As recently as five years ago, almost all (an estimated 98%) of all stock-photo revenue came from print uses. There were few or no Internet and small-business uses; stock and other professionally produced photos were too expensive for such customers. Consequently, when someone wanted an image for these purposes, they either took the picture themselves or copied something off the Internet and paid nothing for its use.
Figure. Stock-image licensing
revenues by usage type |
|
In the last five years, demand for images to be used electronically has grown dramatically. Today, such uses account for roughly 20% of the total industry revenue (see figure).
In 2009, an estimated 1.5 million rights-managed and perhaps as many as 3 million royalty-free images were licensed worldwide at traditional prices. Nearly all of these licenses were for print uses. During the same period, microstock and subscription sellers licensed an estimated 125 million to 150 million images, and a significant percentage of these were used on the Internet and other electronic media.
Unfortunately, no one can provide a more accurate figure as to how many
images might have been licensed for Internet uses, because no one, not
even the agencies licensing rights to the pictures, has any idea how the
images will be used. These companies license rights based on file size
not on use. Currently, the only licenses where a customer must provide
sellers with some information relative to how the image will be used are
those for the 1.5 million rights-managed images.
| No one can provide an accurate figure as to how many images are licensed for Internet uses, because no one, not even the agencies licensing rights to the pictures, has any idea how the images will be used. |
Microstock sellers can make some guesses based on the file size downloaded, but small file sizes whose primary use may be the Internet can also be used in many other ways. Sellers may occasionally survey their customers, but if they have any ideas as to how their images are being used, they are not sharing that information with suppliers.
Internet and electronic use is a broad generic category that encompasses a variety of customer needs. Each user group has a different pricing tolerance depending on the value they perceive they will receive from using the image.
For example:
Are the customers’ students using the images for personal Web sites or class reports? This user group is not going to have much in the way of budget for imagery.
Are they corporate users promoting a product or service? Are they small businesses? Are they traditional editorial users who are doing picture stories? Are they corporate bloggers with significant ad revenue supporting their blogging activity? Are they using the images for offline PowerPoint presentations? For all these electronic uses, the customer only needs an XSmall file, but the value any particular customer receives may be very different from that of another Internet user.
| In my opinion, everyone who finds an image in a searchable database on the Internet should be charged something—as a service fee, if nothing else— even if we assume the image itself has NO value (which, of course, I do not). |
Are they bloggers looking for an image that supports their editorial content? Some think bloggers without a large following should be given images for free, but is $1 too much to ask? In my opinion, everyone who finds an image in a searchable database on the Internet should be charged something—as a service fee, if nothing else— even if we assume the image itself has NO value (which, of course, I do not). When the customer is required to pay a small fee, rather than getting the image for free, it reinforces the idea that images do have value.
Internet Use Pricing
Most Internet uses are at microstock prices. If we divide the number of downloads of microstock and subscription images into the estimated gross revenue of this segment of the industry we get an average price per download in the range of $2.50. (Subscription downloads tend to bring this number down.) iStockphoto users who only need a few images for a Web site currently must buy a minimum of 12 credits for $18.25, and the smallest file costs $1.52. (Do not believe the $1 figure on the home page. That is 1 credit, not $1.) The next larger size costs $4.56.
However, some images on some sites are much more expensive. The average gross license fee for a non-exclusive iStock photographer’s image is about $6.50, on which the photographer receives a royalty of about $1.30. However, if the photographer is exclusive, his or her images are licensed at a higher price, with correspondingly higher royalties—up to 40% instead of 20%. The average such a photographer would earn is probably in excess of $2.60 per download, particularly on higher-priced iStock collection segments (see table).
| Table. iStockphoto pricing by collection |
| File size |
Image price (credits) |
| Main Collection |
Exclusive |
Exclusive Plus |
Vetta |
| XSmall |
1 |
2 |
5 |
|
| Small |
3 |
5 |
10 |
20 |
| Medium |
6 |
10 |
15 |
30 |
| Large |
10 |
15 |
20 |
40 |
| Xlarge |
15 |
20 |
25 |
50 |
| XXLarge |
20 |
25 |
30 |
60 |
| XXXLarge |
25 |
30 |
35 |
70 |
iStock exclusive contributors also have the option of placing up to 20% of their collection in the Exclusive Plus collection. The higher fees for this collection give photographers the potential of earning even more per download, but their total downloads may decline because they have priced their images out of the range of some customers. Some photographers with 20% of their images in Exclusive Plus are finding that the average gross fee per download is now in excess of $13.00, and if they are “diamond” contributors, they receive 40% of the gross sale and earn more than $5.20 per download.
Perhaps these collections are getting a little pricy for some customers,
but because agencies selling the work have no idea how the customers
intend to use the images, they are limited in their ability to structure
reasonable prices for all their customers. Four years ago, the image
that costs $4.56 today cost only $1.00. Then that file size was called
“small.” As prices increased, iStock probably discovered it was losing
some customers and created the “XSmall” size. This allowed the company
to continue to service the needs of some customers at prices these
customers can afford.
| Because agencies selling the work have no idea how the customers intend to use the images, they are limited in their ability to structure reasonable prices for all their customers. |
Distributors have also segmented their offerings to increase the number of price points in an effort to charge higher fees to those who can afford to pay more, but they are limited by the basic structure of their pricing system in how well they can accomplish this goal.
Downloads declining
A recent review of the download statistics for 198 of the top iStock photographers examined download trends over the previous 14 months. The overall number of monthly downloads was flat, possibly even in a slight decline. Many photographers experienced significant declines; one photographer said he had a 27% decline in number of downloads in June 2010 compared to June 2009. In addition, these 198 photographers had been working hard during the period and had grown their iStock collections by an average of 10%. Despite the decline in downloads, most saw revenue growth due to the price increases.
| Some believe this plateau of the last 14 months can be attributed entirely to the recession, and everything will go back to normal growth when the recession ends. |
Many in the industry believe that image uses will grow as the Internet grows. Some believe this plateau of the last 14 months can be attributed entirely to the recession, and everything will go back to normal growth when the recession ends. This flattening of sales could also mean that some former customers have simply stopped using images, either because their needs changed, or because they found another source at a more reasonable price. Other agencies could be taking market share from iStock due to its price increases. Some customers may have turned to Flickr or Google and free Creative Commons-licensed imagery to fulfill their needs.
Price vs. Volume
One of the big issues facing photographers is whether higher royalties will continue to offset declining volume as customers are priced out of the market. Is it better to focus on the higher end of the market, or try to service all the potential customers?
Microstock sellers should recall what happened in the traditional royalty-free market. In mid-2002, it became apparent that royalty-free imagery was losing some customers. New customers were not coming into the market. The only way to grow revenue was to raise prices. So in a little less than three years, Getty Images raised the average price of a royalty-free image by 140%. All other sellers followed.
Rights-managed images were often less expensive than royalty-free, but the real game changer was when microstock began to take over the market that traditional royalty-free retailers left behind. Will Flickr and Creative Commons take over the market that microstock leaves behind? Will microstock sellers find a way to learn more about their customers and price more rationally? (While this analysis uses iStock data, it is only because the site is the largest microstock seller and makes information more readily available than other microstock sellers. All of them have the same problem of deciding how much they should raise prices.)
Nobody knows for sure, but anyone considering freelance photography as a career, particularly with the intent of focusing entirely on producing stock images, whether for licensing through microstock or a rights-managed site, ought to consider the current state of the market.