Recently, Selling Stock subscriber Don Farrall commented: “When RF was first introduced, it brought in new buyers and added to the overall pool of dollars spent on stock photography. Yes, some RM dollars were lost, but they were more than made up for by explosive growth of RF. Eventually, many RM shooters added RF, or switched altogether to RF, because they could make more money. This is not the case with microstock. The introduction of microstock has produced an overall contraction in the amount spent on stock photography.”
This is, in my opinion, an erroneous portrayal of history and may lead to false conclusions today. True, after the introduction of royalty-free licensing, there was explosive growth in the number of customers using digital images delivered on CDs and later online. Yet the resulting overall growth in dollars spent on stock photography is not beyond dispute.
When the royalty-free model was introduced in the early 1990s, the stock-photo industry was very fragmented and made up almost entirely of small private companies that did not disclose revenue. No one had any idea how much revenue the industry generated at that time.
PhotoDisc and other royalty-free companies grew rapidly and supplied images to many new customers, but it stands to reason that the revenue generated by such companies was offset by a corresponding loss in rights-managed sales, as more and more professional buyers were able to replace expensive photos with cheaper ones.
It was not until Getty Images, a public company, began providing the industry with regular sales data that it became possible to make better determinations about industry size and growth. As Getty acquired companies in the late 1990s and 2000s, its post-acquisition revenues never quite matched the sum of the revenues it and each of the acquired companies generated independently. This got worse later in the 2000s.
As royalty-free revenue grew during this period, we saw a corresponding decline in rights-managed revenue. After a few years of unabated growth, royalty-free imagery reached a plateau in the number of units licensed. Some time around 2002, the growth of royalty-free revenue became a function of price increases, not the number of images used. Between the first quarters of 2002 and 2006, Getty raised its royalty-free pricing by roughly 150% to an average of $250, and such a high price opened the door for many buyers to explore the lower-priced microstock alternative.
Unquestionably, microstock has grown rapidly and brought many new customers into the market. Similarly conclusive is the loss of rights-managed and traditional royalty-free sales to microstock.
At the end of 2007, Getty’s average price per rights-managed image licensed was about $500. The price per royalty-free image licensed was about $250, and the price for an iStockphoto image was about $4.00. Thus, when a traditional royalty-free customer used a microstock image, it was necessary to make 62 more microstock sales to offset the loss of one traditional royalty-free image sale and 125 microstock sales to offset the loss of a single right-managed sale.
Despite these discrepancies, gross industry revenue appeared about in balance through 2008, due to a dramatic annual increase in the number of microstock buyers and continual increases in microstock prices. Thus far, we haven’t seen much of a drop in total industry revenue due to the existence of microstock.
As we look ahead, however, it becomes apparent that the rate of growth in microstock images licensed has begun to slow, making it somewhat harder to continually push prices up for fear of losing low-end customers. We may be entering a period where there will indeed be an overall decline in industry revenue as a result of cannibalization of traditional sales by microstock—but this has not happened yet.
The state of the world economy is also likely to accelerate the use of microstock instead of more expensive products. Farrall’s analysis is likely to be closer to reality by the end of 2009 than it is today.