China's Stock Photo Market

For me, one of the big stock photography mysteries has been the size of market in China and its potential for growth. I recently spent ten days in China talking to photographers and stock agents in an effort to get a better understanding of where this market is today and how it might develop in the next few years.

Given the country's population of about 1.3 billion people (20% of the world population) and its rapid growth as a consumer nation it seems reasonable to expect that there would be a huge demand for photos for use in advertising. According to Adweek some experts expect China to become the biggest consumer marketplace in the world by 2020 and other say that could happen as early as 2012.

In visiting the shopping centers of Beijing and Shanghai there seems to be rampant middle class consumerism and the middle class is expected to grow to approximately 520 million by 2025.

Nevertheless the general consensus of stock photo seller in China is that total stock photo sales in China are about $20 million U.S. annually (1 US Dollar = 7.75387 Chinese Yuan Renminbi ). About half the revenue comes from commercial sales and half from editorial. Mr. Lv, Chen, Chairman and President of Panorama, the largest agency in China, says his company's target for 2007 is $50 million U.S., but everyone else I talked to was skeptical of this figure and was in general agreement that $20 million was about right for 2006.

The leading agencies are:

Another player in the editorial market is China Photo Press which currently represents Allsport images, but it is expected that Getty will pull Allsport back under its own wing as soon as the contract permits and this would significantly reduce the size of China Photo Press.

Keeping in mind that most photos are used in some form of print and that newspapers and magazines are responsible for a large portion of still photo use, the following figures for advertising expenditure in 2006 give some indication of the relative size of the advertising market.

In the U.S. the single biggest category or use is probably direct mail and brochures, but agents in China tell me that direct mail is not a significant user of stock images. There is significant demand for photos for billboard and calendar uses.

Fees

Part of the reason that gross revenue is so low is that usage fees are low. In the major cities a full page advertising use costs about $200 and billboard use goes for about $290. (Various sizes of billboards are widely used in Beijing and Shanghai, and I assume most other major cities.) A full-page editorial use goes for about $63.00 and a quarter-page editorial averages about $12.50. In February Imaginechina licensed rights to 30,000 images (mostly editorial sales), but based on the company's gross 2006 revenue the average price for each of these usages would have been less than $10 per-image. RF does not sell well in China because it is too expensive for local users. On the other hand many sellers sell RF at RM prices in order to make the sale.

Commercial sellers say that the vast majority of their images are used by buyers in the major cities: Beijing, Shanghai, Quangzhou and HongKong. Potential customers from virtually all the others regions outside of these cities argue that stock photos are too expensive and buy little of what the major agencies have to offer.

This also brings up the issue of micropayment. Currently, all Chinese customers are using the Internet to search for images and they want to use the Chinese language to do their searches. The agencies tell me that they hardly ever deliver a piece of film anymore - just like the rest of the world. So far the only micropayment site searchable in Chinese is Shutterstock, but it won't be long before all of them do the same thing. When that happens it seems to me that users who think $10 is too much to pay for an image will be enthusiastic about using micropayment images at lower prices.

Mr. Lv of Panorama is Not worried about micropayment, but I think his confidence is misplaced. He did indicate that his company may set up a separate division of offer images by subscription or maybe even micropayment.

On the editorial side of the business Imaginechina has managed to reach out to the regional customers, but at very low prices as indicated above. Jerome Lacrosniere, Managing Director of Imaginechina says that there are no national distributors in China and in order to deal with regional papers it is necessary to work through regional distributors who deal directly with the local customers in the regions.

One of the services these regional distributors provide is to monitor usage in their areas.
While each license is for use in one paper or magazine there is a tendency by some publishing groups to pass photos around to all their publications and friends rather than paying for each separate usage. It is impossible to monitor this activity from a central location in the country. Imaginechina currently works with 30 regional distributors.

Another problem related to pricing is the tendency of larger users to expect kickbacks under the table when they have a good budget. A good designer may get a salary of $625 monthly. Such people will try to add to their overall income by asking their image suppliers to bill the designer's customer a high fee and then kickback a significant portion to the designer.

Copyright

There were varied opinions on whether copyright protection is a serious problem, or not. Mr. Lv is Not worried about copyright. He said, "Copyright shouldn't be a long term problem. In time customers and the country will realize the consequences." It seems to me that won't happen without legal penalties and the laws to establish such penalties take a long time to enact.

Imagechina's Lacrosniere thinks copyright infringement has been responsible for at most 10% of loss revenue in the past and now it is no more than 5%. He doesn't consider it a major issue. Of course, at the lower prices for editorial imagery that make up the bulk of his sales there may be less incentive to steal images.

Lacrosniere also points out that foreign producers need to be very careful about multiple distributors in China. Some distributors in Taiwan have been known to sell CD's into China at very low prices and this undercuts the potential for Chinese companies to sell the images. Large publishing groups will often buy an image for a particular project and then pass it around to their friends in other division of the company or in other regions. If someone isn't monitoring the usage carefully significant revenue can be lost.

Photographer Fritz Hoffman offered a couple examples that illustrate the infringement problem. He had a spread in Life Magazine in 1998. Both a Shanghai magazine and a book publisher scanned the images in Life and blatantly used the pictures without permission. In an effort to try to get some compensation Hoffman hired a lawyer, but it quickly became apparent that the legal costs were going to be prohibitive compared to what he might have been able to recover.

Hoffman also pointed out that currently on many of the bus stops in Shanghai there is poster advertising a service that uses an image with an "Imaginechina" watermark across the center of the picture. Clearly, the user pulled the watermarked preview image off the web site, rezed it up and used it without permission. He also says the same type of thing happens with images from Xinhua (the official Chinese news agency).

As best I could determine no one is using a service like PicScout to monitor Internet usage in China. Given the amount of unauthorized use that has been uncovered in other countries and the general disregard for creators rights image sellers might be surprised to discover the degree of unauthorized use that does exist. On the other hand, since there may not be a way to collect for such uses, maybe it is better that they don't know.

Only about 10% of the Chinese population connects to the Internet, but that comprises a pool of 137 million users.

Panorama - Beijing

The largest agency in China is Panorama (www.quanjing.com) and it has been in business since 1993. It has an online site, searchable in the Chinese language, with about 100,000 images its photographers have produced and 400,000 from overseas agencies. About 50% of the company's revenue comes from pictures produced overseas.

Currently, all customers want search and delivery online. According to Mr. Lv, Chairman and President of Panorama, the company has over a million film images on file, but they are stored in a back room of the offices and almost never accessed.

The vast majority of images this company licenses go to commercial customers in the major cities, particularly Beijing and Shanghai. The company makes very few editorial sales and does not focus on that segment of the market. Mr. Lv says they have between 100 and 300 key accounts that were responsible for about 80% of their revenue in 2006. He expects these customers to represent only about 50% of the company's revenue in 2007 as they focus a major part of their marketing toward the 1,000 to 2,000 middle level agencies who have used less imagery in the past and been responsible for no more than 20% of their sales.

Mr. Lv also says that there are between 50,000 to 100,000 smaller commercial and editorial image users in China to whom Panorama sells almost nothing at the current time. The company's plans are to begin reaching out to this segment of the market in a more aggressive way in 2008.

Currently the company has a staff of between 150 and 200 located in Beijing, Shanghai, Guangzhou and Hong Kong, with about 120 of these in the main office in Beijing. They have ramped up this staff very substantially in the last couple of years.

They have several catalogs and when they produce a catalog they generally print about 5,000 copies. Only one of their catalogs with about 2,000 images is currently being distributed overseas. The vast majority of the images in this catalog are business and lifestyle images. There is a good selection of travel images of the major tourist attractions of China, about 70 images showing Chinese industry and 30 of agriculture.

Mr. Lv says that less than 10% of the company's revenue comes from licensing rights overseas to the images they have in this catalog. Some of the staff indicated that sales are significantly less than 10%. The strongest sales for this catalog come from Southeast Asia, Japan and Korea where there are either significant populations of Chinese, or where the models used by Panorama look like nationals from these countries.

Panorama is about to release four new brands with the hope of dramatically expanding sales overseas. The first will be Asia Face, an RF brand that will concentrate on Chinese faces, people and lifestyles. This will launch with 5,000 images in the near future and the company will continually add to the collection. They expect to have 10,000 images by the end of 2007 and 20,000 by the end of 2008.

Most of the images they have marketed up to now have been from freelance photographers who are paid a royalty, but they intend to significantly ramp up their production of wholly owned imagery. The company has employed 8 full-time photographers and is supporting them with assistants, stylists, makeup artists, etc. The company is in the process of building studios where most of this production will be done.

The other three new brands will be: China Knot, an RM catalog of landscapes and cityscapes, China Elements, concept pictures, and Overseas.

Imagine China - Shanghai

Imaginechina (www.imaginechina.com) was created in 2000 in Shanghai. It is the leading press photo agency in China representing over twenty press and news agencies such as AP, AFP, EPA, Magnum, Gamma, ICON International, JBG, Zuma, Contrasto, LA Times, Retna, Dppi, LAIF, Anzenberger and etc. in China, Hong Kong and Taiwan. The agency also has offices in New York and Los Angeles. The company represents over 500 professional and specialized photographers in all regions and cities in China. About 50 of these produce enough volume, and are used frequently enough, that they earn a good living of about $500 a month from Imaginechina.

While the company's main focus is news, they also represent a number of RF and RM collections. These collections include: Aflo, Banana Stock, Beauty, Brand X, Comstock, Ernoult, Hoaqui, Idea, Image Click, Image Source, Index Stock, IPN Stock, Laif, Mike Watson Images, Olive, ONOKY, Pixland, Purestock, SELF, Stock Image and Veer. In China traditional RF prices are too high for a significant portion of image users. Consequently, many of the RF providers have authorized Imaginechina to negotiate RF sales at local RM price points. In November 2006 the company launched ICreative to enable customers to search specific collections, or all commercial collections..

In addition the company operates a studio where they do some advertising work and they do some assignments for commercial clients. In 2006 about 66% of the company's revenue came from editorial uses with the rest being commercial.

Jerome Lacrosniere, Managing Director of Imaginechina said that the company's gross revenue in 2006 was about $3.4 million. Imaginechina has 70 to 75 employees working 2 shifts, 7 days a week. In January 2002 the company was selling about 100 photos a day. In the month of February 2007 they sold 30,000 images. At that rate, and assuming revenue and number of images licensed doesn't rise in 2007, the average price per image licensed would be about $10.00. Almost everything is licensed on an a la carte basis rather than by subscription.

The company has over 5 million photos in its archive, and it is adding about 5,000 new photos of news, business, sports, entertainment and culture daily. About 700 to 1,000 of these are of Chinese subjects and the rest are from their International contributors. All photos are searchable in Chinese. Most foreign photos come to them captioned and keyworded in English and they have built a translation database that converts most English words to Chinese. They constantly add new words to this database as they appear as newly used keywords.

The production of China images is distributed in more than 25 countries and regular clients include publications such as Business Week, Forbes, Fortune, Spiegel, Paris Match, Far Eastern Review, South China Morning Post ... They also offer a press release service to their customers and send releases to 1,000 media in China as well as newspapers, magazines and websites in 25 countries.

One of the problems Chinese stock agencies have with the top commercial customers is that many expect kickbacks under the table on the higher priced projects. A good designer receives a salary of about $625 a month. Thus, there is a great incentive find ways to supplement this revenue. The budget for a project, and what the agency will bill, may be $625, but in order to make the sale the agency must kickback 20% to 30% to the art buyer making the net sale $500 or less. Jerome thinks that such buyers will love to use micropayment because they can still bill their company, or customer, the normal rate and make a huge profit because they get the images for so little.

According to Lacrosniere images of Chinese people taken in the U.S. don't sell well because they can be identified as being from the U.S. In fact, even Chinese from Southeast Asia don't sell well because they tend to have darker skin and Chinese buyers want to use pictures of people with lighter skin typical of the Northern Chinese. Of course, pictures of blacks or other ethnic groups are almost never used for any kind of commercial use in China.

Models

This points up one of the dilemmas for those trying to sell into the Chinese market, or for Chinese photographers trying to sell to the Americas or Europe. When it comes to people pictures, which are a significant portion of the world market, for the most part Chinese buyers want pictures with models who look like they live in China. Chinese living outside of China have a different look. Chinese buyers have little use for pictures that show ethnic mix, and yet in the rest of the world the goal is to produce pictures that show ethnic mix and interaction.

On the other hand, Chinese photographers who would like to produce people pictures that to sell outside of China have little access to Western looking models. The models available to them all look very Chinese.

One of the issues I wanted to explore on this trip was whether, as the Chinese economy grows, it might be possible for the work of Chinese photographers to become much more competitive in the worldwide stock photography market. Would their lower cost of living and cost of production enable them to make a decent living selling images for much lower fees than U.S. or Western European photographers would need to receive?

For example, I think it would be very possible for Chinese photographers to produce good food and concept pictures at much lower costs per image than would be possible the U.S. and Western Europe. Thus, they would be happy to sell them for less in order to capture a share of the market.

However, I came to the conclusion that the model issue will be a significant problem for the Chinese photographers trying to produce people images that will sell outside of China. When it comes to pictures of people it will be very difficult for them to find satisfactory models.

Panorama, for example, has high hopes of significantly increasing their sales of images to the world market outside of China. To do this they must be able to produce business and lifestyle images that look like they might have been shot in New York, Munich or London. Chinese photographers certainly have the artistic talent to produce such images, but without models who look and dress like they lived in the West pictures shot in Beijing or Shanghai are not likely to sell well in the Western world. I think the Chinese are going to find that the model issue is a very difficult hurdle to overcome.

We know that today many of the business and lifestyle images that sell in the U.S. and Europe are being produced in low cost areas of the world like South Africa, Venezuela, Argentina, Eastern Europe and India but at this point there seem to be few people living in China that the right look for such pictures.

View Stock

View Stock (www.viewstock.com) started its business in 1993 with the aim of supplying pictures to the commercial market. The company has published three catalogs, each with about 1500 images and a distribution of 6,000 in China. They have about 150,000 images in file and about 75,000 online, all keyworded in Chinese. Most of the online images have been drum scanned to about 40MB.

Like Panorama, virtually all their customers want to be able to do online search using Chinese characters. While they have about 150,000 images in their film files, today they are almost never asked to research these files or ship out film. Their web site is not ecommerce and customers must call to negotiate price. The hi-res images are stored off-line and once negotiations have been completed the hi-res file is FTPed to the customer.
The customers are billed for the usage and virtually no one pays by credit card.

Seventy percent of the company's sales are to customers in Beijing and Shanghai. About 30% of their sales are of mostly business and concept images that were produced by agencies operating outside of China. View Stock's gross annual revenue is about $625.000.

View Stock has two staff photographers shooting mostly concepts and represents a total of about 110 photographers. None of their photographers make a living from shooting stock. Their top photographer earns about $10,000 a year from stock and the average photographers earns about $4,000 a year. The company has an operating staff of 14. The salary for an English speaking employee with the skills to do keywording is in the range of $400 per month. Professional models get about $250 per day.

More To Come

While in China I talked to a number of photographers, both Western and Chinese. Early next week I will be releasing a companion story to this one that examines in depth the experiences of three photographers working in China.