In March it was reported by Moody’s and Standard & Poors that the gross revenue for Getty Images in calendar 2011 was $945 million. This figure provides some interesting insights into the state of the stock photography business.
S&P estimates that “Getty’s 2012 revenue and EBITDA will be flat or grow at a low-single-digit percentage pace.” Such “single-digit” growth is generally accepted in the financial community as being a maximum of 2% to 3% which might push 2012 revenue to $975 million.
While to stock photographers this sounds like a lot of money it is interesting to consider the expectations of Hellman & Friedman when they purchased the company four years ago for approximately $2.4 billion. In late 2007 Goldman Sacks examined Getty’s books and provided the following projections for Getty Images sales through 2012.
| Getty Images Revenue and Estimates (in millions) |
|
|
|
| |
2007 |
2008 |
2012 |
| Creative Stills |
$560.94 |
$461.00 |
$348.00 |
| Editorial |
$138.34 |
$180.00 |
$289.00 |
| iStockphoto |
$72.00 |
$122.00 |
$262.00 |
| Footage & multimedia |
$42.88 |
$47.00 |
$83.00 |
| Other |
$43.44 |
$77.00 |
$159.00 |
| B2B music |
|
$14.00 |
$46.00 |
| |
|
|
|
| Total |
$857.60 |
$901.00 |
$1,187.00 |
While Getty’s revenue has grown somewhat from its 2007 level, it certainly has missed expectations by about $200 million or 16%. Of course the world has had a recession during the period. In addition, there have been some spectacular shifts in imagery use.
On the positive side, in 2007 iStockphoto’s revenue was expected to grow from $72 million to $262 million in 2012. I believe that last year iStock's revenue was already in the range of $350 million. In 2012 iStock's revenue may continue to grow faster than Getty’s overall rate of growth. However, as I have reported
here and
here the number of images licensed on an annual basis is already in decline leaving price increases as iStock's only way to grow revenue. S&P expects iStockphoto revenue growth to slow.
I believe Getty’s editorial revenue has probably remained on track with 2007 projections. Shortly before taking the company private Getty had purchased some editorial brands, and the revenue these brands generated hadn’t been fully recognized in Getty’s bottom line figures at the end of 2007. Despite a declining demand for print uses of editorial images, Getty seems to have consolidated its position in the overall editorial market. I estimate Getty’s 2011 revenue from its editorial collection at a conservative $200 million. It could easily have been more.
The demand for footage and multimedia has certainly been increasing. 2011 revenue from this segment of their business was probably at least $60 million. The “Other” and “B2B Music” categories have probably progressed at a somewhat slower rate than anticipated due to the recession. I estimate their combined total at about $125 million.
Thus, the total of $945 million is divided up among market segments as follows:
| Getty Images Revenue and Estimates (in millions) |
|
| |
2011 |
| Creative Stills |
$185 |
| Editorial |
$225 |
| iStockphoto |
$350 |
| Footage & multimedia |
$60 |
| Other |
$100 |
| B2B music |
$25 |
| |
|
| Total |
$945 |
Creative Stills
If you accept my figures for the lines of business described above (if anything they are conservative) then that leaves “Creative Stills” at a surprisingly low $210 million gross revenue for 2011 -- down 37% from $561 million in 2007. (Bad as the Goldman Sacks projection of $348 million appeared, the reality is a lot worse.)
In 2007 about half the Creative Stills revenue was RF and the other half RM. However, since 2003, when the RM portion of Creative Stills revenue was 62% of the total, that percentage steadily declined (
see historic numbers) while the RF percentage steadily increased year over year. My guess is that total RM revenue in 2010 was less than $100 million and as a percentage of total revenue it may still be declining. RM photographers should also not forget that a high percentage of Getty’s RM licenses were for fees of less than $100. Many Premium Access licenses were for fees under $20.
In the early 2000s before Getty acquired iStockphoto the Creative Stills segment of their business hovered around 70% of total revenue. Now it is about 22% and becoming a less and less important line of business every day.
Paying Back Their Owners
This new information surfaced because Getty Images has issued a new incremental $275 million first-lien senior secured term loan due to be paid back in November 2015. According to Moody's Investors Service “Getty will use this money, along with $115 million in cash, to fund a $380 million special distribution to its shareholders” (Hellman & Friedman).
According to SEC filings Hellman & Friedman originally invested up to $941.3 million equity in Getty as part of the buyout.
Add this $380 million to a $496 million dividend Getty paid Hellman & Friedman in October 2010, and the investors have recovered 93% of the equity they invested in the $2.4 billion leveraged buyout of Getty in 2008. Getty Images has $1.245 billion outstanding on an existing first-lien term loan due November 2016.
S&P has rated the new loan as BB- or junk status. They advise investors to expect a recovery in the range of only 40% of their investment in the event of a payment default.
Profits
In its report S&P said, “we believe that growth in the company's low-priced licensing business, iStockphoto, may slow as this business begins to mature and may be facing competition from very low-priced image options. We believe that the company's EBITDA margin will benefit from recent cost reductions in 2012, and expect the EBITDA margin to remain healthy at over 35% over the near term.”
Microstock photographers will recall that iStockphoto cut its royalty rates at the beginning of 2012 which helped Getty improve its EBITDA margin. EBITDA (earnings before interest, taxes depreciation and amortization but after all expenses have been deducted from gross revenue) was 33.2% in 2010. As a result of reducing their costs Getty was able to raise its EBITDA margin to 35.6% in 2011.