While fees charged customers for stock photo use have been steadily declining, there is another issue that should be of equal concern to image creators. That is the percentage they receive of the gross fee the end user pays. This can be complicated and not the number many photographers think it is.
Here is what’s happening. There are a few major image distributors that most customers use. They include: Getty Image, Corbis, Masterfile, Veer, Alamy, Mauritius and maybe a few others. For most photographers the key to success is to have their images represented by one or more of these companies. Not everyone can get their images accepted by these organizations. Often, if these distributors are willing to accept some images they won’t accept as much of a photographer’s production as he or she would like.
As a result, in order to get more images where they can potentially be seen, creators place their images with smaller, less used agencies. Some creators prefer to use the smaller, specialist agencies because they tend to get more personal attention and support than when they deal with one of the bigger companies. These smaller agencies may make some sales directly to customers, particularly if they have a unique niche, but increasingly a high percentage of the total sales of small agencies are made through a network or distributors.
This is not a particularly new trend. It has been going on for a couple decades, or more, But, with the development of Internet marketing a larger and larger percentage of total sales are now being made through a few large distributors. The smaller agencies have become increasingly marginalized in terms of direct sales to customers. Some agencies may have their images represented by as many as 200 distributors around the world, but in most cases 80% of the total revenue generated tends to come from only a handful of top companies.
To make this clearer I will use the term “prime agency” to indicate a company where the image creator submits his images. The term “selling distributor” refers to those companies that establish prices for image use and license rights directly to the end using customers.
The photographer may have a contract with the prime agency that says he will receive 50% of the revenue “
the prime agency receives.” Often that is nowhere near 50% of what the customer actually pays to use the image. If the prime agency is also the company that deals directly with the customer then the image creator may receive 50% of the gross fee paid, but if there are one or more selling distributors in the supply chain additional cuts of the gross fee will be taken out before the photographer’s percentage is calculated.
Selling Distributors
In most cases the selling distributor retains 50% to 80% of the gross amount paid by the customer. If the image is licensed as RM the selling distributor’s share is usually 50% to 60% of the gross amount paid. For RF images the selling distributor share of the gross fee paid is most commonly 80% and sometimes 70%. The remainder is paid to the prime agency. Thus, if the gross license fee paid by the customer was $100 the prime agency will receive between $20 and $50 from the selling distributor and the image creator will receive 50% of those numbers, or between $10 and $25 of a $100 gross sale.
New Development
A relatively new development is the insertion of another cut in the supply chain. For example Getty Images represents images from 297 brands. A number of these brands are wholly owned by Getty. In those cases Getty deals directly with the image provider and the royalty percentage is that stated in the contract. But, at least 200 of the brands, representing about half the total images in the Creative collection of
www.gettyimages.com, are “image partner” brands.
Getty recognizes that they have images from more brands than they need and they are reluctant to take on new brands. Prime agencies that have been unable to get accepted by Getty have started making arrangements with some of Getty’s image partners to get some of their images included in the image partner’s collection on the Getty site. This helps the image partner meet their upload quotas and is often the only way a small agency has a chance of getting their images seen on the Getty Images site.
Now there are three cuts between the image creator and the customer. There is the “selling distributor”, the “image partner” and the image creator’s “prime agency”. It is unclear what percentage image partner’s take in such arrangements, but I suspect it is usually around 50% of what they receive from the selling distributor.
The numbers for a $100 license of an RM image might look like this. The selling distributor receives $100, retains $60 and pays $40 to the image partner. The image partner pays $20 (50% of $40) to the prime agency. The prime agency reports a gross sale fee of $20 (what it received) on the sales report provided the photographer and pays the photographer $10 (50% of $20).
If the image was licensed as RF the numbers might look like this. The selling distributor receives $100, retains $80 and pays $20 to the image partner. The image partner pays $10 (50% of $20) to the prime agency. The prime agency reports a $10 sale (what it received) on the photographer’s sales report and pays the photographer $5 (50% of $10).
Sales Reports
Photographers are often confused by the gross sales figures reported on their sales report. The “gross sale” number is always the amount the photographer’s prime agency received, not necessarily what the customer paid. Thus, a reported gross sale of $50 could mean the customer actually paid $250 or $500 to license rights to the image.
Photographers represented by Getty Images believe they don’t have to worry about any of this because their prime agency is also the selling distributor. That is not necessarily true, particularly for photographers with RF images. While Getty licenses rights directly to customers in most of the large markets, in some of the smaller markets around the world they deal through local distributors. Presumably these distributors receive a percentage of the gross sale. Corbis licenses rights to some of Getty’s Photodisc images through a brand called Ocean. Presumably Corbis receives a percentage of these sales.
Most agencies will not divulge to their photographers the percentage of the gross fee they receive from selling distributors or image partners because they are prohibited from doing so in their contracts with those organizations.
A question they should be able to answer is, “What percentage of your gross revenue comes from sales made directly to the end using customer without any sub-agency taking an additional cut?” This will, at least, give the image creator some idea of the real percentage of gross sales he or she might be receiving. If 90% of revenue comes from distributor relationships (often the case) and only 10% from direct sales to customers, that is important information for the image creator to know.
Microstock
I really hate to always be seen as beating-the-drum about Microstock, but with regard to percentages and the gross revenue received by the creator we need to at least take a comparative look.
Virtually all the sales made by microstock sites are made directly to the end user. Thus, the percentage of the gross sale the photographer receives is almost always based on the total fee paid by the customer. There may be a few small exceptions, but so far they don’t represent any significant amount of gross revenue.
Thus, if a microstock image is licensed for $15 a 30% share of that fee would be $4.50. Above we calculated that in some cases when an RF images is licensed by a traditional agency for $100 there are three cuts and the image creator’s share might only be $5.
Previously, I have reported that in 2010 iStock exclusive photographers were earning an average of about $4.50 for every image downloaded. Some exclusive photographers are earning as much as $8.50 per image downloaded. Thus, photographers would earn about the same per-image-licensed regardless of whether the images were licensed for an average fee of $15 on a microstock site or $90 on a traditional site.
But consider, if you’re a customer. You can find an image that will work for your project for $15 on one site and $90 on another. Where are you likely to go to buy your images? We also know that worldwide about 4 to 5 million stock images are licensed annually at RM and traditional RF prices. But, something in the range of 100 million microstock images are licensed annually. That’s 20 microstock sales for every one at traditional prices. That changes the revenue odds dramatically in microstock’s favor.
But suppose you don’t want to be exclusive with iStock. If you’re non-exclusive the average fee you receive will be much lower because the images will be licensed at lower prices and the percentage of gross sale you receive could be as low as 15%. However, many of the non-exclusive iStock photographers have their images on multiple microstock sites and are earning as much or more than exclusive iStock photographers.
Yes, there are always those $10,000 and higher sales that are only available if the rights for every usage are managed (RM). But the vast majority of photographers will never -- in their career -- see a sale at anything approaching this number. If your goal is to make money, is it better to hold out for the once-in-a-lifetime opportunity or focus on volume?
It’s time to take a realistic look at percentages.