“The biggest problem with the stock-photo business from an independent photographer’s perspective is the lack of any real link between cost of production and prices charged by distributors,” commented Tim McGuire in response to “Ross Shares Cost Control Strategies.” (There were also several other well thought-out comments that are worth reviewing.)
Many think, as McGuire, that the industry should find a way to charge fees based on the cost of production. But the flaw is really in the whole idea of stock photography as a primary business.
Stock photography used to be about making supplemental income from pictures produced on assignment, where all costs and a reasonable fee for the photographer’s time were already paid. Any additional revenue generated was a bonus. It cost very little to send a few transparencies to a stock agency, and if the agency could generate a little extra in sales, that was better than doing nothing with the images.
In the 1980s, demand for stock pictures began to grow, because they were often cheaper than shooting an assignment. For a few years, demand was much greater than supply. Photographers discovered that certain subjects were in much greater demand than others. By producing the right kind of images, photographers could earn more by shooting specifically for potential stock sales than by working on assignment.
That worked while demand was greater than supply, but by the mid-1990s—and some will argue exactly when this happened—the market hit a tipping point. Demand stopped growing, and supply grew at an ever-increasing pace, because everyone wanted to get on the bandwagon.
Consequently, image prices will never be linked to production costs. There are at least three reasons. First, customers will always make decisions as to what they are willing to pay based on how they value the image. Second, the value of an image to any particular customer has nothing whatsoever to do with the cost of production and is based entirely on planned use. Third, the value is also affected to a great degree by other choices available to the customer.
There will never be a link between cost and price, as long as photographers are willing to create images, at their own expense, before they know anything about the customer and how that customer will value the image. Those who want set their licensing fees based on production costs need to find customers who will assign work on a fee-plus-expenses basis.
McGuire suggests that photographers might want to become their own distributors, but photographers have absolutely no way to determine, before an image is shot and marketed, the number of customers likely to buy it at any particular price point. History has also taught us that different customers are willing to pay widely divergent prices for the same image. A photographer may establish a price sufficient to cover all production costs in a single sale, but that is no guarantee a given image will ever sell. With a lower price, based on a certain number of expected sales, there is no guarantee the image will sell that many times—or at all.
Every production is a crap shoot (hence the concept of producing “on spec[ulation]” of future sales). Experience enables some photographers to make better judgments about subject matter and style, but even so, a huge percentage of the images produced never sell.
Consider that in 2008, Getty represented approximately 1.5 million rights-managed images but sold only about 500,000 rights-managed licenses. Since many of these were for the same images that sold multiple times, well over two thirds of Getty’s rights-managed collection did not sell. Similarly, of the 14 million images in the Alamy collection, the company licensed rights to about 215,000 during all of 2008.
iStockphoto has over 4 million images and an estimated 22 million downloads, at an average of $6.50 each. Thus, the average annual gross return per image in was $35.75 in 2008. While on average each image generated some revenue, each photographer’s production and overhead costs for each accepted image are not known. What is public knowledge is that 70% of the photographers with images on iStock made no sales in 2008. Many photographers shot, keyworded, color-corrected and uploaded images that were not accepted; to determine profit, such costs must be deducted from the overall revenue generated by the images that did sell.
In all, the problem is not in the lack of a link between production costs and image price, but in the hope that such a link would exist in the business of stock photography.