325
CORBIS CONTRACT ANALYSIS
July 14, 2000
The new Corbis contract has been released. It is not getting any shorter. It is a
massive document that will require a lot of careful examination by photographers and
lawyers.
There is definitely good news. Corbis is obviously trying hard to develop a
photographer-friendly Agreement and there are some major positive improvements when
this contract is compared with previous Corbis contracts and contracts in the industry
in general. But, there are still some issues that many photographers will want to
consider carefully before jumping to sign this agreement.
This story will outline what I believe are a number of the positive factors, and some
that are not so positive, in the Agreement. Each photographer should carefully study
each clause in the light of their own business. Listen to the advice of other
photographers and have the contract reviewed by a lawyer. My story should be viewed,
not as a complete examination of the contract, but only a discussion of certain
issues. There may be future stories on other aspects of the contract.
Positives
1 - There is no non-disclosure clause in the contract. It will be made
available publicly on a Corbis web site in about a week. When we have it we will post
the URL. Every photographer is free to discuss this contract with anyone they choose.
2 - The copyright ownership issue has been laid to rest in favor of the
photographer. For a full explanation of this see my Story
320 .
3 - Corbis has reversed recent industry trends by offering a royalty rate
structure that should slightly increase the percentage of overall gross sales
photographers receive in royalties, rather than decreasing it. Calculating how much
that really means for each individual photographer is complicated, but it is certainly
a major move in the right direction.
The basic rates are:
50% for editorial uses
45% for commercial uses
20% for broad rights (royalty-free)
20% for consumer digital products
5% for merchandise (prints, posters, etc.)
There are three other factors that must be considered in order to determine how much
these percentages will mean in actual dollars in anyone's particular situation.
- The photographer is given the option not to participate in any of the five
basic categories of sales. Thus the photographer can choose not to allow his or her
images to be licensed as broad rights, or for consumer digital products or merchandise
and will receive either 45% or 50% on every sale.
The photographer exercises this option on a submission by submission basis so he or
she can decide that images from one submission may be licensed for consumer digital
products and limit that type of licensing on the next submission. This provides the
photographer with maximum flexibility in controlling the licensing of the work.
- A distributor fee of 35% is deducted from the gross fee collected by Corbis
wholly owned foreign offices before the photographer's royalty is calculated. This is
good news because with most other agencies this "distributor fee," or foreign office
fee, is normally 40% and sometimes 50%.
Thus, on a gross sale of $100 in the UK a $35 distributor fee would be deducted and
the photographer's royalty would be a percentage of the $65 depending on whether the
usage was editorial or commercial. With most other agencies on a similar $100 sale
the photographer's percentage would be calculated on $60 or $50 because the selling
office is allowed to keep 40% of 50%.
- "Corbis does not impose any marketing or catalog charges, or scanning and
duplication charges on any of the Accepted Images."
Taking these three aspects into account existing Corbis photographers will definitely
earn more than they have in the past. In most cases the photographer with the newly
acquired agencies will probably earn more than has previously been the case.
4 - Corbis photographers will be paid monthly instead of quarterly, but there
is up to a 45 day delay after the end of the month before they will be paid.
5 - Corbis clearly states its intent to preserve the editorial integrity of
editorial images and agreements made by editorial photographers with their subjects.
The contract language says:
"Corbis respects the special ethical considerations
associated with editorial and news photography and will not intentionally and
materially alter the fundamental nature of the subject matter in such (digital files
that are cleaned up, color corrected, or enhanced in any way to preserve detail)
Accepted Images or the caption information."
In addition, "For Accepted Images you submit depicting celebrities or personalities
and which resulted from an oral or written agreement between you and the
celebrity/personality permitting the photographs to be taken, you agree to provide
Corbis with any restrictions, including written or oral restrictions communicated by
celebrities, publicists, or their agents, that would limit Corbis' ability to license
the Accepted Images to its editorial customers. By example and not by limitation,
such restrictions may include (1) the requirement that Corbis obtain placement
approval from a celebrity or representative, or (2) restrictions based on time
(including embargoes), territory, or type of publication to which Corbis may license."
This is a strong statement of Corbis' intent. The only small problem is that there is
no definition of how Corbis will be liable if they fail to honor the restrictions the
photographer has placed on such usages. In the celebrity situations in particular,
not only might there be lawsuits, but a photographer's ability to continue to work in
that industry could be severely damaged if a trust is violated.
There is no indication as to whether Corbis will allow photographers to restrict the
use of certain images for commercial purposes such as "no tobacco or liquor
advertising," etc.
6 - Corbis has agreed that upon termination of the contract, (and the survival
period) they will destroy all digital copies of the photographer's images. The
contract reads: "Upon termination of this Agreement, Corbis shall return any analog
originals or transparencies, destroy all analog dupes and remove and destroy all
digital files containing Accepted Images and any Corbis enhancements."
7 - Corbis is offering a Preferred Payment Option which guarantees that the
photographers will be paid even if Corbis incurrs a bad debt. Corbis will pay when a
license is invoiced, instead of upon receipt. If the image is used, but for some
reason Corbis can't collect (a bad debt) the photographer gets to keep his share. If
the sale is cancelled for any reason the amount the photographer received for the
cancelled sales would be deducted from future royalty payments. However, cancelled
sales would be unlikely since Corbis delays payment until 45 days after the end of the
month.
If the photographer chooses the Preferred Payment Option a 2% fee is charged on all
sales, not just Corbis office sales, to cover Corbis' costs of making the money
available to the photographer before they collect.
The difference between a "bad debt" and a "cancelled sale" should be noted. In the
event that Corbis pays a royalty to the photogragher and the sale is subsequently
cancelled, Corbis will need to recover the invalid royalty payment from the
photographer. In most cases the $ amounts involved on cancelled sales and the
resulting adjustment to the photographers are relatively small. However, it should be
noted that one photographer on this program had $30,000 in sales cancelled and this
money was deducted from future sales. In the event of a large invoice cancellation --
as a ratio of the photographer's normal monthly earnings -- Corbis will spread the
impact out over a reasonable time period to avoid any economic hardship to the
photographer.
8 - When a photographer uses the Corbis official model release, Corbis agrees
to defend the photographer against model-release lawsuits.
General Strategy And Exclusivity
It should be noted that their Photographer Representation Agreement is designed to
standardize many of the details of the photographer-agency agreement, but it is not
the total package. Not only is the photographer allowed to choose certain options
within the standard agreement, but each division will have separate additional issues
to be negotiated.
One of the areas that will be open for negotiation is the degree of exclusivity. The
agreement indicates that Corbis will work with photographers in three different ways:
Photographer Exclusivity, Image Exclusivity and Image Non-Exclusive. This actually
reflects the different arrangements they currently have with various photographers.
They say that each of their divisions has unique business reasons for wanting to
handle the exclusivity issue in their own way. Thus, the detail of exclusivity is
left to individual negotiation and will be covered in each photographer's
Representation and Use Rider.
Corbis makes the point that generally they will treat similar photographers
similarly...that is to say that each Corbis division will negotiate similar terms with
its photographers regarding exclusivity. The options relating to exclusivity will be
determined by each division based upon its business needs. (For example, Corbis'
ability to command a higher price on commercial photos depends upon exclusivity.)
When they use "divisions" it does not mean brands or acquired businesses. The divisions
will be celebrity portraiture, news, commercial photography, etc. The new acquisitions
of TSM and Sharpshooters will be combined in a commercial division along with the
WestLight photographers. It appears that the contracts for the commercial division
will be image-exclusive despite the fact that many of the photographers with these
agencies currently have photographer exclusive contracts.
Officials at Corbis indicate that their philosophy is one of total integration, not
maintaining separate brand identities. On the other hand they say they will continue
to promote individual collections that are meaningful to the clients. It is unclear
whether this means there will be future TSM and Sharpshooter catalogs because their
brands have some meaning to the clients, or whether there will be a single "commercial"
catalog that integrates all these photographers.
While all the images will become part of one large database, Corbis says that all the
distinctives of the various brands and divisions will not disappear. It will be
important in coming weeks to try to get a sense of what distinctives will remain and
which are likely to diasppear. For the commercial photographers, Patrick Donehue, the
new VP of Commercial Photography will be key in setting the strategy.
I am having trouble seeing where "Photographer Exclusivity" relationships fit into this
model. There may be a reason for images that go into print catalogs to be exclusive
(image-exclusive), but I
have trouble seeing why every image a photographer produces should be exclusive, and
moreover, why certain photographers should be restricted from trying to market,
through other sources, images that Corbis does not want to scan or promote.
It may be reasonable to accept a photographer exclusive agreement if you are receiving
in return some tangible benefit that all other photographers represented by the agency
are not receiving.
One of the reasons for being an exclusive photographer is that the agency will agree
to market and promote ALL of your production. That does not appear to be part of
Corbis' strategy. They intend be very selective about what they put into their
system. Most
photographers will find that they have lots of images which they believe are
marketable, but which Corbis will be unwilling to promote.
While Image Non-Exclusive is the ideal, for most photographers it would seem that an
Image Exclusive agreement for the Accepted Images would not be logical until Corbis
demonstrates to the photographer that they are accepting the vast majority of the
photographer's production.
If Corbis works out some system to provide "High Visibility Featuring" on their site
of certain images that might be a reason for agreeing to Image Exclusive, but not
necessarily Photographer Exclusive. Another option would be a guarantee of a certain
minimum number of images in future print catalogs. There must be a quid pro quo in
exchange for agreeing to Photographer Exclusivity.
A photographer is earning $200,000 a year from his or her agency can afford to be
exclusive. One making $10,000 can't. But, this $10,000 a year person may produce
certain unique types of imagery that Corbis needs, and no matter how hard both sides
work this photographer may never to a level where he or she could be self supporting
from the income generated from Corbis. The specialized producer should not be
penalized, or denied the opportunity to market his or her work in other ways simply
because some people in the "division" are producing work that generates a high volume
of sales.
Similars
Photographers who are considering the Image Exclusive arrangements should examine the
definition of "Similars" closely. I think it needs to be narrowed. At present it
reads as follows:
"Similar" means a photographic image, in analog or digital form, that may reasonably
cause an industry professional viewing the image to believe that it is the same or
substantially the same as an Accepted Image by virtue of it: (i) being taken at the
same time and location, and, if containing people, with the same people regardless of
changes of wardrobe; or (ii) relying on the same conceptual style, lighting or other
photographic composite or illustration technique.
Let me try to describe with a couple examples why I believe this is a problem.
If you have a sequence of a running cheetah, two different frames shot 15 seconds
apart are not going to be Similar and should not be considered as such.
Suppose we have a picture of a couple walking along a beach. We also have a tight
shot of the same couple in the same clothing, shot 30 minutes later having a drink in
a cabana. In addition we have a silhouette of the couple shot from farther away
showing the ocean and the sunset in the background. This pictures was taken 10
minutes after the previous one and there were no costume changes. None of these three
diffrerent situations should be considered Similar. They are all different and unique
situations.
If some advertising client wants to lock out all uses of this couple in any situation
then they should be doing a custom shoot rather than buying stock. If everything shot
in one day becomes a similar very few photographers will be able to justify shooting
model released people or expensive travel and wildlife shoots.
Most photographers can not afford to give up a lot of small sales where exclusivity is
not important for the hope of making an occasional block buster sale.
The "or (ii) relying on the same conceptual style, lighting
or other photographic composite or illustration technique," makes things particularly
impossible. Because it is preceded by "or" rather than "and," if a photographer
develops a particular style he can only sell one image in that style. If a client
buys an exclusive on that style all of the rest of past and future production could be
locked out of the market.
Maybe the Corbis sales people won't interpret a given situation to this extreme, but
the problem with the language is that the photographer has no way of knowing how it
will be interpreted. Given the definition the photographer can not safely market
anything through other sources that has any relation whatsoever to an Accepted Image.
Such an option might be acceptable if Corbis were going to accept everything the
photographer submits and market it all agressively in a non-exclusive manner until the
time when a client wants broader future exclusivity and is willing to pay a
substantial price for that privilege.
The problem is that Corbis is not willing to agressively market ALL the work of the
photographers they represent. They only want to market a very small segment of the
photographer's production, and leave it up to the photographer to do something -- or
nothing -- with the rest. If the "exclusive" agent is unwilling to agressively market
ALL the photographer's production then the photographer's earning potential is
severely limited.
The best option is to narrow the definition of similars to an "identical" image. This
way the photographer can continue to market through "other sources" images that were
taken at the same time and place, but are not the exact image. In those rare cases
when the client wants to place broader limitations on the use of "similar" images,
Corbis needs to go back to the photographer and work out the details on the particular
set of images.
Exclusive sales that lock out similars are rare. Granted, that when they occur they
respresent high dollars, but even then I believe it is a very small percentage of
total gross sales for the agency. While no one wants to give up any sale, I think
losing an occasional high dollar sale is better than establishing policies that make
it impossible for many photographers to earn a living, or forcing many photographers
to reject working with the agency.
Having to check with photographers on such sales certainly isn't the most convenient
way for Corbis to operate, but it is the only practical way so long as they are
unwilling to manage the entire production of the photographers they represent.
It is important for everyone to keep in mind that photographers have been willing to
agree to such a "similars" definition, because their agency was agressively marketing
ALL their work. When the agency changes the business model and starts "cherry
picking" and refusing to handle much of the photographer's production the way
"similars" are handled must also change.
Issues With Positive and Negative Aspects
1 - The contract is for a 3-year terms, not 5-years or 20-years as were the
previous Corbis contracts. The contracts reads: "This Agreement commences on the
Effective Date and lasts for an initial term of three (3) years. Upon expiration of
the initial term, this Agreement will renew on a year-to-year basis; unless terminated
by either party upon at least ninety (90) days written notice prior to the anniversary
date of the Effective Date."
There is a little kicker with termination. Clause 10.2.1 says: "Upon expiration or
termination of this Agreement, Corbis may continue to exercise the license rights
granted herein (on a non-exclusive basis) for the following period after termination
or expiration: three (3) years for all Accepted Images, five (5) years for
commercially scanned Accepted Images, and in the case of Accepted Images incorporated
into Broad Rights products, for the life of such product,"
It seems to me that a continuing 5-year right to license images after a contract is
terminated is an unreasonably long time. That means this contract is in effect for at
least 8 years, not three. I understand that Corbis needs time to recover their costs
if they go to great expense to scan and keyword images and then only have the right to
license them for three years. Corbis estimates that they spend more than $50 per
image to prepare an images for the database. After observing their operations, I am
convinced that they have such costs.
I asked if the 5-year survival for "commercially scanned" images is figured for all
images from the termination date of the contract, or from the date when the image went
on-line? For example, if an image went on-line at the beginning of a three year
contract, would that image's survival time be only two years after the termination of
the contract. More to the point, assume that a photographer has been with Corbis for
six or more years and then terminates the arrangement. The images that went up during
the first year have already been in the system more than five years, and thus it would
seem logical that they could be removed immediately.
The answer from the official spokesperson was, "Survival periods start and are
effective following termination, not the 'online date'."
2 - "Upon completion of this process (digitizing accepted images) and at our
expense, we (Corbis) will promptly return to you the analog originals of your Accepted
Images."
The good news is that all original transparencies will be returned to you once they
are digitized. The originals of the "Accepted Images" will not be retained until the
end of the contract period. This greatly reduces the chance that any of your images
will be lost of damaged.
The bad news is that within a few years all the analog files of the existing agencies
will be broken up and the images that have been so laboriously collected, and
carefully edited -- in some cases over decades -- will be returned to the individual
photographers. Corbis will digitize a small fraction of these images after going
through their editing process. (Getty appears to have more or less the same
strategy.) The photographers will then have to go through a process of editing the
returns and resubmitting them to another agency for filing, or more likely, the images
will remain in individual photographer files where no one can ever find them.
This may be a good thing because undoubtedly a large percentage of the images that
will not be digitized are outdated and will never be in demand. However, based on
comments from experienced photographers who have received returns, there are a lot of
saleable images in the material coming back. They may not be saleable at a level that
can justify spending $50 or more in preparation costs for every one of them.
Photographers need to give careful consideration as to what they will do with the
images that will be returned. One productive WestLight photographer has already had
more than 40 boxes of his file images returned, weighing over a thousand pounds.
3 - One positive thing is that Corbis has stated in their contract that the
wholly owned foreign offices will charge 35%. They can't change that without changing
the contract. No other agency that I know of has been willing to make such a
statement in their contract.
What is left unsaid is the commission split with independent foreign sub-agents. A
Corbis spokesperson has told me that the 35% is a median of the rates that foreign
sub-agents currently deduct. That means there are variations. Some may take 30%,
others 40% or something else. We know that some companies not affiliated with Corbis
get to keep as much as 50% of the gross fee collected before remitting the balance to
the parent agency.
There are indications that Corbis may end up using sub-agents in many countries rather
set up wholly owned offices. They currently use a sub-agent in Germany which is
probably the largest single market outside of the U.S. Thus, the sub-agent
percentage is important. On the other hand Corbis is giving their photographers more
information on this issue than most other agencies at the present time.
4 - The "Limitation of Liability" may present some major problems for
photographers with a large quantity of images in existing files. As I understand it,
if any photographer currently with the acquired agencies signs this agreement the
maximum claim that photographer would eventually be able to recover in the event that
a large number of his or her images have been lost is $10,000. Certain major
producers should give this clause careful consideration before signing.
I understand that Corbis needs to put some limitations on their risk, but this is
unreasonable considering what the photographers have at risk. It is particularly bad
for the single image. If Corbis happens to lose or damage a great one-of-a-kind image
that could easily generate thousands of dollars for the photographer over its lifetime
all that photographer is going to recover is $100? That's not reasonable or fair.
Accidents happen. A photographer may spend thousands of dollars to produce a set of
images and get basically one frame that really works.
Given that the industry standard has been $1,500 for years, I think you the single
image number to $1,500. There needs to be a top end to maximize risk for Corbis, but
$10,000 is too low.
5 - The clause that deals with "Promoting and Testing Accepted Images" allows
Corbis to use any of the Accepted Images - even if the photographer has chosen not to
participate in the Consumer Use Rights section of the business -- to test certain
markets and to Promote the Corbis brand. They can do this without compensating the
photographer in any way for these usages. Corbis could set up a web site offering
free use of images for e-greetings. Even if they receive significant revenue from
sponsors or advertisers on such a site, none of therevenue would be shared with the
photographers.
Signing On
The new improved terms and conditions do not automatically go into effect for
photographers who currently have Corbis contracts.
Each contract will need to be separately negotiated and given the potential
administrative overload that may take some time. Some Corbis photographers have
received letter saying that they are "eligible for upgrading" and if they agree to the
new agreement it will go into effect on January 1, 2001. Photographers who haven't
been contacted and who are interested in considering the upgrade option should
probably call their editor and get their name on the list.