It seems likely that we will see some major shifts in the stock photography business as the three major players – Getty Images, Shutterstock and Adobe/Fotolia – jockey for position in a market that is experiencing very little, if any growth.
At the end of 2014
Getty’s total revenue will be somewhere around $870 million, but $260 of that will be editorial. Shutterstocks will be about
$328 million and I estimate Fotolia’s at somewhere in the range of $110 million.
Back at the end of 2012, I estimated the
total market for stock photography including video at about $2 billion. Based on the disruption in the market and declining fortunes of many of the smaller players, I think market size at the end or 2014 will be no more than $2.3 billion. The market is not underdeveloped as some in the investment community contend. It is operating at near full capacity.
Getty Images
In 2015, it seems likely that Getty will sell its
Editorial Division in an attempt to reduce its $2.5 billion in outstanding debt. Unfortunately, the parts of the business Getty will retain are for the most part the weakest and seem destined for a steady decline. The demand for Video is growing, but it only represents about 11% of their remaining business. The demand for Premium Stock and MidStock (iStock, Thinkstock and Photos.com), the other 89% of the remaining business will continue to decline.
Unfortunately, there is not much Getty can do to change that. Given the huge oversupply of good quality images at much lower prices fewer and fewer customers find it necessary to pay Premium prices for an image. To some extent Getty is able to solve that problem by dramatically discounting the prices of Premium images for certain customers, but while that enables them to continue to place a reasonable number of images and keep their best customers from jumping ship it doesn’t lead to revenue growth.
On the Midstock side Getty will continue to see serious declines. They keep promising bond investors they will turn it around, but none of the changes they have made in the past two or more years have seemed to help. Finally in September they got their iStock prices about as close as possible to those of Shutterstock, but there are no early indications this move has had much of a beneficial effect.
Getty’s big problem with iStock is that about 75% of revenue comes from the work of exclusive contributors who receive higher royalties and whose images are priced 3 times higher than single images at Shutterstock. There is not enough difference in quality that Shutterstock users feel it is worthwhile paying the higher price.
Getty can’t cut the exclusive contributor royalties or the prices of their work without precipitating a mass rebellion and exodus. This has started already. As of July about one-third of the
top-selling contributors had added less than 100 new images to their collections in two years. I suspect the percentage is much higher among those making fewer sales. The revenue generated is not worth the time, trouble and expense of producing new images. This is particularly true for those trying to earn a living from their photography, and it even discourages many amateur suppliers.
All-and-all, I see no likelihood that Getty’s gross revenue will increase in 2015. The only question is how rapidly it will decrease.
Shutterstock
Shutterstock will continue to grow, but not quite at as rapid a pace as the 40% per year it has grown in the last few years. The company predicts a 32% growth to $432 million. That’s not bad, but does indicate that as they get a larger and larger share of the market the opportunity for growth is decreasing.
It is also important to understand where their growth is coming from. For years their business was based entirely around low priced subscription sales, but the number of subscription customers may have reached its peak. In recent years they have seen a dramatic increase in single image, enterprise and video sales that are much higher priced than a subscription download. Still 89% of their image downloads are through subscriptions. Here’s how I think 2014 revenue breaks down.
| |
Revenue |
Percent |
Price per |
Percent |
| |
Brakdown |
Total Rev |
Download |
Total DL |
| |
|
|
|
|
| Subscription |
$134,480,000 |
41% |
$1.25 |
89.0% |
| Image on Demand |
$111,520,000 |
34% |
$11 |
8.0% |
| Enterprise |
$59,040,000 |
18% |
$20 |
2.5% |
| Video |
$22,960,000 |
7% |
$60 |
0.5% |
| |
|
|
|
|
| |
$328,000,000 |
100% |
|
100% |
The question for Shutterstock is how much they will be able to increase Image-on-Demand and Enterprise unit sales in the face of increased competition from Adobe/Fotolia and Getty lowering its prices. Keep in mind that the market is growing at a very slow pace, if at all. All the customers have been reached. So growth comes from taking customers away from a competitor. And, if it is impossible to charge more for at least some of the images licensed then overall revenue will decline.
Shutterstock is the only one of these three that is seeing growth per image downloaded. Both Getty Images and Fotolia are seeing lower average prices per image downloaded due to the introduction of lower priced products.
Adobe/Fotolia
It seems likely that
Adobe/Fotolia will take some unit sales away from Shutterstock with its Fotolia Dollar Photo Club (DPC) offering. Shutterstock’s IOD customers will be able to get images for $1.00 compared to the roughly $11 they would pay at Shutterstock. On the other hand Shutterstock has twice as many images and a much more efficient search than Fotolia.
Will Adobe be able to improve Fotolia’s search? The issue is
not more images. Everyone has way too many despite the fact that occasionally there are low demand subjects that have not been added to their collections. The issue is getting the best images to the top of the
search return order to save customers time. It is also important to note that a high percentage of the images available on Fotolia are also available on Shutterstock, and some are available on iStock as well.
Adobe seems to want to add a monthly subscription plan to its
Creative Cloud offering, but there is a big question as to how to do this without simply copying Shutterstock’s offering. If they do that, and lower prices to make it sufficiently attractive to get customers to switch, they will further anger contributors that are already unhappy and untrusting of Fotolia management.
When it comes to photography and illustration, user needs vary greatly month-to-month. That is why more Shutterstock customers are turning to Image-on-Demand rather than subscriptions. Adobe will have problems integrating IOD pricing into their Creative Cloud subscription philosophy. In addition, if they drive Fotolia’s traditional buyers away from Fotolia’s traditional pricing to the DPC it will further anger image contributors and make them much less likely to supply new images.
Adobe has 3.4 million Creative Cloud user compared to Shutterstock’s one million customers. But it seems likely that Shutterstock has already addressed all of the higher volume users. The remaining 2.4 million CC users are probably students or small users who have very little need for stock visual content.
All-in-all it will be fun for outsiders to watch how this plays out, but on the whole professional image creators will probably experience another difficult year.