy, a smaller percentage of the total images in the collection may be licensed than is the case with Getty, but because the Alamy photographer has so many more images in play than the Getty photographer the actual number of unique images licensed by Alamy could be greater than the number licensed by Getty.

From talking to various photographers, all who tightly edit the images they submit to Alamy, I've estimated that the average annual RPI for Alamy is about $10. If the average annual RPI for Alamy is $10 and the photographer has 1,000 images in the collection he would earn $10,000 per year. Again, this is only an average for the photographers I have talked to. Some earn more, some earn less and my information is only based on a very small sample of photographers.

Alamy does not report RPI (See Alamy Q2 2007 Figures). They report RPIL (Royalty-Per-Image-Licensed) and since they do not report either the total number of images licensed, or total revenue generated it is impossible for us to calculate RPI. They do report the total images in their collection, but that is not useful here. If we just look at the average from the images licensed we totally disregard all those images in the file that didn't sell, and for the photographer who had to spend time and money putting them there, that is something he cannot afford to disregard.

For comparison purposes in the last quarter Alamy's average for each RM image licensed was $155 and Getty's was $506. For each RF image licensed Alamy had an average of $220 and Getty had an average of $240. These figures are gross revenue and in most cases the photographers get about 65% of the Alamy number and 33% of the Getty number.

(It should be noted that with Getty, until the beginning of 2007, we were given the figures that allowed us to calculate gross revenue for RF and RM as well as the RPIL. This enabled us to calculate the total number of images licensed. Getty has now stopped providing average RPIL, although it is probably remaining about the same, so we can no longer calculate the number of images licensed. It is still possible to determine the total number of images on the Creative section of their site at any given time. Using that number and the gross annual revenue figure that they are required to report to the SEC we can make an approximation of RPI.)

Using This Information

The big question is once a photographer knows Getty's RPI how does he use the information? What I am trying to provide is a benchmark that will enable the photographer to determine if his returns are high or low compared to the average photographer working for the same organization. If a photographer has been pumping a lot of images onto the Alamy site, but his personal average RPI is way below the overall average, that may be an indication that he may need to edit a little tighter. Just dumping a lot more images on the site isn't going to improve his situation that much. On the other hand if his RPI is $10 or higher he's probably got the editing about right and as he ads more images his revenue is likely to increase proportionally. If a photographer has an RPI significantly greater than $10 per image, he might want to think about being a little looser in his editing despite the huge number of images already on Alamy and the regular complaints about people who don't edit their work tightly enough.

Any person who has 100% sales results of every image he posts on any web site is probably editing too tightly and not maximizing his potential revenue. There are probably variations of each situation that he has refused to submit, because they weren't the perfect image by his standards. However, these variations might better fit the need of certain customers and could generate additional income for the photographer if the customers only had a chance to see them. Finding the right balance in offering similars without overdoing it is very tricky and RPI can help.

The Getty RPI, because we have been tracking it for so long, provides some very useful information for Getty photographers. At the end of 2006 the average RPI for photographers was only about $108, about 45% of the $242 average at the end of 2003 (See Return Per Image At Getty for gross Getty numbers). This huge drop was due primarily to the huge number of images added to its site in the three years. At the end of 2006 Getty had 3.3 times the number of images on its site that it had in 2003. Thus, the chances of any image being licensed were drastically reduced. All indications are that they intend to keep adding images at an even faster pace and this will undoubtedly cause the RPI to continue to drop.

Getty photographers should not be surprised if their RPI is falling. Knowing their own RPI helps the photographer understand whether he is doing better or worse than the average and whether his rate of decline is the same, better or worse than the average. The photographer can also get some indication of how many new images he needs to add each year just to stay even in terms of revenue.

Photographers that are not represented by either Getty or Alamy can also use these numbers to at least have some idea of the range of what they might expect to earn from the images they produce. This can help the photographer make some wise decisions relative to how much he should spend in time and money on an average shoot to get a reasonable return on investment.

Another advantage to making decisions based on average RPI is that it totally removes the question of royalty percentage rates from the equation. RPI looks at the actual revenue the photographer receives from a given agency and doesn't focus on the rather irrelevant issue of the percentage of the total licensing fee that the photographer is receiving. Clearly, it is entirely possible for a photographer to earn more money from an agency where he has a smaller number of images depending on a number of other factors. After all, the important thing is how much money you take home at the end of the day after deducting expenses from total revenue.

In summary, the important factor is not the number of images licensed, or the number of times each image is licensed. Given the widely diverging prices for various types of use it is possible to make more money from licensing a smaller percentage of a large collection, than a larger percentage of a small collection. Photographers can also make more money from selling images more times at a lower price that from getting high prices for a relatively few sales. From a business point of view the important thing is to keep focused on the gross revenue earned relative to the cost of producing the images.

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 www.selling-stock.com, 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: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  


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