Paul Melcher disagrees with much of my pessimism about the future of the stock photo industry. I have the greatest respect for Paul and his opinions. He is founding director of
Melcher Systems and has been working in the stock photo space for more than 20 years. He has a thorough understanding of our industry. He has done much more in depth research of the tech side of the industry than I have, and has much better contacts and networking in that space. For these reasons, it is important for my readers to carefully consider what he has to say.
The following are some of the issues we’ve been discussing recently. I’ve bolded Paul’s comments.
PM - I think you are leaving out key elements:
- The International Market. Most markets are not yet as mature as the US market and a lot are growing. There are vast opportunities, especially in emerging economies. Shutterstock has been aggressively expanding and will continue to do so. Even the US market still shows growth.
JP - The share of the various segments of the world market have remained very consistent over the last decade or more.
In Shutterstock’s most recent report 30% of total revenue came from the U.S., another 9% from Canada and Mexico, 34% from Europe and 27% from the rest of the world. In 2006,
Getty reported that 46% of it's revenue was from the Americas (North and South), 46% from Europe and the Middle East, and 8% in Asia/Pacific.
While these are not exact comparisons, the U.S. may have declined a little as a percentage of the total, Europe declined a little more and Asia has grown. The ratios of the various segments of the market have remained more or less the same throughout the past decade.
If we look at populations alone, Asia has more than three times that of Europe and North America combined. The population of Africa is about equal to EU and NA. So there may be great opportunity in the emerging economies, but I don’t see any indications that is happening yet.
PM - You are looking at shares of one year, which will bring you nothing. What you need to review is shares of international markets year to year. Furthermore, % will also reveal nothing. If the US market grew at the same time as the European market, for example, the share will remain the same while the income grew. Population is also not a factor: countries like Germany, UK, France have a much higher rate of pro image licensing than most countries in the world but certainly not the largest populations. It's a question of culture and economy, not size of population. Finally, since you mention ASIA, you should look closer at the numbers from the Chinese market (VCG, for example). The fact that Corbis was purchase by a Chinese company should also be a strong indication that non US markets are growing.
PM - Increase Usage: all image buyers I have polled have signaled an increase in the amount of images used. One of Shutterstock’s key successes has been in subscription because image buyers need to license images more frequently than ever before (think usages in various social media). As well, the lifespan of an image is much shorter than a few years ago and they need to be replaced more frequently. This trend will continue.
JP - I would agree that there has been a huge increase in image downloads, particularly via subscriptions. I believe, but cannot absolutely prove, that a high percentage of the images downloaded via subscriptions are considered during the creative process, but never actually end up in products delivered for public viewing. Since users don’t have to pay extra for every image they download via a subscription they grab every image they think might work rather than waiting until they actually know what they are going to use before downloading.
Nevertheless, I concede that the lifespan of an image is shorter and significantly more images are being used than a decade ago. However, the more important factor for image creators and aggregators is that the revenue per image used has declined more rapidly than the growth in image used. The net result is very little growth, if any, in total revenue generated. That revenue is now being divided among a much larger group of creators whose costs of production have not really declined. Thus, from the creator’s point of view growth in demand does not seem to be working to their advantage.
PM - Video: while at a much slower growth than expected, due to its more complex nature, it shows vast potential. Cisco estimates that by 2018 I believe, video will represent 80% of all internet traffic.
JP – I agree that there will be a dramatic increase in the use of video and relatively less use of still imagery. The question in my mind is whether that will translate into a significant increase in the demand for stock video. It seems more likely to me that a significant percent of the growth will be of videos that are created start to finish by the creator. In large part these creators will not need to rely on stock clips that they were unable to produce themselves. I could be wrong. Time will tell.
PM - That is for the market. On efficiencies, these companies spend a lot of time and money on editing/captioning. Although you are dismissive of its potential, probably because still nascent, visual recognition is advancing very fast which will allow for entirely automated editing/captioning process in a few years. That will cut cost significantly.
JP – I am very skeptical as to how much visual recognition (automated editing/captioning) will aid in making it easier for customers to find the image they need. It seems more likely that it will simply increase the number of images being added to the collections. Already, customers are receiving way more returns to any search query than they can reasonably consider. Visual recognition will be able to identify elements in an image and translate that into words. I am skeptical that if will be able to identify the image concepts and feelings that customers are seeking and are of key importance. That is why I have been
hammering so hard on curation in the last few months.
It is also important to note that the distribution companies (agencies) are not spending “a lot of time and money on editing/captioning.” They have thrown all of that work on the backs of the image creators. If visual recognition is successful, it will make it much easier for more part-timers and amateurs to place many more images into the major online collections, greatly expanding the size of those collections and making it increasingly difficult for customers to find specific useful images.
PM - Image recognition can already identify concepts and will only get better at it. Machine tagging also eliminates spam keywording, can detect information otherwise missed and is overall much more precise. For the users, search will only get better and more accurate, regardless of the amount of images initially available. While initial captioning might be done by contributors, companies likes Shutterstock and others spent a lot of time and money on making it more accurate. But the key element here is curation. When dealing with independent contributors, you need a battery of editors to select which image will make it in and which ones will not. That is a lot of manual labor than can and will be automated. Linked to market intelligence data, it can even be brutally efficient in selecting not only the technically proper images, but those that actually correspond to a demand.
PM – The cost of servers as well as other related technology will also continue to drop.
Content: with over a billion images uploaded daily, it is not volume of fresh content that is missing, regardless if it is coming from pro or not. It is easy and getting easier to tap into this seemingly endless supply. With technology as mentioned above, it becomes even cheap. Non pros, as you know, couldn’t care less how much they make.
JP – The volume of fresh content is not the issue. In fact, a huge number of choices is becoming more of a disadvantage than an advantage. (See
here) I don’t see how having access to hugely increased numbers of images makes it easier for the customer to find the right image.
PM - More choice means more sales and more customers. Current customers can better find the exact image they need and new customers can finally find images they couldn't find before. Furthermore, it feeds the need to renewed content.
PM - Marketing: while it is still a few years away, it will become possible to better know in advance what type of images will be needed. One of the biggest hurdles of the stock photography world today is its inefficiency at knowing its market. Thus companies are building huge databases of images (80 million +) in the hopes that some will get licensed. Once market intelligence gets better, it will no longer be necessary, reducing the overhead.
JP – I do agree that market information is not being analyzed by distributors or shared with creators so they can be more productive. Instead of just producing more images the industry must start focusing on producing the images customers really want to buy.
The sad part in all this is that much of the data is already available. But, for “competitive” reasons those who have the data refuse to share it with those who could help them make more money.
For me one of the most telling things about the huge database is that they are not increasing downloads. If we divide the total Shutterstock downloads in a quarter by the total number of images in the collection in that quarter we see that the percentage of images licensed has been steadily
declining over the last two years. In Q4 2013 86% of the images were downloaded. Two years later in Q4 2015 only 56% were downloaded.
Unfortunately technological improvements that will enable more images to flow into the databases will not “reducing the overhead.” Instead, in order to make the collection useful to the buyer some type of curation will be required. That, I believe, will require people and increase overhead costs. I don’t see any other alternative and I haven’t heard of any technological proposal that will be able to effectively deal with this problem.
PM - On that same vein, we are also not far in building images on demand. Not by having a photographer shoot it, but a computer built it (75% of Ikea’s catalog is already CGI). Stock photo agencies will be able to build photos (rather than having them photographed), matching even better the needs of the marketplace. And reducing cost.
JP – I agree that a much higher percentage of the images used in the near future will be created using CGI. What I don’t see is how this will benefit photographers or those who are distributing the work of photographers. It seems to me that the revenue earned by the agencies and image creators will decline.
It seems to me that most of the CGI imagery will be created by in-house staff designers of the customers. There may be a secondary market for some of this work through the existing stock agency/distributor networks. In fact, a significant percentage of the imagery currently licensed by stock distributors (I estimate 25% to 30%) is created by graphic designers and illustrators, many of whom produce the stock imagery they license as a sideline to their full time job.
Considering this young people with a desire to be involved in image creation in the future might be better advised to study graphic design rather than photography.
PM - it will not help photographers. It will benefit stock agencies as they will be able to create the content they need (no commission). Only big companies might have staff designers and even so, like today, their occupation will be to customize content, not to create it. Finally, if the final goal of whoever you are advising is to shoot stock photography (which is a poor choice), then yes, they should study CGI.
PM - In other words, once you take away the traditional contributors point of view, you can see that there is a lot of potential.
JP – By “traditional contributor” I presume you mean “still photographer” not necessarily graphic artist or illustrator. If that is the case, then I agree there may not be much future opportunity for photographers. While there will still be increasing use of imagery of some type, it is hard to say who will be producing it; what the distribution channel between the producer and the end user will look like and what kind of revenue will be generated for producers. Maybe I’m wrong.
PM - It has always been a poor choice to choose stock photography as a career. While revenue was very comfortable for a while for some, it has always been much more interesting for the distributors. This is nothing new and different than the rest of the economy. It is better to be Wal Mart or Amazon then any of its suppliers. For the last 10 years, signs have been flagrant for stock photographers that their 'job” was in decline and will never recover. I hope that they know that by now.