Stock photo prices have fallen dramatically in the last decade. Some RM photographers are earning, on average, less then 7% per-image-licensed of what they earned a decade ago. RF prices have seen similar declines, although not quite as severe. Seventy to 80% of traditional image licenses are for fees of $20 or less. More than 50% are for $10 or less. Throughout most of this period photographers have continued to produce new and better images. The cost of production has not declined.
Royalty shares have dropped as distributors take an increasing share of the gross fee paid. In many cases there are double and even triple cuts before the creator’s share is calculated. Creators, and many of their prime agents, have no control over pricing.
Without some dramatic changes photographers trying to earn a portion of their living from stock photography will be forced to give it up and engage in other activities in order to earn a living. To a great extent the industry has already been turned over to hobbyist who enjoy taking pictures and are unconcerned about any revenue their images might produce. Maybe amateur photos are all that’s needed.
If there is a need for professional producers, then it’s time for some dramatic changes in the business model. Ways must be found to begin to raise prices and pass on a larger share of what the customer pays to the image creator. It’s time for stock agents and distributors to examine options.
The following is a possible strategy for mid-sized, and specialist stock photo agencies to consider.
Non-Profit Stock Photo Distribution System
A number of mid-sized and specialist agencies should join together and explore the possibility of establishing a non-profit online distribution system (NPPDS) that gives each of the organizations collecting images from image creators better control over pricing and a larger share of the gross revenue received from the licensing of the images.
In today’s technological marketing environment setting up and managing an effective worldwide distribution system is not as difficult, or costly, as it used to be. There is no reason why major image suppliers should not work together to build a single site that offers a broad cross-section of premium imagery at prices that are higher than most major distributors are charging today.
Some of the elements to the plan that need to be considered are:
Founding Partners
1 - Each of the Founding Partners of the non-profit photo distribution system (NPPDS) will contribute their images into one combined, central database. Ideally there would be 20 to 30 founding partners providing a broad cross section of all types of imagery usually needed by customers.
2 - The NPPDS operators will manage the database accepting images from partner contributors, handling sales, retaining 30% of the revenue collected to cover its operating costs and paying out the remainder to the partners on a monthly basis.
3 – Partners will establish an oversight board that will monitor day-to-day management of the non-profit organization.
4 - Partners will have voting control over all major decisions including establishing a unified pricing system for the group. Issues will be voted on at an annual meeting, or at special interim elections called by the board.
5 – Initially, each partner will have one vote. After the first year each partner’s vote will be based on the percentage of total NPPDS revenue the partner’s images contributed in the previous year. Thus, each partner’s voting power may change from year to year.
6 – All agency partners will be supplied with a detailed financial report, on a quarterly basis, of the expenses and overall income of the distribution organization.
7 – Annually, any profits of the non-profit organization will be distributed among the agency partners based on the percentage of total revenue each partner agency generated during the year.
8 – To establish this organization some partners may be required to supply up-front start up money. That money, plus interest, should be repaid out of profits before additional profit shares are returned to the partners.
9 – Images will be supplied to this collection on a non-exclusive basis. Founding Partners may continue to license their own images directly to customers and through other distributor organizations at different price points. It is expected that at some point in time partners will determine that it is not to their advantage to make the images they have on the NPPDS available through other sites that charge lower prices, but they will not be required to remove those images from other sites.
10 – Once the NPPDS is established and functioning by the Founding Partners the work of other “associate partner agencies” may be added to the collection. These agencies would not have voting power with regard to the rules of the NPPDS.
Possible Image Pricing Strategy
The following is a possible strategy for licensing images, but the final strategy and prices would be determined by the Founding Partners. To keep pricing simple, I would suggest that images be offered at five different price points. All licensing would be non-exclusive royalty free with a limit of a 500,000 print run. For Unlimited Print, Product for Resale, and Market Freeze uses I would suggest that the NPPDS adopt the Stocksy pricing model. Multi-seat licenses should also be available.
The 5 different price groups should be:
Premium Plus
Image has been licensed at least 10 times for prices at the Premium level or higher.
Premium
image licensed at least one time for a price of $10. (Depending on the number of images in this collection this price may need to be raised.)
Unsold
image that have never been licensed or fall below the premium level. Once any unsold image is licensed it automatically moves to premium.
Microstock
Only for microstock images – all images are delivered full size at 300dpi
If a microstock image has sold more the 10 times the creator should have the option to move the image to the Premium price level. If a microstock image is moved up it can no longer be licensed at the full size microstock or 72dpi levels. Many creators may determine that they can earn more by keeping their images at the lower price point and getting a greater volume of sales that than by moving them up.
Microstock 72dpi
Smaller file size only suitable for web use. No print use is allowed.
Any images in the microstock category can be licensed for this use.
This site should not offer no subscription or Premium Access type licensing.
This system would make it easy for customers to review both lower cost microstock images and higher priced premium images, all on the same site. A modification might add a Microstock Premium category that would show only those microstock images that had been licensed at least a minimum number of times.
This system bases price on customer demand for specific images. Images that no one has ever wanted to use are not offered at extremely high prices just because the photographer thinks his images are worth that amount. On the other hand, images can start out at a low price and rise in price based on real customer demand.
Eventually, it would probably be a good idea to move any Premium image that has not been licensed back down to the Unsold category to see if it might sell better at a lower price point. It also might be advisable to move Premium Plus images back to Premium if they have been in the higher priced category for a long period of time and never sold again.
Unlike most current offering, this system puts a bottom line price on each use. Small discounts are given to volume users, but not the huge discounts we’ve become accustomed to.
Obviously, given what some images are selling for now, there will be some customers who will not be able to afford even the lowest priced image. The goal of NPPDS is not to provide every conceivable customer with all the images they need for whatever they are willing to pay. Some customers will be told they need to go somewhere else. But the lost revenue from these customers who pay extremely low per image prices will be so insignificant that they are not worth worrying about.
Prices
The following prices are an example of how the strategy might be used, but actual prices can be adjusted depending on the Founders decisions.
Most customers would use a credit system to purchase images. However, they would be able to purchase a single image in any of the categories below at a slightly higher per image price to cover the cost of handling.
| |
Image |
|
| |
Allowance with |
Price per |
| |
Basic Credit Package |
Image |
| Premium Plus |
1 |
$200 |
| Premium |
5 |
$40 |
| Unsold |
10 |
$20 |
| Microstock |
20 |
$10 |
| Microstock 72dpi |
80 |
$2.50 |
A basic package of credits would offer 80 credits for $200. Credits can be used to license any combination of images from the above list. For these prices the customer receives a non-exclusive license with a maximum print run of 500,000. Extended Licenses and other services are available.
Customers that purchase 5 packages at one time get a 5% discount for $950
Customers that purchase 10 packages at one time get a 7% discount for $1,850
Customers that purchase 20 packages at one time get a 10% discount for $3,600
Credits can be used at any time and expire one year after purchase. (With most current systems there is a monthly credit limit. Downloads not used after a year are lost. Indications are that on average Shutterstock customers only use about 25% to 30% of the downloads they are allowed.)
Search Advantages
Customers would be able to search any single collection, or combination of collections. For example, a customer might want to search Premium and Premium Plus for images that other users of the site had licensed. This could save the customer time.
If the customer has a budget issue the customer might want to search a combination of Unsold and Microstock or just one of those collections.
Advantages over existing distribution strategies:
1 – The ability for customer to view a smaller segment of the entire collection of images that includes only those images other buyers have found useful for their purposes.
2 – Individual agencies have greater control than when dealing with current distributors.
3 - Premium images will not be discounted heavily to masses.
4 – Agencies and contributors both receive higher royalty shares of the gross fee customers pay.
5 – The site offers images at a full range of price points making it easy for customers to find what they need on one site at a price point they can afford.
6 – The initial focus will be on selling commercial and feature image, not breaking-news editorial.
7 – Individual agencies can still sell direct. They can also continue to deal with their current distributor networks until they decide that may no longer be to their advantage.
8 – A significant percent of the revenue collected from customers no longer goes to a few wealthy managers and private investors.
Why this service will be good for customer accounting departments.
1 – If they are careful not to purchase more credits at any time than they can use in a year they will get the maximum value from all the credits they purchase. Customers can purchase a new package at any time and that starts a new year for those credits.
2 – The ease of search for images at whatever price point they can afford make image search easier and more efficient for the art directors and reduces staff time needed to find images. This will reduce the overall cost of acquiring new images.
3 – If the staff starts using too many images in the higher costing categories it will be possible to limit the collections that a particular art director is allowed to review.
4 – Art directors have greater choice, all on one site, making it easier to find something that will work for their project and in the long run save on staffing costs.
Advantages for Creators
1 – All images are not treated equal.
2 – Higher prices are charged for images that have previously been in demand.
3 – Once an image is licensed it will be moved to a higher price point.
4 – There is a bottom line price.
Selling The Plan
The key remaining question is how do the Founders sell this plan to the image buyers? How do they make the buyers aware that this new image database exists?
It will require marketing. It may require Enterprise agreements with big users to supply them with additional services. It will probably require at least a small sales team in most major countries. It may require sales teams in many countries. Can the cost of such a sales operation be covered with the 30% I have allocated for operational costs, or will it have to be higher?
The mid-level agencies that will be Founding Partners probably have a good idea of the marketing problems involved and the costs.
Technologically, this system will not be breaking a lot of new ground. It will simply be a matter of using well established systems more efficiently. The need for a lot of venture capital will probably be unnecessary.
In addition, there is no reason why a few senior managers and the investment community should be siphoning off a significant percentage of the revenue being paid by the customers.
The Founding Partners are not being asked to “cut the cord” to existing sources of income in order to participate in this new venture. They are just being asked to join and test a new venture that will probably produce some additional income, and hopefully, become a major income source down the road.
At the very least mid-level agencies need to be exploring the possibility of a new business model.