Jupiterimages And Micropayment

3

January 11, 2007

One of the things that has confused me as I've watched the astronomical growth in the use of micro-payment images is why JupiterImages has not moved more aggressively into this segment of the market.

Jupiter wholly owns millions of images - many more than any of the other major image suppliers and more than any of the micro-payment sites are currently offering. One would think that they could re-purpose a lot of these images quickly and easily to a micro-payment format if they wanted to. A good portion of these wholly owned images are being licensed through subscriptions which means that the actual fee per image used is not that much different from the fees being charged by the micro-payment sites.

Customers seem to be demonstrating that in most cases they prefer to buy single images rather than a subscription. They want to buy exactly what they need, at the time they need it, rather than buying a subscription that gives them access to a large collection before they know what specific images they are going to need in the future. This is exactly the same thing the industry learned when RF was first developed. Initially, all RF images were sold as CD collections. But once it became possible to deliver single images online customers flocked to that licensing model rather than buying collections. At present, I estimate that only 5% to 10% of buyers feel they get a better value by purchasing CD collections than they get by buying individual images as they need them. My guess is that the same would be true of subscriptions.

That doesn't mean that there isn't a continued market for CD's, nor that there won't continue to be a market for subscriptions. But it seems clear that the vast majority of image buyers will always prefer to buy single images as they need them, rather than buying access to collections.

To try to get a better understanding of why JupiterImages has been so cautious in moving into the micro-payment arena, I asked Alan Meckler, CEO of Jupitermedia, a few questions.

I asked if he has seen any evidence that micro-payment is making serious inroads into his subscription customer base? He indicated that micro-payment has hurt somewhat, but that pricing and programming anomalies were a bigger factor in subscription sales in 2006. In the last four quarters subscription sales for Jupiterimages have been (in millions of dollars):

To me, this indicates a mature market with little potential for revenue growth unless the growth comes from price increases. And price increases would make subscription less competitive with micro-payment, and thus probably not result in growth.

Meckler also indicated that sales rebounded late in the fourth quarter once they had corrected some of the problems.

I pointed out that micro-payment seems to be the major growth area of the business and asked why Jupiterimages is not offering more of its wholly-owned subscription images in a true micro-payment format. In this way customers would have the option of purchasing a few images at prices much lower than normal subscription fees if their immediate needs were not enough to make the minimum subscription price attractive.

There is no reason why Jupiterimages can't license the same images through a subscription and on a micro-payment site in much the same way traditional RF makes the same images available on CDs that can also be purchases at single image prices.

Meckler indicated that they have been considering this and are about to roll out some dramatic micro-payment options which they expect to accelerate their growth in 2007.
However, he was not prepared to announce any details of these plans.

At one point I estimated that Jupiterimages might have 25,000 to 35,000 subscribers for subscription products, basing this on the belief that many subscribers would buy six month to a year subscriptions and taking into account an average of the subscription prices of Jupiterimages' many brands.

Meckler was unwilling to give out subscriber numbers but indicated that my estimates were way low. If we assume that nearly all of their customers only buy a one month subscription, and we use Photos.com one month subscription price of $139.95 as representative, we would get 175,000 as the total number of subscribers for the past year. I suspect the actual number is somewhere in between this figure and my 35,000 number.

That said, iStockphoto, Fotolia and Dreamstime each have more that 1,000,000 customers. Even if we accept the 175,000 figure it would seem that many potential customers are not considering subscription products as they look for inexpensive photos.

In addition, Jupiter has the option to offer a more tightly edited micro-payment collection than the other players in the micro-payment space, and that could give them an advantage.

Meanwhile, the micro-payment site Dreamstime has added a subscription option to its site that will allow customers to download 300 images a month for $139.99. (Longer contracts are available for fees that are slightly less on a monthly basis and give the user more total downloads monthly.)