Use-Based Pricing Needed

Posted on 2/2/2009 by Jim Pickerell | Printable Version | Comments (8)

The industry needs a new pricing model. The models we have include rights-managed, royalty-free, subscription, microstock and rights-ready, which is about to become extinct. What is needed is use-based pricing, or UBP.

All images marketed using the use-based pricing model would be licensed for non-exclusive uses. Prices would be established based on the customer’s intended use. Unlike with royalty-free licensing, the customer would not be able to make multiple uses of any image without paying the proper fee for each use, unless the original use-based fee was sufficient to purchase an unlimited use license and that was stipulated in the invoice.

The UBP model would differ from rights-managed licensing in that none of the images would be available for exclusive or restricted licenses. As with the royalty-free model, there would be no restrictions on the simultaneous use of the same image by others and no restrictions on how the price is established, except that it would normally have some relation to the image’s use.

One of the selling points of royalty-free imagery is that the fee paid covers a perpetual use license rather than a specific use. However, very few royalty-free buyers really want to use the same image multiple times in multiple different ways. Buyers who want to use images in multiple ways can usually afford to pay more for such uses. These same buyers would also benefit from lower prices when their requirements are small and specific.

Advantages of UBP


Images currently being rights-managed or royalty-free could easily be transferred to the UBP model. Images licensed as UBP could also continue to be licensed as royalty-free.

Since most agencies already offer images under both rights-managed and royalty-free models, there is nothing to prevent them from offering three models, with different images available through each. One advantage to this strategy would be that agencies that have thus far offered only rights-managed and royalty-free images, but not microstock, could now offer a full-service option. UBP images would be available for certain types of small uses at much lower fees than rights-managed and traditional royalty-free pricing. This would make it possible for these agencies to expand their customer base.

UBP prices for commercial uses would be similar to current rights-managed prices. Some argue that the reason royalty-free and microstock imagery have been so successful is that these models offer a simpler process for determining a price for a particular usage. If that is the case, there is no reason why a rights-ready or modified rights-ready strategy could not be used to price UBP images. It is hard to argue that microstock, with multiple file size-dependent price points and complex extended license rules, is simpler than the rights-ready model.



UBP also offers more flexibility than royalty-free and microstock models when licensing images in the developing world. Prices could be set at different levels for different economies.

Photographers who have licensed their images at traditional royalty-free prices would find the UBP strategy superior, because images could be licensed for very small uses to the huge market uncovered by microstock, for prices well below existing rates. At the same time, these images would remain available at higher rates for commercial uses.

Similarly, UBP would give rights-managed photographers the opportunity to make images available to a much broader customer base than is currently possible, while still maintaining existing pricing levels for commercial customers.

Microstock photographers would also find the UBP option very attractive. They would still have the potential to make volume sales for certain uses, at prices similar to or even below existing microstock prices. However, microstock shooters would also have the potential to make a lot more money, as rates for commercial uses would be significantly higher than they are today. Microstock photographers would also be able to determine what percentage of their total sales corresponds to traditional commercial uses, compared with sales to customers that can only afford micro prices.

Microstock photographers could continue to sell through all the existing agencies that represent their work, since UBP contractual arrangements are non-exclusive and do not stipulate how uses should be determined. While UBP is based on a specific use the customer stipulates, there is no reason the method used cannot be the cumbersome file size-dependent method that microstock uses, rather than the typical rights-managed formula.

The percentage of the licensing fee received by the creator would probably be higher, if the image was licensed under the UBP model, rather than as royalty-free or microstock.

Disadvantages of UBP


Rights-managed photographers who choose to license images under the UBP model would give up the potential of making exclusive sales.

However, most photographers rarely, if ever, make such sales. It seems extremely likely that most photographers would more than make up in volume for any loses of those very rare exclusive sales.

In addition, photographers would not be required to make all the images they produce available for UBP licensing. Certain images could remain rights-managed, thus retaining the right to make exclusive sales.


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 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.  

Comments

  • Grant Faint Posted Feb 2, 2009
    useful suggestion....however problem is image buyers have for too long been given easy access at low prices. How do you get them to "go back" to a more expensive and somewhat more restricted setting.

    faint

  • Mark Turner Posted Feb 2, 2009
    To my mind, we already have Use Based Pricing in the rights-managed model. One flavor, the highest-paying, of rights-managed is some form of exclusivity. I can recall making only one exclusive license in the last 15 years so all of my business has been use based. For most customers it really isn't complicated -- editorial folks don't need to think about commercial uses and vice versa.

  • Don Farrall Posted Feb 2, 2009
    Sounds good in theory, except for the fact that most people when given the opportunity to cheat, will. Policing usage is very difficult. It would take an across the board industry move to make something like this work and I can't see that happening. It does make sense from an image providers perspective, and it highlights the main problem with miocrostock,( that commercial users who could and would pay more don't have to) but implementation is a pipe dream I'm afraid.

    Don Farrall

  • Tim Mcguire Posted Feb 2, 2009
    Jim,

    It might seems to many this could all be done under traditional RM non exclusive licenses... BUT the big problem is the perception / image problem the "Rights Managed" brand has amongst a sizeable portion of the buyer side of this industry. For many RM in any form has an image / perception problem (real or otherwise they have it). They think RM is old complicated, slow, and expensive. Perhaps by giving it a new name with new images and marketing it as a "new" licensing model you could then license images in a use based price (UBP)way and avoid the old negative preconceptions. Of course then, the new model would actually have to dispell these negative preconceptions and actually perform as something useful and easy for clients to use.

    I know you've been writing about this idea for a while but no one seems to do it. I'd love to see it.

  • Betsy Reid Posted Feb 2, 2009
    We have an opportunity to create standardized licensing models through the PLUS Coalition. PLUS has a model for a streamlined and flexible form of use-based licensing called PLUS Packs. Jim's "MMR" model bears some similarities to this standard.

    Distributors, buyers, photographers and their trade associations all support the mission of PLUS. Why aren’t we working together to fine tune one universal standard to improve use-based (RM) licensing, rather than creating even more variations?

    Download SAA’s Intro to PLUS Packs (and SAA’s Calculator)


    PLUS Packs Quick Reference Guide:


    PLUS Coalition web site:


  • Betsy Reid Posted Feb 2, 2009
    Information on PLUS Packs here:
    http://www.stockartistsalliance.org/pluspacks/index.htm

  • Jagdish Agarwal Posted Feb 3, 2009
    Jim,

    Wonderful idea. Let us know if it takes shape.

  • D. jake Wyman Posted Feb 3, 2009
    Jim

    You know that as suppliers, we have very little input as to how our stock is priced by the agencies; apart from opting-out of certain models. I agree with your assertions, but I wonder if/how you are getting this proposal in front to the decision makers?

    Also, I look forward to your ideas in response to Betsy's question:

    "Why aren’t we working together to fine tune one universal standard to improve use-based (RM) licensing, rather than creating even more variations?"

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