Why Creators Receive 20% of Royalty-Free Sales

Posted on 2/12/2009 by Jim Pickerell | Printable Version | Comments (3)

Photographers frequently ask how royalty-free still photography got started and why creators only receive 20% of royalty free sales. Here is a little history.

Clip-art illustrations and typefaces have been sold for decades through various types of print catalogs. Customers were allowed to make unlimited use of anything they purchased. The first still-photo illustrations came on the market in the early 1990s, after Kodak introduced its PhotoCD technology.

EARLY ROYALTY-FREE PLAYERS

In addition to Corel and Photodisc, early royalty-free brands included EyeWire and Digital Stock.

In 1994, Adobe Systems purchased the Calgary, Canada-based EyeWire, a company that had specialized in selling typefaces on CDs to the graphic arts community. Adobe created its visual content division that also started selling photos on discs. Though the company created a brand that was fairly widely used, it did not generate enough revenue to satisfy its management. In September 1998, Adobe decided get rid of this division and sold it to the division's management team and EyeWire founder and president Brad Zumwalt, who sold it to Getty Images 11 months later. After Zumwalt's non-compete agreement expired, he founded Veer, which was subsequently acquired by Corbis at the end or 2007.

Another major company was Digital Stock, started in 1994 in Southern California. Corbis purchased Digital Stock in February 1998, and it became the core of Corbis' royalty-free collection. Interestingly, the director of photography (or creative director) of Digital Stock was Rick Becker-Lechrone. He stayed on at Corbis but eventually left, after Corbis bungled its early royalty-free efforts compared to what Getty and Photodisc were doing. Becker-Lechrone freelanced for a few years before establishing the very successful royalty-free company Blend Images.

One of the first companies to put images on discs was Canada’s Corel, which would buy 100 images on a particular topic from photographers and resell the CD compilation. Most of such images were from amateurs. If I remember correctly, Corel paid $50 per image for all rights. Corel was a major developer of Word Perfect and graphic arts software programs. Several other small companies, mostly with strong connections to the graphic design community, put out similar discs using the same strategy.

Photodisc was the first major breakthrough in getting images from professional photographers. I believe the company started in 1991 and obtained its early images from amateurs, just as Corel. But Photodisc wanted better quality, so it made a deal with a small Seattle stock agency called West Stock to get images from its professional photographers, agreeing to pay a percentage of sales. West Stock received 20% of Photodisc sales, and the photographer received half of West Stock’s share. Each disc carried about 300 images, so photographers with only a few images on the disc received very little per unit sold.

Discs were originally priced at about $125.00 each. Photodisc argued that, because of such low product price, all the company could afford to pay for the images was 20% of sales. The company had to spend huge amounts of money to scan images and print and distribute catalogs to hundreds of thousands of potential customers in order to sell the product. Photodisc argued that it was exploring a new market with a customer base that had never been able to afford traditional stock photo prices, and thus the offering would have no impact whatsoever on traditional sales. West Stock and the photographers who agreed to participate bought this argument in the hopes they would earn a little extra on top of their current sales and, if the project was successful, prices and royalty share could be raised.

This is where the 20% we live with today came from. Discs are no longer a major part of royalty-free licensing. There are no more scanning charges, because photographers are now required to deliver digital files. Expensive print catalogs are no longer being sent to potential customers, greatly reducing printing and postage costs: in the heyday, Eyewire was distributing more than 8 million print catalogs a year. Yet the fact that these costs are no longer incurred has not induced most distributors to up creators’ percentages of the gross licensing fees.


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

  • Betsy Reid Posted Feb 12, 2009
    With macroRF increasingly cannabilized by micro and subscription, contributors may no longer be so accepting of this low revenue share.

    Those stock companies offering them more than 20%, and in a few cases substantially more, are positioning themselves well to attract photographers who deliver the kind of premium imagery that will be less vulnerable to low priced alternatives.

  • Don Farrall Posted Feb 12, 2009
    This is all true, however image resellers like Getty and Corbis do have considerable expenses that relate to driving customers to their sites. In spite of the seemingly high percentage that these companies earn from the sales, Corbis has yet to turn a profit, and Getty when operating at it’s peek was only earning overall profits in the low 30% range; not out of line for what was, at the time, a publicly traded company. Now both of these companies are experiencing difficulties, and any suggestion that photographers should be earning a higher percentage is a bit misplaced.

    Sure I would rather be earning more than the 20% that I earn, but I do value Getty’s ability to reach buyers. Over the years, for good or bad, Getty has pushed up the price being paid for RF imagery in order to make more money for themselves and for contributors.

    Most of the credit for the sale of individual image downloads, the current backbone of the stock industry, can be traced back to Photodisc. The movement away from disc sales was the best thing that could have happened, but it was an outgrowth of this early model.

    There have been players that paid higher percentages to photographers, where are they now? Out of business. Alamy is the exception, and while they have recently decreased the payout percentage, they remain way out in front in terms of the percentage of royalty payout. On the down side, Alamy has spent very little on advertising and despite the size of their collection, their overall sales are not that high. In spite of the higher royalty percentage, Alamy RPI is well below that of Getty. So making more per sale, of less sales in the end does not make more money.

    The fact is, in the stock photo industry, the distribution is worth more (costs more) than the product. Our industry is not the only one where this is the case. A pair of Nikes cost $7.00 to make. Most of the furniture we buy in the US is made overseas and is marked up five fold by the time we buy it in the furniture store. Book authors receive something like 3-5% royalties. I’m not suggesting that photographers should receive less, we are already at a point where many (traditional RF) photographers have quit participating due to decreased sales volume, but it is very unlikely that the market can sustain a higher payout. There might have been a possibility prior to the introduction of microstock, but the current pressure is not in contributors favor.

    The bottom line is that at 20% royalty, plenty of photographers have been willing to participate, and plenty have made a very good living at it. It’s tougher now, but that is not because of the percentage of royalty. Microstock agencies should be paying a higher percentage, (and charging more), but they are not having trouble finding willing contributors.

    Jim, you have outlined the history correctly, and the article does answer the question, which I have heard before as well. Since most here will automatically consider that anything that has been put in place by an agency is one sided, evil, and unfair, I thought I should suggest that people consider the bigger picture in an equally historic light.

    Don Farrall

    www.donfarrall.com

  • Greg Ceo Posted Feb 12, 2009
    Could it be that microstock and RF will merge at some point?

Post Comment

You must log in to post comments.

Stay Connected

Sign up to receive email notification when new stories are posted.

Follow Us

Free Stuff

Selling-Stock Now Free
Good News. Beginning today, Selling-Stock (www.selling-stock.com) is FREE to all readers. Try it out. Not only is it possible to read every new story on the site by simply clicking on the headline, b...
Read More
Stock Photo Pricing: The Future
In the last two years I have written a lot about stock photo pricing and its downward slide. If you have time over the holidays you may want to review some of these stories as you plan your strategy ...
Read More
Future Of Stock Photography
If you’re a photographer that counts on the licensing of stock images to provide a portion of your annual income the following are a few stories you should read. In the past decade stock photography ...
Read More
Blockchain Stories
The opening session at this year’s CEPIC Congress in Berlin on May 30, 2018 is entitled “Can Blockchain be applied to the Photo Industry?” For those who would like to know more about the existing blo...
Read More
2017 Stories Worth Reviewing
The following are links to some 2017 and early 2018 stories that might be worth reviewing as we move into the new year.
Read More
Stories Related To Stock Photo Pricing
The following are links to stories that deal with stock photo pricing trends. Probably the biggest problem the industry has faced in recent years has been the steady decline in prices for the use of ...
Read More
Stock Photo Prices: The Future
This story is FREE. Feel free to pass it along to anyone interested in licensing their work as stock photography. On October 23rd at the DMLA 2017 Conference in New York there will be a panel discuss...
Read More
Important Stock Photo Industry Issues
Here are links to recent stories that deal with three major issues for the stock photo industry – Revenue Growth Potential, Setting Bottom Line On Pricing and Future Production Sources.
Read More
Recent Stories – Summer 2016
If you’ve been shooting all summer and haven’t had time to keep up with your reading here are links to a few stories you might want to check out as we move into the fall. To begin, be sure to complet...
Read More
Corbis Acquisition by VCG/Getty Images
This story provides links to several stories that relate to the Visual China Group (VCG) acquisition of Corbis and the role Getty Images has been assigned in the transfer of Corbis assets to the Gett...
Read More

More from Free Stuff