In Q4 2007, Getty Images reversed the trend of the first three quarters and showed revenue increases in every category of its business.
| | Q1 2006 | Q2 2006 | Q3 2006 | Q4 2006 | Q1 2007
| Q2 2007 | Q3 2007 | Q4 2007 |
| Gross Revenue | $ 200.90 | $ 204.80
| $ 198.10 | $ 203.50 | $ 212.60 | $ 218.00 | $ 208.90
| $ 218.10 |
| | | | | | | | | |
| Rights Managed | $ 86.18 | $ 83.76 | $ 78.05 | $ 77.94 | $ 81.64 | $ 79.79 | $ 71.86 | $ 71.97 |
| Royalty Free | $ 73.53 | $ 78.23 | $ 77.25 | $ 79.16 | $ 82.91 | $ 81.75 | $ 79.80 | $ 82.88 |
| News/Entertain | $ 22.10 | $ 24.98 | $ 25.36 | $ 26.66 | $ 26.56 | $ 35.97 | $ 36.55 | $ 39.26 |
| Footage | $ 11.65 | $ 10.85 | $ 9.90 | $ 10.79 | $ 11.27 | $ 10.68 | $ 10.02 | $ 10.91 |
| Other (Assign.) | $ 6.63 | $ 6.96 | $ 7.35 | $ 8.95 | $ 10.20 | $ 9.59 | $ 10.65 | $ 13.09 |
However, despite overall growth in RF, the trend for single image RF sales remained on a downward slope (see chart below). This segment of Getty's business represents 38% of the company's total revenue and is divided into traditional single image sales (representing 64% of total RF) and
Other, which includes CDs/VCDs, subscriptions and iStockphoto. Since the
Other category had been growing at a rapid pace, while traditional sales were level in 2006 and then declined in 2007, it seems important to try to separate the iStock portion of the
Other revenue. iStock had 5.2 million downloads in the quarter.
Prior to purchasing iStock in Q1 of 2006, Getty's quarterly sales of CDs/VCDs and subscriptions was running about $9 million per quarter. Allowing for a small increase, I have estimated that segment of the business at about $10 million a quarter for the past two years. Some variations were likely, but this general approach seems a reasonable way to get some idea of the iStock revenues.
Once microstock appeared, it seemed likely that CD/DVD and subscription sales would plateau. Thus, if we subtract $10 million a quarter from the total of Other revenue, we probably have a fairly accurate picture of what has been happening with iStock revenue.
| | Q1 2006 | Q2 2006 | Q3 2006 | Q4 2006 | Q1 2007 | Q2 2007 | Q3 2007 | Q4 2007 |
| RF Revenue | $ 73.53 | $ 78.23 | $ 77.25 | $ 79.16 | $ 82.91 | $ 81.75 | $ 79.80 | $ 82.88 |
| | | | | | | | | |
| Single Image Rev | $ 61.77 | $ 65.71 | $ 64.12 | $ 63.33 | $ 63.01 | $ 59.68 | $ 55.06 | $ 53.04 |
| iStock Estimate | $ 1.76 | $ 2.52 | $ 3.13 | $ 5.83 | $ 9.90 | $ 12.07 | $ 14.74 | $ 19.84 |
| CD's, VCD's | $ 10.00 | $ 10.00 | $ 10.00 | $ 10.00 | $ 10.00 | $ 10.00 | $ 10.00 | $ 10.00 |
| | | | | | | | | |
| iStock downloads | | | | | | | | |
| in millions | 2 | 2.5 | 2.5 | 3 | 3.5 | 4.25 | 4.6 | 5.2 |
| | | | | | | | | |
| Average RPI | $ 0.88 | $ 1.01 | $ 1.25 | $ 1.94 | $ 2.82 | $ 2.99 | $ 3.20 | $ 3.81 |
These numbers show that not only was there a rapid rise in units licensed by iStock, there was even a more significant rise in revenue generated and average return-per-image as the percentage of customers purchasing larger file sizes increased. iStock's total revenue for 2007 was approximately $55.55 million; with 17.55 million, the average RPI for the year was $3.17. However, even more impressive is the average RPI on a quarter-by-quarter basis, with an average of $3.81 for Q4 2007.
This is also before the January 2008 price increase was instituted. If iStock continues to have the same mix of file sizes used, it should easily hit an average RPI of $5.00 before the middle of 2008. This is significant for the traditionalists who love to talk about $1 per image microstock and argue that it will never be possible to sell enough to offset the loss of $250 per image sales. At a $5 RPI, you have to sell 50 instead of 250 at the lower price for every $250 sale lost.
CEO Jonathan Klein said, "Volumes for traditional single image RF declined high single digits for the full year." In 2006, the number of RF images licensed was about 1.05 million. The decline means that 2007 volumes were under 1 million. iStock's 17.55 million downloads is 17 times the number of traditional RF images that Getty licensed. Assuming zero growth in number of downloads (not likely), the average RPI would only have to reach about $15 per image to exceed the current revenue generated by traditional RF.
Put another way, if iStock can double its volume to 35.1 million downloads annually and raise their average RPI to only $9.33, the micropayment revenue would equal all of Getty's 2007 revenue. Still a long way to go, but its not nearly as impossible as it looked two years ago.