Trend Toward Production Companies

5

January 31, 2005

There seems to be an increasing industry trend for a greater portion of the available stock imagery to be produced by large production operations, rather than individual photographers. These production operations are similar to motion picture production companies (although usually on a much smaller scale) in that they employ people with a wide range of skills all working together to produce the end product. The chief operating officer may be a photographer, but in many cases the COO has other skills, or capital, and photographers, like all the other staff, are hired on a buyout assignment basis to produce the needed images.

As this trend expands photographers who want to work on a royalty basis are likely to find it harder to get their images on major web sites and the proportion of available images that are wholly owned by large production operations will increase.

Some of these production operations, particularly in the RF area, have been around for a long time, but as the industry changes and a few portals dominate the marketing of imagery around the world it seems likely that images (both RM and RF) created by these large production operations will make up an increasingly larger share of the total images licensed.

Tension Between Suppliers And Sellers

To better understand why this is happening consider first the basic tension between the image producer and the seller. The image producer wants to spend his or her time shooting subjects in greatest demand. If possible, he also wants to increase his percentage of images in these subject categories relative to all the other images in the category on the site where his images are represented because this increases the odds that one of his images will be picked by the customer.

The seller wants the broadest cross section of subjects possible, including subjects that are of low demand, so his company may satisfy the needs of any customer that comes to its site. To the extent possible the seller also wants to limit the number of images on its site, particularly in the high demand areas where there tends to be lots of very similar imagery. Provided there is a basic minimum of choices to any given search the fewer images returned, the easier for the customer to find something to use. The question for every seller is what is the desirable critical mass in any given subject category. Many sellers feel they have reached that point in the high demand subject areas.

The seller also wants to limit its costs of acquiring images, integrating them into the system and maintaining the database. This means that the fewer images the organization has to deal with, the fewer administrative hassles and the lower cost. Finally, to the degree possible, the seller wants to increase its margin which means reducing the royalty paid whenever possible.

Thus, the image producer wants to constantly increase the number of images he has in play and left to his own devices would produce more and more of the subjects in highest demand while it is in the best interest of the seller to place limits on the number of images it accepts and to find inexpensive ways to acquire images of more low demand subjects that may not sell in high volumes.

Some other factors that drive the trend toward greater dependence on production operations and less dependence on individual photographers are:

• Technical requirement to properly prepare images on online databases

• Volume Production

• Availability of statistics

• Oversupply of images in high demand categories

• Lower percentages available to producers

• Ability to Control Production

Technical Requirement

The technical requirements for an acceptable digital image are getting tighter and tighter and becoming more and more difficult to meet. This includes not only proper post production preparation or digital files, but also effective keywording to very tight specifications. It is no longer satisfactory for a photographer to produce a great piece of film and turn it over to the agent or portal for marketing. Now sellers expect image producers to do more of the work of preparing the image for marketing. Formerly, much of this was handled by the agent.

It is the rare photographer who is equally skilled in all the various steps of the process, and even for those who are capable of doing everything themselves, handling the production process from start to finish is usually not the most efficient use of the photographer's time.

For example, the process of cleaning up images from a two or three day shoot can sometimes take weeks for one person to do. That is not necessarily efficient time management for a photographer who has the ability to organize and plan shoots. Keywording can also be very time consuming and is best done by someone with a gift for language.

Post production may be more efficiently handled by a team with a variety of skills than by a single individual. It may be possible to sub-contract some of these activities, but many who have tried that route have discovered that they need to manage the process more closely than is often possible with a sub-contractor. Producers who handle much of the pre-productions arrangements can also be very useful members of the team.

Thus, for many it makes a lot more sense to put together a team to handle production rather than try to do it as an individual.

Volume Production

There are several advantages in producing volume. Producers in a position to offer a steady volume of images to a distributor are much more likely to be accepted than the individual photographer who comes in with 50 or 100 great images. In such cases there is much less administrative overhead for the seller.

In addition, with a volume of images in play, the producer can begin to determine what sells and what doesn't and make better decisions about what to shoot in the future. Of course, the major portals have the best statistics, but they tend to only share this information with their best producers, or not share it at all. Thus, a production company that is producing volume has a better chance of figuring out what is in demand than the small individual supplier who is trying to guess what the market will want. Of course, the photographer who just shoots what he likes and doesn't worry about market demand at all is usually not someone most portals are interested in representing.

While volume producers want to shoot high demand subjects, they also want to do everything they can to keep the seller (portal operator) happy. Thus, they will occasionally produce images specifically requested by the portal even when they do not have a high level of confidence that the image will sell. They can afford to take this risk because their volume generates enough revenue that they can occasionally afford a few losing shoots. On the other hand, if an individual photographer goes to great effort on the instruction of the agent, and produces a losing shoot without enough revenue from successful shoots to offset the lost, that photographer may be out of business. This also hurts the seller because now he has to spend time to develop another shooter.

Oversupply

If you go to any major web site and search for specific subjects within the high demand subjects areas of business, lifestyle, nature, scenics and travel you will quickly see that there are many more images available on these subjects than anyone would want to review. Consequently, many portals are trying to slow their growth and be more discriminating in the new images they accept. While some new and updated images of the high demand subjects will always be needed the trend of those who control the major portals seems to be to put tight limits on the amount of such imagery they will accept.

Even thought portals require image suppliers to fully prepare the scans and supply keywording ready for automatic uploading, they still have costs in adding images and managing the ever larger database. Many feel it is not in their best interest to let the database get a lot bigger, and certainly not to put up images that are similar to what they already have on the site.

They will add truly unique images when they find them, but they don't want to spend a whole lot of time cross checking every image against what is already on their site to determine if it is unique. Consequently, they tend to look for new providers who specialize in subject areas where there may be lesser demand, and where the portal currently has very few images.

Portals As Producers

Some photographers expect the major portals to increasingly produce images that
they will wholly own. For most portals that is not a good economic proposition. They may do some wholly owned production of subjects when it is clear there will be very high, immediate demand for such images. But for the most part it is better for them to let someone else take the production risks and earn their revenue from a percentage of sales.

Many distributors have no intent, or interest, in getting into production. They want to focus on selling product rather than producing. This leaves them with two choices -- getting that product from production companies, or individual photographers. Production companies are the preferred choice because the seller can get more images with less administrative hassle.

Getty has gone through a stage of building an in-house production operation that would work with individual contract photographers to encourage them and guide them to shoot subjects where the company felt it had holes. While this produced some great imagery, it appears that the costs were higher than Getty would like. Now Getty has focused its efforts on acquiring a much larger portion of the imagery it licenses from Image Partners that are either agents or production companies. Some of these suppliers are agencies that accept imagery from individual photographers, and prepare it to meet Getty's standards. But the economics are such that these suppliers are encouraged to do wholly owned production when ever possible.

If a photographer is getting a percentage there are at least two and sometimes three cuts of the gross fee ahead of him and thus the payment per-usage is often very small. In some cases the production company's percentage is small (30% or less) and if they work with photographers on a royalty basis that must be split with the photographer. The trend is for the production company percentages to be reduced. If the production company can afford the upfront capital investment there is an incentive to hire photographers, own the content and keep the entire portion of the fee the seller pays rather than sharing a percentage with a photographer.

Given these relatively low royalty rates, many photographers may eventually find it more desirable to produce such images for an immediate buyout fee, rather than speculating that the images will produce more in royalties down the road.

One move that may seem counter to the production company strategy is that Getty is expanding the Photographer's Choice operation and accepting more images from the individual photographers they represent. However, there are two things to keep in mind. This will be a very small number of images compared with the quantities they accept from other Image Partner agencies. Secondly, each photographer pays an upfront fee to have his images included so Getty has offset its costs. As a means of acquiring images PC is much more comparable to the arrangements with Image Partners than Getty's normal direct dealings with individual photographers. The biggest negative for Getty is that they give up a higher percentage of PC image sales than is the case with many Image Partners.

Control What Is Shot

Sellers would like to influence and control production as much as possible without having to fund it. Working with a few production companies appears to give them the greatest influence for the least cost. It's not a perfect solution, but it seems to be a lot better than working with lots of individual photographer over whom they have very little control.

There are cases where the Image Providers manage to slip in high demand subject matter that the seller might not have accepted had he been editing everything tightly as is the case. This will tend to overbalances the volume of images in a subject category, but at least the seller has very little cost in adding these images.

In the long run, it appears that what Getty, Corbis and other large portals need to do to maximize their profits is work with a few highly efficient production operations that will produce exactly what the sellers want -- at no cost to them - and not over saturate any particular subject area in the database.

How Do Individual Photographers Survive?

Some photographers will say, "I don't want to set up a production company. I like working independently. What should I do?" Others simply don't have the management skills to run production companies. Still others don't want to work on an assignment or staff basis for a production company. They say, "How is the individual photographers survive?" As I see it, the choices are not easy.

It may not be a good analogy, but think about automobile manufacturing. When the industry started in the early 20th century there were hundreds of manufacturers with different ideas about how a car should be built. They produced many different models and each sold a few. But as manufacturing efficiency and marketing became more important there was consolidation. A lot of people with good ideas were either absorbed by the bigger companies or left by the wayside. The consumer was left with many fewer choices, but most of them worked well and were available at prices the consumer could afford.

In the creative/advertising area the variety of visual interpretation will be limited if fewer photographers are creating most of the images. On the other hand that has already happened with RF, and it doesn't seem to be creating any negative reaction among the buyers. They seem satisfied with the choices available. Thus, I see no reason why a larger portion of the images directed toward the creative/advertising side of the business won't be created by production companies.

There may be more opportunity on the editorial side of the business because there is a much broader need for specialized subject matter for which there is a relatively low demand. It may not be cost effective for the big production operations to ramp up in these areas of the business. And it may not be cost effective for the portals to hire staff at reasonable rates to produce this imagery. In the long run the real question is will it cost effective for the editorial shooters to produce this material and make it available if they are not also earning income from some other source (which in many cases may be possible).

Photographers may not want this to happen, but I believe it is a reality they all need to consider as they plan their stock photography future.