According to
Bloomberg, Getty Images has found a way to raise a net $90 Million in an effort to revive its “Midstock” business.
Midstock is the term Getty invented to distinguish its iStock business (Thinkstock and Photos.com are also included in the division) from other microstock offerings. At one point iStock prices were much higher than the rest of the microstock segment of the market, thus the lofty title. However, after repeated lowering of iStock prices that distinction is no longer justified, but still used.
How Has Midstock Been Doing?
Runor has it that Midstock losses are declining. In Q3 2015 gross revenue was “about $50 million”
down only 8% from the prior year. In the two previous quarters revenue was
down 10% and 15% respectively compared to a year earlier. Earlier this year Getty told investor that revenue
declined 15% in Q4 2014 compared to Q4 2013 and that Q3 2013 was
down 9.8% compared to the previous year.
It is interesting that Getty launched
iStock subscriptions in April 2014 in an effort to compete with Shutterstock. iStock revenue has been declining ever since. Of course iStock revenue had also been declining long before they launched a subscription offering.
iStock subscription sales have definitely been growing, but rather than taking share from Shutterstock (and in the past six months AdobeStock) they are probably cannibalizing their own higher priced single image sales.
iStock’s new 10 images a month subscription price has now lowered the price of iStock’s Exclusive images to the same level as Shutterstock’s non-exclusive images and has priced their non-exclusive single image sales at $4.00 each, less than half of Shutterstock’s prices.
Where Did The Money Come From?
The company currently owes a group of bondholders about $550 million in unsecured bonds that pay 7% interest. Some of these bond holders have been convinced to swap some of their old obligations for new first-lean debt that will pay 10.5%.
Investors taking the deal will be exchanging old obligations that traded at 30 cents before news of the swap deal for new ones that rank as high as debt trading at about 68 cents, according to data compiled by Bloomberg.
Geof Marshall, a portfolio manager at CI Investments Inc. whose firm owns some of Getty’s bonds told Bloomberg, “The incremental liquidity is positive but the incremental debt and interest expense are negative. I’m disappointed in the sponsor because growth capital is supposed to be equity.”
“Although cash balances would increase initially by roughly $90 million post-transaction, planned funding of growth investments and higher debt service will leave the company with only adequate liquidity and limited ability to reduce debt balances over the next 18 months,” Moody’s said in its report.
How Will Getty Use The Money?
Evidently Getty plans to use the cash, in part, to increase its marketing efforts and improve its image search.
Of the three major microstock image suppliers – Shutterstock, iStock and AdobeStock – iStock’s search engine is clearly the slowest and weakest. Shutterstock will spend over $100 million on sales and marketing in 2015 and there are strong indications that AdobeStock has been marketing more aggressively that Shutterstock in the last few months. For iStock $90 million may not be nearly enough.